The Corporate Implications Of People Leading Longer Lives

People will want - and need - to work longer, because investments designed to support 5 to 20 years of retirement will be insufficient for a generation which may routinely live 10 or 15 years longer than their parents and grandparents, possibly to 90 or 100.

This could impact compensation, workforce training, expectations regarding employee turnover and a rising tax burden to support longer life expectancy. As the following research suggests, few enterprises are thinking about what this may mean for them. JL


Lynda Gratton and Andrew Scott report in MIT Sloan Management Review:

Most companies still view life in terms of full-time education, full-time employment, and retirement (at) 65. This worked when life expectancy was 70, (but) cannot be stretched to support a 100-year life. Rising life expectancy means the savings required to provide income for retirement at age 65 is infeasible. The generation just entering the workforce has the longest expected lifespan in history. Their working lives are apt to involve different jobs in a variety of sectors. A long, shifting career will force them to create a sense of coherence with their preferences, and adapt new skills and interests.

People are living longer and working longer — but few organizations have come to grips with the opportunities and challenges that greater longevity brings.

Across the world, people today are living longer. Whether it is in the United States, China, or Rwanda, average human life expectancy has increased over the past few decades. If life expectancy continues to grow at the rate of two to three years every decade, as it has done over the last 150 years, then a child born in Japan in 2007 will have a more than 50% chance of living past the age of 107. Under the same assumptions, children born in that year in most of the advanced economies will have similar odds of living past their 100th birthday.1There is growing awareness that increasing longevity will have major implications for how people manage their work lives and careers. Rising life expectancy means the level of savings required to provide a reasonable income for retirement at age 65 is becoming increasingly infeasible for most people.2 We predict that, given the average level of savings in advanced economies, many people currently in their mid-40s are likely to need to work into their early to mid-70s; many currently in their 20s (many of whom could live to be over 100) will be working into their late 70s, and even into their 80s.
Across the world, people are becoming more conscious of their lengthening working lives — but frustrated by their working context. Our research suggests that while people know they will have to restructure their lives and careers, corporations are unprepared. (See “About the Research.”) Indeed, corporations have been somewhat inconsistent in their reaction to greater longevity. On the one hand, many executives are excited about the possibilities of tapping into the estimated $15 trillion of spending power of people over 603; on the other hand, few have taken full account of the opportunities and challenges longevity brings to their own workforces.

About the Research

The purpose of our research was to consider the impact of longevity on individual and corporate practice. We began with a series of financial calculations. For different age cohorts, we calculated the variable impact of savings rates, retirement age, and retirement income replacement rates on the length of a working life. This enabled us to show how working lifespans were likely to covary with longevity and also demonstrate the trade-offs individuals face between savings rates and retirement age. Next, we looked more closely at current corporate practice.

In the Future of Work research consortium led by one of the authors, we focused on the theme of longevity. Over a period of six months, we engaged in conversations and workshops with more than 100 executives from 45 companies in Europe, the United States, Japan, and Australia to discuss their attitudes and policies about longevity. Finally, we created a diagnostic tool to measure the extent to which individuals believe they are building, maintaining, or depleting their tangible and intangible assets. We made this available online at www.100yearlife.com and also used it with students and executives at London Business School. We have data from 10,000 people aged from 21 to 90.

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Most companies, especially those operating in the advanced economies, still view life in terms of three stages: full-time education, full-time employment, and then a “hard stop” retirement around the age of 65. This is the life structure that emerged in advanced economies in the 20th century and continues to underpin much thinking about the workforce. Although this structure worked when life expectancy was 70, it cannot be stretched to support a healthy 100-year life.

Individual Experimentation

In response to the pressures resulting from longer working lives, individuals are starting to experiment with new stages of life and creating different career structures. The pressures are having particularly significant effects on three age groups: people approaching retirement age, those currently in their 40s, and those just entering the workforce.

People Approaching Retirement

One of the first age groups to test traditional corporate policies are those currently in their 60s. For many of them, the idea of a traditional “hard stop” retirement at age 65 is under real pressure. As they think about the rest of their lives, they are beginning to look for ways to be productive for longer. Currently, one in five Americans over the age of 65 (and one in 12 over 75) still works, and these proportions continue to rise. Some of those working longer are continuing in their existing jobs; others are taking on roles that involve different skills or offer a better work-life balance. An increasingly popular option is to become an entrepreneur; indeed, in the United States, people starting a business today are more likely to be over 55 than under 34.4

People in Their 40s

For people in their mid-40s, there is a growing realization that retirement isn’t a hard and fast turning point. Indeed, some are beginning to recognize that they could have another 30 or more years of work ahead of them and are figuring out how to make the most of those years. Navigating this extended period successfully will require maintaining skills, remaining enthusiastic, maintaining physical well-being, and creating a good work-life balance. Many are considering what they need to do to upgrade their skills to continue on their current trajectory or wondering whether now is the time to switch to a new career and a new stage of life.

People Entering the Workforce

The generation just entering the workforce has the longest expected lifespan in history, perhaps 10 to 15 years beyond that of the generation approaching retirement. In contrast to older workers, many younger workers are aware that their working lives are apt to involve many different jobs in a variety of sectors. A long and shifting career will force them to create a sense of coherence with their values and preferences, and to adapt and develop new skills and interests.
Members of this group are beginning to focus on options, which become more valuable as the time horizon over which they can be exercised becomes longer. As a result, the age range at which a number of traditional markers of full adult independence and commitment take place — such as getting married, having children, and buying a home — has been extended. In addition, as can be witnessed in the streets of Brooklyn, New York, and London’s East End, many in this group are embracing a new form of entrepreneurship that combines work, leisure, and creative space, and that includes a focus on experimenting, learning new skills, and building a distinctive professional identity.