Baby Boomers Are Retiring: Implications for the Workforce and Economy

Annie Erling Gofus - Aug 14 2023
Published in: Global Workforce
| Updated Aug 14 2023
With baby boomers entering retirement in substantial numbers, the global mobility industry is facing challenges related to workforce and labor market gaps.

Today, the number of retirees is surging at a remarkable pace, outpacing the influx of new workers. This trend is leading to an unparalleled aging of America’s population, bringing about significant transformations in the workforce, economy, and the global mobility industry.

The pandemic appears to have accelerated the retirement of baby boomers, born between 1946 and 1964, by pushing individuals who might have otherwise continued working for a few more years, to make the decision to retire.

“All these tailwinds were pushing in the same direction, and suddenly they were all stopping at the same time,” Aaron Terrazas, the chief economist at the job-search site Glassdoor, told Business Insider in May.

Despite this pandemic-related push, the main reason for the increase in retirements was that more baby boomers reached retirement age. “The aging of the baby boomers between 2020 and 2022 led to a significant rise in retirements, reducing participation,” wrote researchers Mary Amiti, Sebastian Heise, Giorgio Topa, and Julia Wu in a blog post.

During the third quarter of 2020, approximately 28.6 million baby boomers had retired, and the number of baby boomers retiring continues to grow. This significant increase in retiring workers has substantial implications for the labor market.


What Increased Retirements Mean for the Labor Market

The demand for workers continues to be robust, with approximately two job openings available for every unemployed individual. And with more than 75 million baby boomers retiring sooner rather than later, it’s clear that employers will need a strong workforce plan for replacing exiting workers.

Meeting the workforce gap presents a considerable challenge. Relying solely on Gen X workers is not enough, and many millennials may lack essential work experience. Foreign-born workers could face immigration hurdles, and not all roles are suitable for flexible or remote workers. Nevertheless, by exploring these diverse sources, global mobility programs and other organizations can partially bridge the skills gap created by retiring baby boomers, leading to enhanced employee retention rates in the long run.


How the Global Mobility Industry Can Approach the Changing Workforce 

The growing labor shortage is a critical concern affecting both workers and employers. As the baby boomer generation retires, workforce participation faces downward pressure due to population aging.

The implications of the labor shortage for workers in the coming years are significant. It will lead to a fierce competition for their skills and expertise. As a direct consequence, workers can anticipate higher salaries. In order to draw in an adequate number of workers, employers will find themselves compelled to offer improved benefits and working conditions. Labor analyst Denton predicts that this upward trend in wages will persist, surpassing the modest 2% annual increments observed in the decade prior to the pandemic’s onset.

As a consequence of the labor shortage, younger workers can anticipate faster career advancements in the years to come, as older bosses retire.


Generation X and Millennials Can Step Into Leadership Roles

Generation X, consisting of individuals born between 1965 and 1980, contributes significantly to the U.S. economy with around 53 million workers. However, not all Gen Xers are able to continue working full-time due to family responsibilities, including caring for children and aging parents. Workplace flexibility and work-life balance are crucial factors for them when deciding to remain in or leave the workforce. 

Companies have responded to this trend by offering benefits like unlimited parental leave, unlimited vacation, and sabbaticals, which particularly appeal to Gen Xers with two working parents facing difficult decisions about their work arrangements. While not all companies can provide unlimited benefits, offering telecommuting, part-time hours, compressed workweeks, sabbaticals, job sharing, shift trading, project-based contracts, or temporary jobs as workforce benefits can improve their chances of attracting Gen X workers.

Millennials, born between 1981 and 1997, comprise around 56 million workers. However, they won’t be enough to compensate for the skills gap left by retiring baby boomers. This could result in a shortage of highly educated talent in the future, making it challenging for organizations to find entry-level employees. 

To address this, focusing on employee training, especially soft skills training, and implementing early management programs may help groom millennial employees. Millennials are drawn to transparent and collaborative organizations that provide access to information, given their tech-savvy background. Companies with open-book financial management and open-door hierarchies may have an advantage when recruiting millennials.

As a tried-and-true strategy, some companies will resort to offshoring. If they cannot find enough workers domestically, they will explore opportunities overseas.


The Global Mobility Industry Can Use Immigration to Bridge Labor Gap

Increasing the number of immigrants would bolster the workforce of working-age Americans and mitigate the nation’s aging process. Immigrants, on average, are younger than Americans and presently constitute the primary driving force behind the country’s population growth.

Research conducted by the Cato Institute and the National Bureau of Economic Research indicates that increased immigration correlates with improved outcomes for individuals reliant on long-term care. However, despite these potential benefits, the last significant immigration bill was passed back in 1986, and the matter seems to be currently stuck in a state of political deadlock.

Immigration presents a solution to address the economic demand for skilled workers, particularly in critical sectors like elder care and Social Security programs. To effectively bridge potential labor gaps arising from retiring baby boomers, companies can explore the option of hiring experienced international employees. 

The surge in retirees is reshaping America’s workforce and economy at an unprecedented pace. The pandemic has accelerated the retirement of baby boomers, and as more than 75 million baby boomers retire, there will be a pressing need for an effective workforce plan to replace exiting workers. 

The labor shortage poses significant challenges for employers, and addressing it will require tapping into various sources, including Gen X workers, millennials, and potentially foreign-born workers. Companies must offer improved benefits and working conditions to attract and retain skilled workers in this competitive market. 

The global mobility industry can play a crucial role by considering immigration as a solution to bolster the workforce and mitigate the effects of aging. Ultimately, fostering a diverse and adaptable workforce will be key to meeting the demands of the changing labor landscape and ensuring a sustainable future for organizations.