The changing shape of employment: government policy facing limited success
The “developed world” is experiencing great demographic change, characterized by declining birth rates, greater longevity and ageing populations. In western industrialized nations these shifts are predicted to result in labour market skill shortages and, in combination with social and technological changes and the wider forces of globalization, are creating major challenges for employers and nations in managing labour supply.
In response, most industrialized nations now regard an extension of the working lives of individuals as the basis of sustaining welfare systems and off-setting declines in numbers of young labour market entrants. Though, internationally, policy actions have developed extensively in recent years, the aspirations of government remain little more than rhetoric.
The popular premise, that ageing populations go hand-in-hand with ageing workforces, appears to be contradicted by much of the available evidence, which points to rather more complex scenarios, in which outcomes are uncertain, but clearly where older workers may not necessarily fare well.
Societies are experiencing rapid social, economic, and cultural change brought about, in the main, by a sharp reduction in the cost of transportation and the emergence of new information and communication technologies. International corporations are increasingly pursuing the goal of integrating production and value delivery worldwide, economic activity is, increasingly, turning outward and export volumes have grown substantially.
Production processes have become increasingly decomposed, vertically as well as horizontally, breaking down into their constituent parts with each produced where production can be achieved most efficiently and at least cost. In consequence, tasks that can be provided at a distance, across all industry sectors, are increasingly likely to be off-shored. These cross-border flows are enabling the relocation of industry to new centres of global production and are opening up new markets for talent.
The “developed world” is also experiencing great demographic change, characterized by declining birth rates, greater longevity and ageing populations. The trend towards ageing populations raises issues about the management of ageing workforces.
In combination with declining birth rates, the retirement of a large cohort of baby boomers is expected to reduce the supply of skilled workers, contribute to a lowering of workforce participation rates while also raising dependency ratios. Of concern, in western industrialized nations these demographic shifts are predicted to result in labour market skill shortages. Reports from Governments and institutions in Australia, the USA and in Europe have noted that demographic change poses serious challenges for employers and economies in the developed world.
However, the problem of a decline in labour supply in OECD (Organization for Economic Cooperation and Development) nations adopts a new dimension when considered from a global perspective. For example, the expansion of global capitalism to China, India, and the former Soviet bloc, doubled the supply of labour available to the global capitalist system and, in future years, workforce growth is expected to be strongest among developing nations.
In 2005 the global labour force numbered 2.8 billion and is expected to grow at an average rate of approximately 40 million persons per year. The majority of this growth, 38 million, will occur in developing nations. Given noted labour force capacity concerns in developed economies, the depth of labour supply in the global labour markets presents as a new resource for organizations to utilize. In consequence, the labour market for skilled workers has become global, “both in terms of demand and supply for skilled labour”.
Countries now compete, not only for markets, technology and investment to grow and to raise living standards but also skilled labour. International migration has thus become a key element of national policy agendas.
Limits of public policy
These types of challenges have prompted new approaches to labour market management. Active labour market policies are a feature of modern policy approaches and are designed to improve labour market efficiency, to ease the load and to share the burden. However, for a significant number of at risk workers, such as late career workers, policy approaches inherent in the language of individual responsibility do little to adjust the social habitus of life's circumstances, culturally embedded roles and the limited fields of opportunity.
At the level of government, current policy approaches now face the prospect of increasing ineffectiveness, as the shape of employment adopts new forms and faces new risks. Job destruction and creation no longer takes place according to an orderly and foreseeable set of scheduled events and sectoral patterns and is happening much more quickly than in the recent past. Consequently, policymakers now face the challenge of predicting change and identifying jobs at risk in an increasingly dynamic environment.
"Older employees are perceived as being less effective than younger workers and to represent a serious barrier to organizational change and flexible performance."
New pathways out of the workforce are exerting catalytic effects and, for some, these effects are facilitating, if not accelerating, transitions into marginalized employment and premature exit from the workforce. These changes now require a rapid response from government, enterprise and workers across all industries.
In the past, manufacturing jobs were perceived to be most at risk while for workers in non-traded sectors most would have felt secure from the adverse effects of international competition. Now, a wide range of white collar jobs, previously regarded as “safe” (non-tradable), face the same off-shoring and industry competition risks.
Challenges to working later
Against a background of changing patterns of employment and a desire to remove barriers to the workforce entry of older workers, it is useful to consider the influence of individual and organizational factors. Redesigned jobs are frequently more demanding than the jobs they replace. For older workers this will frequently necessitate re-skilling, requiring that they undertake the difficult task of adjusting to new routines to re-establish their job “fit” and to overcome the fear of starting again. Older workers, however, may not want or be able to negotiate this transition.
Feelings of uncertainty and anxiety represent significant obstacles to work transitions among late career workers. There is also evidence of severe employer prejudice against employing older workers with surveys indicating a strong preference for other strategies to address problems of labour supply. Older employees are perceived as being less effective than younger workers and to represent a serious barrier to organizational change and flexible performance.
Late career workers may also be reluctant investors in their own human capital. As new technologies become available, they stand to benefit less from investing in new technology driven skills as they have a shorter remaining work career over which to recoup their investment. This is exacerbated in industries that experience unexpected increases in the pace of technological change. In the past, this type of event has led to the early retirement of older workers because of the faster depreciation of their human capital.
This presents as a troublesome outcome, given the evidence that jobs now require employees to be able to access higher levels of skills across a broader repertoire of capabilities and to be prepared to continually update these skills because: “Jobs are no longer for life, and employees can no longer train just once in their lives”. The challenge of managing late career workers may also present as an obstacle to policy success.
Transition into adulthood is increasingly occurring at a later age; a move which reflects a broader trend towards “delayed maturity”. Young people are studying for longer, joining the labour market at a later age, leaving home later, marrying later and starting families later. Individuals are seeking to establish a secure base, in terms of employment security (employability), financial security and a secure/stable partner before taking on broader responsibilities such as starting families and purchasing homes.
Employees have come to understand that the psychological contract between employer and employee no longer provides a pathway to work-life security. Chronological age no longer defines the point at which an individual is at in their career. Instead, greater consideration should be given to ”career age” where, for example, five years in a particular speciality might be considered as ”midlife” for that particular activity. As the lifecycles of products and technologies shorten, careers will increasingly consist of a succession of “mini-stages”.
National Governments seeking to respond to these types of challenges will need to adopt a range of new ways that involve a far more intensive level of engagement with transnational corporations (TNCs). The preferred approach will be to recognize that participation in policy through partnership with national, inter-governmental and global institutions and new national structures that reflect the merits of joined-up practice is required. Efforts to extend the global reach of TNCs to carry some of the burden of globalization’s challenges will also need to ensure that the needs of the vulnerable are not buried in the discourse of macro-economic reform and industry success.
Organizations personally engage with consumers on a daily basis, through the routine of exchange for goods and services. Through the routine of exchange, long-term relationships with customers can then be established. These relationships drive profitability and are often a key focus of business marketing activity. This type of relationship is of a very different character to the relationships shared between citizens and their governments, which tend to oscillate around political cycles. This presents as a potential partnership conundrum for policy makers.
The objectives of TNCs and multilateral institutions do not necessarily overlap and by engaging with customers on a daily basis and investing in global flows, transnational corporations are able to exercise significant global influence. National and transnational institutions seeking to deliver a countervailing message are poorly positioned to counter the influence and capacities of TNCs. New institutions of multilateralism: of trade, labour and social policy integrated with individual, business, government and non-government objectives to develop sustainable and equitable solutions are required to restore the soft power, or voice, of private actors.
Explore the alternatives
The integration of the world economy has facilitated the movement of industrial production to new centres and with this, new sources of international demand for skilled labour. High levels of foreign direct investment in developing economies, along with industry restructuring and the emergence of global production networks, have also radically reshaped human capital and financial flows. These change effects carry with them potentially adverse complications for at-risk late career workers.
In the absence of a deep understanding of the current relationship between demographic ageing, the labour market and economic globalization the policy aspirations of government face the prospect of limited success. The currently popular premise, that ageing populations go hand-in-hand with ageing workforces, appears to be contradicted by much of the available evidence, which points to rather more complex scenarios, in which outcomes are uncertain, but clearly where late career workers may not necessarily fare well.
Though policy actions around the themes of participation, migration, population, ALMP and productivity have developed extensively in recent years the aspirations of government remain little more than rhetoric. Employees, organizations and government have not yet managed to triangulate or agree their mutual objectives.
The factors influencing employer actions such as: low cost competition, dynamic change, poaching by competitors, attitudes and behaviour towards older workers, and older worker preferences for work and retirement, stand in the way of policy aspirations and mandate immediate action to transgress the isolated and competing realms of private, public, international and non-governmental institutions to create a way that gives voice to each while protecting the vulnerable from the prospect of uselessness.
Ahead of this, business is continuing to explore the viability of alternative business models that, increasingly, involve transnational activities and cannot wait for government or future employees to adjust.
This is a shortened version of “Employees, employers and the institutions of work: the global competition for terrain in the ageing workforce agenda", which originally appeared in foresight, Volume 10 Number 1, 2008.
The authors are Bradley Jorgensen and Philip Taylor.