UK leaders underestimate aging population, warns EIU

The coming years will see changes in demographics as the European population ages. In a recent survey of European executives, UK respondents were found neither to be taking advantage of their opportunity to transform their businesses to meet their aging workforce, nor the need to start changing benefits required to motivate and keep their current workforce into the future.

Recent research from The Economist Intelligence Unit in on behest of Towers Watson, titled ‘Older, but none the wiser’, surveyed business executives across Europe on the perceived and projected consequences demographic changes will have on their businesses and benefits. The survey reached 480 senior executives at companies across Europe, with 84 in the UK.

Changing demographics
With fertility rates at historic lows across Europe for decades and with ever increasing life expectancy in the region, a demographic shift in work aged population toward older workers is expected to affect most countries in Europe by 2020. In 2012 the continent reached an inevitable demographic tipping point. The percentage of the population of working age fell for the first time in 40 years. With the trend expected to continue until at least 2060.

For businesses the trend is expected to bring challenges. As the working age population ages in a world that continues to demand higher and higher digital skills, businesses are set to face the challenge of a less physically able workforce whose skill-set lags behind the times. The research finds however, that while many European countries are already making provisions to meet the challenges – with especially Germany set to face the facts of aging population labour constraints in the coming years – UK businesses, whose work-force is not expected to reach the tipping point until 2020s, are failing to act proactively to meet the challenge.

The survey highlights that as it stands, only around 6% of the executives surveyed are considering an aging population as a problem. With the greatest concern of these times – cost control, with 68% of UK executives focused on the issue compared to the European average of 57%. By the 2020s however, the issue is expected to fall from significance, with 20% of UK executives seeing it as a concern. Restructuring too will cease holding business attention by the 2020, falling from an important priority of 26% of UK executives today to 4% in 2020. Innovation, expansion and talent management are projected to be the biggest issues facing businesses in the coming five years.

While the external strategic direction of businesses is set to change over the coming years – with Europe and the UK relatively close in strategy – the internal focus around the performance of the company’s workforce shows a different story. In a survey of the way businesses expect to cater to changes in work force demographics, shows that UK companies are not yet transforming condition within their businesses to meet the changes in demand from their workforce. By 2020 only 24% of executives plan to make physical changes to the workplace to accommodate an aging workforce, compared to 45% of German companies. Offering the flexibility of working from home is planned by 77% of executives in Germany, compared to 46% in the UK. Considering changing the working hours of older people, while allowing them to retain their status, is planned by barely 18% in the UK compared to 32% in wider Europe and 39% in Germany. Upskilling older employees is also not considered an issue for many UK executives, with 28% citing plans, compared to the European average of 46%.

More needs to be done, believes Baroness Sally Greengross, Chief Executive of the International Longevity Centre, a UK think-tank on longevity and demographic change. “There is significant denial around the implications and consequences of our rapidly ageing population,” she said in a recent debate. “If we don’t change our employment practice, industry will face a skills gap: this is inevitable.”

Changing Benefits
While UK executives are not yet considering changes needed to future proof their businesses against aspects of the coming demographic change, many are considering changes to employment benefits, with 60% indicating it is on the cards for 2020, compared to 50% in wider Europe.

Employees are expected to start changing their expectations and demand in exchanged for improved motivation and performance according to the report. With economic uncertainty comes job security concerns – now believed to be the biggest concern of employees by their UK employers at 62%, however, by 2020 it will drop to a concern for 31%. Retirement savings are raised as important issue for 14% of employees today – increasing to 35% by 2020. The biggest issues considered by employees remains securing a good work life balance – at 55% today for UK respondents, decreasing 7% to 48% by 2020. Flexibility, as older personnel seek to mix retirement and work will becoming a bigger issue the report finds.

As it stands however, UK employers particularly lag behind the rest of Europe in terms of the suitability of the benefits they offer and the expected demand in 2020. With 48% responding that their benefits were unlikely or very unlikely to be up to scratch, compare to 24% that thought their packages will meet the expectation required to retain and motivate the employees of the future.