About two years from now, the first trickle of baby boomers hits early-retirement age. In the years after that, the trickle will become a flood. When they leave their jobs, who will be left to mind the store?
Younger boomers will move up. But behind the boomers lies a small generation, the baby bust. The number of workers aged 25 to 34 will shrink by nearly 9 percent in the decade ending in 2006, according to the Bureau of Labor Statistics.
Even now, there aren't enough hands and brains to fill all the positions available. As older boomers bail out, the shortage of workers is going to get worse. That is, unless companies offer incentives to get skilled middle-aged employees to stay.
Right now, employers are subsidizing their own brain drain, says Dennis Coleman, a principal in the consulting firm PricewaterhouseCoopers in Teaneck, N.J. Most retirement plans motivate workers to retire young.
A few companies, however, are designing plans aimed at retaining valued older people. Coleman expects many others to follow, once they see the light.
Just because people quit their regular jobs doesn't mean they'll go fishing. The majority of boomers want to work part time, according to a survey by Roper Starch Worldwide for the American Association of Retired Persons. Nearly one in five wants to start a business.
The AARP divides boomers into five different groups:
The Enthusiasts (13 percent of the total). These are the only people who don't intend to work. They look forward to quitting, think they'll have enough money and don't want to lift a finger ever again.
The Self-Reliants (30 percent). This group has the highest income and educational level and is saving money aggressively. They intend to work at least part time after retirement age, not because they have to but because their work is fun.
The Traditionalists (25 percent). They're a little less affluent but still doing okay. They expect to keep working at least part time, both for pleasure and the extra income.
The Anxious (23 percent). They earn less than the average boomer and can afford to put only a little money aside. They believe they'll have to keep working, perhaps full time.
The Strugglers (9 percent). This group earns the least and is saving virtually nothing. They're mostly female (64 percent), and more likely to be single, separated or divorced. Retirement isn't even on their radar screen.
Employees who can't afford to retire will stay on the job as long as they can.
But it's different for workers with good pensions or fat retirement plans. They'll quit, grab their money and supplement it with a part-time salary from another firm.
To retain these people, a few companies are trying something different. It's called "phased retirement," and it takes various forms.
For example, workers might retire, then be hired back for part-time or temporary work. They might be allowed shorter workweeks or workdays for a few years, at a lower rate of pay. They might go on a part-time schedule, with a less-demanding job.
In a new survey of nearly 600 employers by the consulting firm Watson Wyatt Worldwide, 16 percent reported making some use of phased-retirement options. Nearly half believe that these options will become more common in their companies. More than one-quarter showed interest in implementing phased retirement over the next two to three years.
The principal reason for offering these new options is to retain skilled workers, Watson Wyatt consultant Laurie Graig told my associate Dori Perrucci.
Unfortunately, the structure of most pension plans makes it awkward to offer a menu of phased-retirement options.
Under current regulations, you can't take retirement payments from your 401(k) plan if you're still an official employee. You can't get your monthly pension, either. In fact, your pension might be reduced if you work part-time for a few years.
But corporations can change their pension designs to make phased retirement more appealing. As this issue heats up, I'd also expect Congress to weigh in. Washington could rewrite the pension regulations to make it easier for employers to offer older workers phased-down jobs.
The downsizing craze isn't over yet. Companies are still offering early-retirement bonuses, especially after mergers and acquisitions.
In the future, however, "talented seniors will need to be courted, not discouraged," Coleman says.
There's going to be a struggle for scarce human resources. Employers should face the issue now.