Are you prepared for the silver boom?

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An ageing population in New Zealand, and in other developed countries, entails two key consequences of the HR sector: the loss of expertise and higher wages. This is according to an independent report by the New Zealand Institute of Economic Research (NZIER) entitled Silver lining? What firms need to think about as New Zealand ages.

To start, as baby boomers increasingly exiting the workforce, there will be a drain on the expertise that this generation brought to the economy. HR needs to consider how to offset this. “Firms will need to think hard about the right human resource practices that help retain the knowledge, experience and skillset of older workers,” the report states.

In addition, the ageing population is going to drive up the cost of labour for New Zealand businesses due to intensified competition. “Ageing shrinks the future pool of labour as a fraction of society. That drives up wages as firms bid for talent,” according to the report. The NZIER has forecast a reduction in the labour pool of 5.5% (over the next 50 years) and a 16% increase in wages in the long-term.

Global competition will only make this situation more acute. “Competition for skilled workers, who are increasingly mobile between countries, will intensify, pushing up wages,” the report warns.

The manufacturing sector will be hit hardest, but the NZIER has some suggestions for how to adapt. To cope with the increased cost of labour, companies should focus on niche markets. “Industries will need to move away from making goods and competing on cost and get better at competing in niches using specific expertise that is hard to replicate,” Dr Kirdan Lees, senior economist, said.

In addition, HR should focus on designing policies that will help retain staff to ease the flow of older, experienced workers. Finally, and more generally, New Zealand businesses should be prepared. “The trick is to expect change, to be aware of the trends that will dominate the commercial landscape in the years ahead and to be prepared to adapt,” the report suggested.

Key HR Takeaway:

 

  • As New Zealand’s population ages, businesses are going to lose baby boomers and the cost of labour will increase.
  • The effects will be worst in the manufacturing sector.
  • Companies should compete with their expertise, rather than cost.
  • HR should focus on staff retention.
  • And everyone should be prepared!

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