The way we work

In Japan in 1900, life expectancy was 38; today it is 84. Similar leaps have been made around the world as societies have industrialized and modernized. Global life expectancy has more than doubled since 1900, and the World Health Organization now puts it at 71. Many people born today have a good chance of living to 100.

What this means is that traditional life models—covering everything from career planning to savings to attitudes to health—are out of date as people face the prospect of working into their late 70s and early 80s.

People’s lives are going to change very radically and this three-stage life of education, then work, then retirement, can’t be sustained.

--Lynda Gratton, Professor of Management Practice, London Business School

Outdated practices

“The way we currently run our lives and work is based on what came out of the Industrial Revolution and it’s just not working,” says Lynda Gratton, a professor of management practice at London Business School who specializes in identifying societal trends and how they influence the world of work. “People’s lives are going to change very radically and this three-stage life of education, then work, then retirement, can’t be sustained.

“As lives restructure, people will have to take time to re-energize and recreate their skills and that’s a real problem in terms of income. We talk about tangible assets, like finance, and intangible assets, like productivity and vitality. And nobody can work until the age of 75 without depleting their intangible assets.”

Individuals and families are experimenting with what all this means, notes Gratton. Options include things like taking time out from their careers to re-skill and re-energize or housing multiple generations under one roof to help with finances and responsibilities for care. She believes corporations and governments have been slower to respond to these societal shifts.

“A lot of people want to work longer but corporate policy can be very ageist and companies haven’t quite worked it out yet.” Gratton has a ready source of research and insights in her Future of Work consortium, which has worked with some 85 companies over the past five years. “Highly-skilled people in places like law firms, pharmaceutical companies and engineering companies are often encouraged to leave between the age of 55 and 60, but people who are going to live to 100 can’t afford to do that.”

Funding longer lives will require more saving and better planning, but there will also be times when things do not go as expected. A gap in earnings through illness or disability could have serious domino effects and people might be forced to dip into their savings or pension pot, threatening their income in their final years.

Perhaps the main consequence of the IP gap for employers will be a hit to productivity.

--Lynda Gratton, Professor of Management Practice, London Business School

Productivity hits

A report from Zurich Insurance Group, in conjunction with Oxford University’s Smith School of Enterprise and the Environment, suggests employers need to adapt to changing times and be aware of these growing issues. It warns about the negative effects for employers of the income protection gap (IP gap)—the reduction in household income as a consequence of the death or incapacitation of an adult wage earner on whom that household relies, when all public and private sources of replacement income have been taken into account.

“Perhaps the main consequence of the IP gap for employers will be a hit to productivity,” says the report. “Without adequate protection and with job prospects much reduced for the disabled, many workers will choose to work through minor disabilities at reduced capacity. This “presenteeism” will cost U.S. businesses more than billion USD per year. Left unchecked, IP gaps are likely to result in rising productivity hits as workforces age.”

Thinking about wellbeing

Gratton reports encouraging signs that employers are putting more emphasis on vitality and wellbeing at work. Some banks, for example, have been experimenting with stress monitoring – giving people wristbands that monitor their blood pressure and analyzing the work they find most stressful.

Although the global workforce is aging, there are only a handful of examples of companies that are noticeably embracing older workers. One major car manufacturer is piloting production line changes to help its aging workforce—45 percent of who will be over age 50 by 2020. It is testing ergonomic back supports, better lighting and mobile tool trolleys to bring tools within easier reach. Retailers, meanwhile, have been praised for employing older people on their shop floors.

An additional problem for global companies is the cadre of international employees who, employed outside their home countries, lack a government entity to support them when things go wrong. The pressure is on the global employer to help with any resulting income protection issues.

Finding solutions
“We think the income protection gap is a global challenge, and it’s too large for either the public or the private sector to tackle alone. A collaborative approach is needed and individuals should also take some responsibility,” says David Swaden, Senior Research Manager in Group Public Affairs for Zurich Insurance Group. “We want to improve the general understanding of the challenge, understand what drives it and come up with some possible solutions as well.”

Meanwhile, Professor Gratton is aware of the financial pressures people are facing: “People just don’t think about ‘What will I do when I’m 80?’ With government finances under pressure, we think the state will increasingly focus on the poor, leaving wealthier people to pay for themselves, so anything that encourages people to plan and save has to be good.”

Key takeaways

• As life expectancy increases, the traditional three-stage life of education, then work, then retirement is out of date.
• Individuals and families are leading the way in experimenting with options for changing life stages.
• Employers need to adapt to changing times and be aware of the growing issues.
• Some employers are putting more emphasis on vitality and wellbeing at work.
• Zurich believes the income protection gap is a global challenge and is too large for either the public or the private sector to tackle alone. A collaborative approach is needed and individuals should also take some responsibility.