Gap in the Swiss labour market jeopardises transfer of know-how

A dangerous gap is opening up on the Swiss labour market: half of all employees currently retire early, and just 23% work beyond retirement age. Meanwhile, demographic trends mean that fewer and fewer younger people are joining the labour force, with the groups that could replace many of these older workers – highly skilled workers with university entrance-equivalent qualifications and skilled apprentices –very limited in size. All this means that by 2030, the Swiss labour market faces a shortfall of up to half a million workers.

Theoretically, migration is one way of tackling this shortfall, but using skilled labour from abroad will be impossible for the foreseeable future for political reasons. Automation is another potential solution, but automation itself is a black box: it is impossible to know to any degree of accuracy what its impact will be or, indeed, whether the jobs that need to be filled can be automated all.

230,000 employees – an untapped pool of labour

There is, however, a pool of potential labour within the Swiss economy that is currently untapped: the unemployed, the under-employed and the 'hidden reserve' of the over-50s. They represent a further 230,000 individuals who are keen to get back into work, they make up the largest single group on the Swiss labour market, and they have acquired skills and experience over their working lives and want to put them to good use. 30% have been forced to take retirement even though they would have preferred to carry on working. The cohort of 50 to 64-year-olds still in the labour market and willing to carry on beyond state pension age represents even greater potential: as illustrated by a survey conducted by Deloitte Switzerland¹, around 580,000 people fall into this category, 40% of all 50 to 64-year-olds in the labour force.

The 'age guillotine' and financial disincentives

So why are these motivated and highly skilled individuals not available to plug gaps in the Swiss labour market? The answer lies in the mismatch between ambition and reality. Although 40% of 50- to 64-year-olds would like to carry on working beyond retirement age, only very few of them assume that they will actually do so. Their mindset is that retirement age represents a cut-off point: they assume that they will not be working beyond that age and so rule this out as an option. This “age guillotine” among older workers also, however, has an impact on employers: many bosses assume “Oh, he’ll be retiring soon” and then fail to invest in training and promotion for older employees. And it is rare to find companies having meaningful discussions with employees approaching retirement age about their prospects and opportunities.

However, there are things that those in this age group who are still working or have taken early retirement can do to help themselves. Swiss workers need to take greater responsibility for understanding that they are the masters of their own destiny and to take control of their own continuing training rather than leaving it to their employer and the state. The low-skilled are most likely to be unemployed but also to rely on social security benefits rather than being proactive. Many are also embarrassed to discuss their lack of skills in detail. This, however, is where mindsets need to change in favour of continuing training and lifelong learning.

There are also financial disincentives that keep people in unemployment or stop them working beyond retirement age even when they would like to do so. Does this mean that many Swiss workers have the luxury of being so well off that it is not attractive to carry on working? That seems unlikely. Rather, the state and employers are not providing adequate financial incentives – or dismantling the disincentives. Many potential employees would, in fact, accept lower pay but are reluctant to carry on contributing to the pension insurance scheme when they will not benefit from it. Not only that, but as workers get older, employer contributions to pension insurance increase, making it unattractive to develop models that encourage older employees to stay in work.

We need a culture change within management

Any newly created jobs must, of course, be tailored to the needs of companies. A Swiss senior manager once commented that he took a critical view of continuing training for older workers: after all, he said, he did not need 300 newly trained coaches. The onus is not solely on employers, but they must at least support their employees and offer them opportunities underpinned by robust strategies and specific measures, such as building cross-generational teams and adapting working models and job descriptions.

The availability of continued employment and ongoing training for older workers is still very limited. We need a real culture change – not just a few superficial changes, but a fundamental shift in the mindset of management regarding cooperation between older and younger employees, which is where conflict often arises. Older employees have acquired self-confidence down the years and formed strong views that can lead to tension and conflict, while younger bosses are relieved when such self-confident employees leave the company.

Early retirement as a sign of prosperity

If, then, the above-average rate of early retirement among 50 to 64-year-olds is really just a sign of prosperity, how can we make it attractive to carry on working without financial motives? By emphasising that work is meaningful in itself? By stressing the value of activity and structure? That could help motivate the pool of individuals who do not actually need the money that continued employment brings. In fact, in a Deloitte study², the 50plus age group cite doing a meaningful job as the most important benefit of working, whereas this aspect features much lower down the list of factors motivating younger workers, ranking between fifth and tenth.

The state, too, must create a more attractive environment, for example by making the retirement age flexible and dismantling the financial disincentives to resuming work once someone has taken their pension. A major change in the retirement age may well be unlikely at the moment, but it is important to have a serious debate about alternative models. Any change in the system would almost certainly require a referendum, so it is important that younger workers take an interest in any proposed change. If younger workers showed the same enthusiasm for a sustainable pension system as they currently do for a sustainable policy on climate change, reforms would attract majority support.

Slamming on the brakes on just before retirement

Nevertheless, the impetus to develop new forms of work must also come from the private sector. The “bow career” and part-time models of employment may well enable individuals to “coast” towards retirement. At the end of their career, individuals take a conscious decision to step back and hand on responsibility, but many are still embedded in traditional employment modes, in which individuals end their career at a high level of seniority and at a very specific point in time. In other words, they slam on the brakes suddenly and completely, believing that any other arrangements would be a step backwards – a humiliation, even. One possible solution would be a flexible retirement “corridor”, with individuals deciding for themselves when they wish to retire between the ages of 60 and 70. That may sound radical, but provided the necessary safeguards are in place, it could be a much better option. Countries including Canada and Sweden have good experiences of such a system. And arrangements of this kind may help to overcome the “age guillotine” mindset, encouraging individuals to think for themselves and be more flexible.

Recognising the pace of change – and the looming drama

The first few companies are emerging as pioneers, offering innovative new models of employment. However, most companies still underestimate the dynamics of the labour market. It seems as if the pressure has to intensify – and the disadvantages to become more marked – before anything happens. We still do not fully appreciate how dramatic the labour shortage will be once the baby-boomers start leaving the labour market and there is no one left to ensure the cross-generational transfer of know-how. But being too slow to recognise and tackle this problem will bring major problems. We need more pioneers with constructive solutions to show us all how it can be done.