As Workforces Age, Look to Sweden

Until recently, global economic growth and corporate profits and productivity were bolstered by steadily rising numbers of younger workers. However, due to falling birth rates over the last several decades, the growth in younger working age populations is now slowing dramatically. Between 2000 and 2015, for example, global populations age 20-54 increased 24%. Between 2015 and 2030, growth in these populations will fall to just 10%.

 

So where will tomorrow’s workers come from? Policy makers, economists, and corporate leaders are increasingly recognizing that future workforce and economic growth will be driven by older populations: Between 2015 and 2030, the age 55+ population will increase 49%, five times faster than under age 55 working populations. To sustain economic growth, experts are now looking for national policies, best practices, and strategies to engage, motivate, and retain older workers.

 

Many are now taking a close look at Sweden. Among major OECD economies, Sweden ranks #1 in labor force participation rates among populations age 55+. If other OECD economies could match Sweden’s engagement of older workers, the benefits would be enormous.  According to a recent study by PwC, the OECD could add $2.6 trillion to its total GDP if other nations increased employment rates among people age over 55 to levels achieved in Sweden.

So how has Sweden achieved such enviable workforce participation rates among its older populations? Many attribute the nation’s success to a mix of government foresight and proactive and positive collaboration between labor organizations and companies. While pension and tax policies penalize older workers in many countries, Sweden reformed its pension system in 1999 to allow for continued work while receiving full government pension payments. A decade ago, Sweden created an in-work tax credit that was particularly generous for older workers, abolished payroll taxes and pension contributions for older employees, and modified laws to increase older work employability through the 2007 Employment Protection Act.  In 2009, new laws were introduced to combat age discrimination. In the private sector, cooperation between companies and labor organizations has empowered older workers to find new ways to work.  For example, job security councils have been formed nationwide to support the unemployed, and to help older workers re-train and update skills for new career paths.

 

But there is room to improve even for the Swedes. Although Sweden excels in labor for participation among those age 55-64, its workforce participation for those age 65+ is decidedly average. In part, this is due to cultural norms and corporate policies that encourage exit at a traditional retirement age. Moreover, according to a recent Manpower survey, compared to other nations, Swedish companies rank surprisingly badly in their implementation of formal policies to recruit and retain older workers.

 

As other nations face their own workforce aging issues, they would be wise to examine both the strengths and weaknesses of the Swedish system. Although not all best practices are portable across borders, nations which learn from strategies that apply most effectively to their own workforce environments will be best prepared for workforce aging in the coming decades.

© 2020 Baxter Consulting Group