As Colorado recovers from the pandemic, the state continues to gain steam toward growing the labor force and filling open positions. Yet, one area that may impact the continued labor force growth today and in the future are the mature and aging workers. This segment of the talent pipeline will be critical to maintaining a robust employee base, especially given the continually declining birth rate.
Colorado has the second-fastest aging population in the United States. Many businesses and government agencies have been aware of the demographic shift of increasing numbers of older workers and declining numbers of younger workers. However, working to implement changes to retain aging talent has been slow. Greater awareness and action is needed. It will take time, effort, evaluation, and informed management teams to tackle the transition into a workplace that will attract and retain all age groups, ensuring companies and economies can grow
In the coming years, mature and older workers will play an increasing role in Colorado’s workforce. Consider, between 2010 and 2040, the category of Colorado workers over the age of 54 is expected to grow from one in every five workers, to nearly one in every four. Although Colorado is not unique in facing this changing dynamic, the impacts of the pandemic and the continued labor force shortages have only sharpened the focus of needing a sea change approach to both public and corporate policy to harness the full benefits of the aging workforce.
As a result of the COVID-19 pandemic, Colorado is facing an even more significant labor shortage. While the state has struggled to find enough skilled workers for several years, there are currently more than 149,750 job openings according to Connecting Colorado, a partner of the Colorado Department of Labor and Employment.
The effects of the pandemic on the mature workforce have been especially pronounced for workers 65-years and older. The overall Colorado labor force participation rate has rebounded to pre-pandemic levels. However, it is down by almost two percentage points for workers 65-years and older. In December 2019, the labor force participation rate was 28.8% for 65-years and older workers. But, in January 2022, it fell to 27.2%. The drop in the labor force participation rate for workers 65-years and older remains a troubling trend.
While there are indications the trend for older workers will improve in the coming years, the longer it takes, the more workers who are otherwise willing, able, and interested in continuing to work will instead remain outside of the labor force.
According to the 2020 AARP study “Insights from Global Employers: The Future of Work is Living, Learning, and Earning Longer,” 83% of global business leaders recognize that multigenerational workforces are key to growth and long-term success of their companies. Multigenerational workforces are workplaces that employ people of all ages, allowing for innovation, collaboration and learning opportunities for all employees.
Acknowledging the skills, experience, and knowledge that older workers can bring to the workforce is an important first step in adjusting to the ongoing demographic shift.
However, the same AARP survey indicated that global business leaders have not adopted internal policy changes to the same degree they recognize the opportunity and productivity impacts of doing so. Of the employers surveyed, 74% agreed that they would provide training and lifelong learning opportunities for older employees if they were given the appropriate information on how to properly implement a program. As of December 2020, only 6% already had unbiased recruitment processes in place.
To meet the labor demands, Colorado must retain and hire skilled workers, especially mature and older workers who are willing and able to work but struggle to find a job or stay employed because of their age. Employers that adopt changes to better adapt to the demands of the aging workforce will benefit with access to the talent needed to grow the business
How do we do meet the demand? The good news, in addition to pioneering the answer on our own, we can take a clue from successes around the globe to find the answer.
Public grants to adapt
Public grants could be a useful tool for adjusting the workplace to accommodate the increase in the aging workforce. Kansas, New Hampshire, and Singapore have implemented successful publicly funded programs that help ease the uncertainty of how to get started.
As an example, in 1996, the Kansas Department of Aging launched the Older Kansas Employment Program (OKEP) designed to provide employment placement services to Kansans 55 years and older. In 2017, over 2,400 older adults were served through this program. OKEP is funded by the Kansas legislature through a state grant and the Kansas Older Worker Taskforce recommends and allocates the funding. In fiscal year 2019, OKEP received over $500,000 in funding and the state of Kansas determined a three-fold return on investment measured by the increase of wages to participants in the program. According to the Older Kansans Employment Program Fiscal Year 2019 Annual Report, “for every $1 spent on the OKEP program, $3.23 of income and sales tax was returned to the state of Kansas.”
Another opportunity for adapting to the demographic is to utilize tax incentives for employers that hire, retain, and train aging workers. As The Bell Policy Center noted, these tax incentives “should be paired with strong evaluation mechanisms and targeted to support workers in selective areas, industries, and those more likely to face discrimination.”
Colorado already has the Worker Opportunity Tax Credit (WOTC) which incentivizes employers to hire a specific group of individuals. As of now, the targeted individuals are welfare recipients, veterans receiving food stamps, veterans with disabilities, ex-felons, designated community residents (high risk youth), vocational rehabilitation recipients, supplemental security income recipients, long term Temporary Assistance for Needy Families (TANF) recipients, and unemployed veterans. If the WOTC added older workers (65-years and older) as a targeted group, this would benefit employers and help address the demographic issues Colorado’s workforce is facing. Employers would benefit from hiring these workers, providing supplemental training, and earning a tax credit for doing so.
Education and workforce training
The focus on the aging workforce has a dual purpose of supporting older workers that remain employed, but also allows them to adapt to the changes in the job market and demand for different skills and credentials.
Another program for accommodating the aging workforce’s needs is BMW’s Today for Tomorrow program. This production line program was piloted in Dingolfing, Southern Bavaria in 2017. BMW recognized its aging workforce and the necessary production line changes to keep their employees happy and healthy. The managers of the BMW plant decided to implement minor changes: “better seats, new workbenches that could be adjusted to an individual’s height, wooden flooring that provided better cushioning and insulation.”
When the BMW managers implemented the workplace changes, they also assigned a mix of younger and older workers to operate next to each other at a regular production pace of 560 gear boxes per day. After three months of the mixed production line and subtle workplace changes, BMW found that the mixed age production line productivity improved by 7%, the initial absenteeism rate decreased by half, and the defect rate dropped to zero.
COVID federal relief funds could be a way of funding the necessary workforce training and learning opportunities for aging workers. Catalyzing employers to educate and train their older workers would benefit Colorado’s economy, older workers, and employers.
The Aging Workforce Initiative (AWI) is another example that Colorado could reference and expand on for training and educational purposes. AWI is a program that was made with the intent to help workforce centers and similar entities to better understand the needs of the aging workforce specifically for workers 55-years and older, helping equip older workers to reenter the workforce and/or secure new employment. The program is funded by the U.S. Department of Labor’s Employment and Training Administration. The program focuses on using grants to help build a better capacity for the workforce to assist the older individuals and to help the older individuals learn model skill development.
In AWI, the companies selected to receive the $1 million grants were responsible for targeting a few key areas that are listed in the Solicitation for Grant Applications. The specific areas ranged from training techniques to self-employment to enhancing already learned skills and targeting more needy older worker subgroups.
Such a program would focus on older adults training and education and could be funded by the state and implemented in Colorado. The grants could go to five to ten Colorado communities throughout the state ensuring rural, mountain, plains, and the Denver Metro Area were included. This would utilize the lessons learned from AWI and apply them to the Colorado program, provide further enhancements that would, equip older adults with the ability to evolve and adapt to the changing skill sets and knowledge needed to continue work thus expanding the talent pool for employers to draw from.
A policy shift to phased retirement options
Colorado employers could continue to access decades of mature talent by creating more phased retirement options that allow an employer to gradually reduce hours worked for the aging workers. This would allow older experienced employees to mentor younger talent as well as maintain corporate productivity and revenue generation. Colorado could utilize part-time work, seasonal work, volunteer work, and job-sharing to incentivize the aging workers to remain in the workforce and take advantage of a phased retirement plan.
For some older adults, staying engaged in the workplace in a capacity less than full-time would allow them to continue working for as long as they wish. The concept of phased retirement allows aging workers to reduce their working hours as they start their transition toward retirement. A phased retirement program in Canada allowed workers to decrease their working hours and receive a portion of their pension benefits from employer-sponsored pension plans.[xxiv] These same workers were still allowed to accrue pension benefits in the same plan as they were collecting benefits and still working. Although Colorado could not implement this exact program, it is important for the state and its businesses to acknowledge the abundance of options for phased retirement plans that could be replicated.
One factor that can impact an older adult’s decision to keep working is the way in which retirement income is treated for tax purposes — that is, whether an older adult is penalized for earning more income by reducing benefits from existing retirement streams.
In 2021, Colorado passed HB21-1311. Before this bill was signed into law, taxpayers aged 55 to 64 could deduct a limit of $20,000 of pension and annuity income, including federally taxable social security income, when calculating their taxable income in the state of Colorado. While Coloradans aged 65-years and older could deduct up to $24,000 when calculating their taxable income. However, with the passage of the bill, beginning in 2022 the limit was raised so that all federally taxable social security income could be deducted. The limits still apply to all other forms of pension and annuity income. Policy that would reduce caps on other forms of pension and annuity income would increase older adults’ willingness and interest in staying in the workforce longer.
In the 2022 legislative session, lawmakers passed HB22-1101, a measure that will expand a program that was set to expire in July of 2023. The program “allows a public employees’ retirement association (PERA) service retiree to work full-time without any reduction in the service retiree’s retirement benefits for a rural school district that has a critical shortage of qualified individuals with specific experience, skills, or qualifications that the service retiree has.” This bill becoming law made the program permanent, adds school nurses and paraprofessionals to those eligible for post-PERA retirement full-time employment and allows charter schools or a board of cooperative services to participate in the program that are in a rural school district. Given the extreme shortage of teachers in rural areas, this policy benefits the education system, older adults seeking work, children, and the economy.
HB22-1057, Public Employees’ Retirement Association (PERA) Employment After Teacher Retirement also aims to decrease the stress of substitute teacher shortages the state is facing. Without this bill, PERA “limits the number of days that a retired teacher can work as a substitute teacher.” This bill became law as well.
Another bill focused on the aging workforce is HB22-1035, the Modernization of The Older Coloradans’ Act which proposes several updates to the “Older Coloradans’ Act.” The bill is seeking to reorganize the Colorado Commission on Aging to involve more older Coloradans voices, appoint a representative from the Colorado Department of Human Services to be a liaison for the Commission, and create a technical advisory committee of state agency representatives to oversee the implementation of the strategic plan. Language was added that specifically addresses continued employment opportunities for older adults who need or choose to work. HB22-1035 has passed out of the legislature and has been signed by the governor.