Tackling the Great Mismatch: Retaining Talent at All Ages

This article is part of a special series sponsored by AARP featuring the Future of Work and was originally published on the OECD FORUM. It has been edited to adhere to ASA style.

The “Great Reshuffle”—a sizeable pickup in people changing jobs observed in several countries in the aftermath of the COVID-19 crisis—has led companies to think carefully about how they can attract and retain talent, particularly older workers. The crisis has exacerbated pre-existing labor and skill shortages in some sectors but also broadened to many more traditional ones. While structural factors like aging are shrinking the size of the traditional working-age population, the search for better jobs by many workers is also at play. At the onset of the pandemic, 55% of employers reported labor shortages, and by 2022 the percentage had risen to over 75%.

Widespread labor shortages present challenges for employers. But if they invest in valuing and retaining talent, this can boost productivity as well as providing more fulfilling careers for workers. At the same time, increased longevity means that many workers can and may want to work beyond the normal retirement age if their employability can be secured. But what are the key tools employers can use to retain talent?

Retaining Talent at All Ages, a new OECD report, answers precisely that question—first, by making the case for promoting employee retention and second, by providing actions that employers and governments can take to achieve this.

The Benefits of Worker Retention and Effective Strategies for Keeping Them

Workers are changing jobs with increased frequency. Job tenure has declined on average in the OECD countries by 9 months over the last decade to just under 9 years. Labor mobility is a natural feature of a market economy as it allows for the proper allocation of labor and addresses the mismatch between demand for and supply of skills. However, excessive worker turnover has significant costs for individuals, firms and society. This is particularly the case for older workers, who are more likely to stop working if they lose a job.

Promoting job retention can benefit all stakeholders and society. For employers, hiring and replacement costs can be very high, especially when the skills lost are specific to a business. Firms invest in training programs to enhance the human capital of their employees, but if employees change jobs frequently, firms have fewer incentives to invest in training. Thus, if employees remain in jobs, everyone can benefit. For society, helping older workers stay in the labor market longer eases concerns about the public costs associated with an aging population.

‘Promoting job retention can benefit all stakeholders and society.’

The 2022 AARP Global Employee Survey sheds light on the primary reasons behind employees leaving their jobs. The top three reasons are low pay, feeling undervalued and a lack of job/career advancement. Older workers ages 50 to 64 who retired also frequently cited health problems, along with difficulties with caregiving.

The OECD report identifies three key policy areas to retain talent: promoting better job quality, tackling workers’ difficulties in reconciling work responsibilities with health issues and caring responsibilities, and greater investment in training at all ages. Responding effectively to longer lifespans and capturing its benefits—while engendering greater retention of workers as part of the equation for success—will require action from all sectors. Changes in business behavior and practices will be necessary, and governments and social partners also have an important role to play in supporting employer actions. Here is a look at the three key areas.

I. Job quality: Better pay and improving working conditions

Not surprising, pay matters for retention: in general, low wages are associated with significantly higher quit rates. Essential to improving worker pay is increased productivity, which can be fostered by better management policies, improved training and more efficient skills use. In addition, collective bargaining and minimum wages can play an important role in making sure the benefits of productivity growth reach employees’ paychecks.

At the same time, non-financial aspects of job quality are critical as well. Thanks to developments in digital technology, employees increasingly value flexibility in their work arrangements, for instance opportunities to determine when and where they work, including through teleworking. Workplace conditions are certainly as relevant to older workers as they are to any other segment of the workforce. According to the 2022 AARP Global Employee Survey, older workers have less flexibility in their jobs compared to younger workers. This poses a serious concern in terms of their ability to have long and fulfilling careers.

Policies to improve non-financial aspects of job quality include addressing workers’ increased preferences for flexibility at work. Best Buy, a large U.S. retailer, found that by shifting the emphasis from being physically present at a particular time to giving employees control over where and when they do their work reduced staff turnover. Career development and progression are also key elements of job quality. A new retention scheme in the English National Health Service focused on improving job quality by boosting career progression and engagement, as well as creating a compassionate work culture. Better people-management skills, including the avoidance of discriminatory and negative attitudes toward older workers, can also allow organizations to reap the talent of a multigenerational workforce.

II. Health: focusing on employee well-being

Keeping older workers healthy and productive is another policy goal the OECD report identifies as key. Ill health is a major driver of labor market turnover; in 2019 on average across OECD countries one quarter of older workers (ages 50 to 64) who quit their job cited poor health. Younger workers are not unaffected, as 20% of workers ages 35 to 44 also quit for health reasons. Job strain, stress and burnout affects almost one in every three employees in OECD countries. Further, COVID-19 spurred a rise in telework; while this maintained economic activity and jobs, the isolation and accumulated stress took a heavy toll on mental health. While there is hope that with the return to more normal work practices the incidence of work-related mental health problems will recede, policy makers are seeking means of addressing the new challenges of the workplace’s digital transformation.

Effective career development and performance management can support skill use and enhance skills and experience of existing employees.

Policies to promote healthier working lives include comprehensive workplace health and well-being programs and workplace redesign to avoid unnecessary physical and mental strain. Turck, a U.S. manufacturer, offers an integrated program focusing on five pillars: financial, social, career, physical and community well-being.

In the area of mental health, organizations such as Mind, a UK mental health charity, have developed toolkits to help employers support workers in this key aspect of well-being. Another example in this arena is Bell Canada’s “Let’s Talk” program, which offers access to mental health care and incorporates practices to remove stigma from mental health issues in the workplace.

On the public side, meanwhile, governments can support good health in the workplace by ensuring adequate paid sick leave and timely return to work and workplace accommodation schemes.

III. Training: developing and engaging talent through lifelong learning

The OECD report also highlights how continual training and development throughout working lives is critical to ensure that employees have the right skills to stay employed, thrive in their jobs, and continue contributing as part of a strong workforce. All adults need to continually reskill and upskill to avoid obsolescence as digitalization and automation alter the content and tasks of jobs. Employers across all industries need to invest in the skills development of their workers. There are significant differences in training participation across OECD countries. On average, 41% of adults ages 45 to 54 participate in job-related training, but among those ages 55 to 64 only 24% participate (OECD, 2023). Yet, workers want to continue learning; the 2022 AARP Global Employee Survey finds that 41% of workers ages 45 and older who have not participated in any recent training would like to do so.

High-performance work practices play a key role in ensuring that firms are effectively using their employees’ skills. These practices include effective career development and performance management that can support skill use and enhance the skills and experience of existing employees. Tools such as mid-life career reviews, personal development plans and career conversations can help employees make informed decisions about their training needs and development opportunities. Training also should adapt to the needs of different workers. Small and Medium Enterprises (SMEs) often need greater support from government to be able to offer training opportunities. In the Netherlands, an initiative of the Dutch government called MKB!dee provides full grants to successful SMEs for training projects, prioritising ICT sectors, digitalization and the green transition. The Work for Tomorrow Act in Germany offers training-related subsidies to firms, with increased subsidies for small enterprises and for workers ages 45 and older.

Making changes in these three policy areas—promoting better job quality, improving employee health, and greater investment in training and skills—would help create better workplaces. With a strong commitment from employers, workers and governments, we can embrace the talent of an age-inclusive workforce and make our workplaces truly multigenerational.

Debra Whitman, PhD, is executive vice president and chief public policy officer at AARP in Washington, DC.

Stefano Scarpetta, PhD, is the director for Employment, Labour and Social Affairs for the OECD in Paris.

Photo credit: Shutterstock/fizkes