Generational debates about the workplace have been going on for years now between Baby Boomers and their younger Gen X colleagues. But one topic has now been brought to light by a new study which answers the age-old question: as older Australians delay retirement to extend their time in the workforce, are they stopping Gen X from nabbing the top positions?
While the younger generation tends to think that Baby Boomers are in fact acting as a blockade on their climb to the top, older workers argue that if a worker is valuable enough, either another managerial position would be created to suit them or a rival company would swoop in and poach them.
However, a new study has sided with the younger generation, finding that in situations where older workers postponed retirement, younger colleagues’ wages grew more slowly, and they received fewer promotions. In light of the results, the study stated that workers’ careers are in fact interlinked.
The study – carried out by Nicola Bianchi and colleagues – defined three job categories as blue-collar, white-collar and managerial. According to the results, a retirement delay of one year in white-collar workers saw a 20 per cent drop in promotions while an additional delay of a year was linked to a 50 per cent decrease in managerial promotions.
For each additional year that a company’s average retirement delay increased, the annual wage growth of younger workers at the company fell by 2.3 per cent. And although, the wage growth only fell among workers over the age of 35, the team expected the effects were likely to trickle down to the youngest employees which often includes Gen Z workers.
The study suggested that when hiring these younger workers, companies should be wary of promising a satisfying career trajectory if the careers of older workers could possibly interfere. It added that if the company can’t provide promotions, they should be looking into offering higher wages for those younger workers who miss out on top positions.
The effects were most prominent at slow-growing companies where it was difficult to create new managerial positions for younger workers. However, those Gen Xers who were disadvantaged in their position at work were found to be reluctant to quit and give up their track record with their current employer only to move back to the starting line with another company.
The study looked at a 2011 policy reform in Italy that tightened pension eligibility requirements. The reform changed the formula that is used to calculate when a person could claim full benefits meaning many workers were forced to delay retirement and continue on in the workforce.
In many other countries around the world, due to an increasing life expectancy, some policymakers are pushing to raise the age for pension eligibility. In Australia however, there have been calls for a universal pension that would be provided as a base income to all older Australians to avoid sinking into poverty during retirement.
With retirement expected to last around 30 years these days, experts say a base universal pension would not only allow people to prepare for the long-term retirement trajectory but it would also allow people to properly save without being worried about it affecting their pension balance.
IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial situation, objectives or needs. That means it’s not financial product advice and shouldn’t be relied upon as if it is. Before making a financial decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services advice.
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