Trendspotting: Businesses Face Boomer Brain Drain

NEWSWIRE: 3/11/19

• As Boomers enter their final years in the workforce, sectors with large shares of 55+ workers are bracing for the loss of talent. With roughly 4 out of 5 HR managers believing that older employees make essential contributions to their businesses' success, a similar share agrees that "managing their retirement" is a big near-term challenge. (The Washington Post)
• NH: If it seems like there are lot more Americans approaching retirement, it's because there are. The 60-to-74 share of the workforce has more than doubled over the last 20 years. (See chart below.) Less than half of this rise is due to the sheer size of Boomer birth cohorts. A bigger cause is the large jump in the share of people in this age bracket who are working. Since 2000, Americans in older age brackets are generally a lot more likely to work, in part due to financial need. And Americans in younger age brackets--especially those in their teens and early 20s, a rising share of whom live with their parents--are generally a lot less likely to work. (Hmm, I wonder if there could be a connection? See: "Trendspotting: 1/14/19.")
• Yet the reason HR managers are worried isn't just because the yearly rate of retirement attrition is rising. It's also because they fear these particular (Boomer) workers possess talents and skills that younger Xers and Millennials won't easily replace. (See the NBER study from which the Washington Post writer drew some of his conclusions.) When asked if "the risk of losing talent and knowledge" due to impending retirements is a significant risk for their business over the medium or long term, over 70% agreed; only 15% disagreed. In questions asking HR managers to rank retirement next to other workforce issues (like young-employee turnover, attracting new talent, etc.), they were emphatic: 30% said the impending retirement wave was more important; 53% said as important; and only 18% said less important.
• Apparently, the C-suite just isn't persuaded by all those "Old Economy Steve" posters that show privileged Boomers with little talent getting promoted to cushy jobs with high salaries. Some Millennials and Xers might hope that companies are worried about how to remove all that expensive Boomer deadwood to make room for their own promotions. But no. When asked to compare reasons why the "orderly retirement of employees" is a challenge, just 24% of HR managers said that rising benefit costs are on their minds; and only 35% mentioned "the promotion of younger workers."  So why is it a challenge? A full 60% mentioned maintaining worker productivity, and 83% mentioned "knowledge transfer" to younger employees. (See chart below.)
• Let's cut to the bottom line. Yes, young Boomer workers were in many respects more favored early in life by public policy (subsidized college educations) and by the economy (higher wages relative to older workers) than were young Xers and young Millennials. On the other hand, much evidence suggests that Boomers have returned that favor by manifesting a higher degree of "work centrality" in their lives than either their parents did or their adult children do. Over their careers, the always-do-more ethic of these self-professed "workaholics" has created a generation of senior employees whose deep reserves of expertise and experience have impressed top business leaders--who are nervous about their impending departure.
• In general, the most concerned employers are those who have a disproportionate share of Boomer employees. These include those in manufacturing, mining (including energy), and the nonprofit sector. Retail and service-sector employers are not as concerned. (See chart below for detail on types of business that employ the most and the fewest older workers.) For now, employers are doing all they can to retain valued Boomers by simply keeping them on contract long after their formal retirement age. Over the last decade, the most-educated and highest-paid workers age 65+ are experiencing the biggest leaps in workforce participation. Predictably, this is causing a very rapid rise in the average wages of seniors overall.

• Purdue Pharma, maker of OxyContin, is preparing a possible bankruptcy filing. Facing hundreds of lawsuits over its alleged willful ignorance of the dangers of opioids, Purdue risks becoming the public face of the nation’s opioid epidemic. (The Wall Street Journal)
• NH: Back in June 2017, we specifically tagged Purdue Pharma, the privately held manufacturer of OxyContin (a best-selling brand of oxycodone), as a huge litigation target. (See: "The Next Big Thing: A Nation Hooked.") Guess we got that right. Purdue is currently being sued by at least 36 states and over 1,500 cities and counties--that is, by pretty much everybody in America. The plaintiffs allege that Purdue's deceptive marketing practices and failure to supervise illegal pill mills contributed to tens of thousands of deaths in their constituencies. The crowd with torches and pitchforks is bipartisan. One of the leaders, GOP Missouri state AG Josh Hawley, is now a U.S. senator.
• Anticipating that bankruptcy is a standard response to litigation onslaughts, many of the plaintiffs are also suing various members of the Sackler family, which owns the Stamford, CT-based firm. Purdue does not generally retain earnings, and the Sackler family was recently ranked by Fortune as the 19th wealthiest in America, with a net worth of $13 billion. The plaintiffs charge that several family members personally intervened to downplay health warnings and spur sales at all cost.
• The Sacklers can--and no doubt will--claim that they were simply selling an FDA-approved drug to licensed doctors who bore the responsibility for prescribing appropriately. They may also hope that the recent downturn in opioid deaths (see: "Trendspotting: 12/17/18") takes this issue off the front pages. Good luck with that. History teaches that public backlash is always and everywhere a very blunt instrument: It punishes harshly, belatedly, and broadly--with little regard for legal niceties.
• In the eyes of Millennial freelance writer Maya Kosoff, her generation’s online caution will make its future political candidates “scandal-proof.” Though Millennial politicians will have plenty of social media content for opposition researchers to peruse, the search may prove disappointing since these platforms were probably sanitized long ago for an even tougher crowd: their parents and employers. (The Washington Post)
• NH: Boomers and Xers grew up assuming that one's private life would always stay private and that any weird stuff you did early in life would never see the light of day. The rise of the Internet sure blew that assumption out of the water. And some of the stuff that's now turning up seems fantastic even to older generations. Young Virginians dressing up in blackface and KKK garb? I mean, wow, who would have guessed?
• Millennials, Kosoff argues, are not making that mistake. They assume from the get-go that everything they do is being monitored and recorded. And any who haven't yet learned that lesson from their parents, teachers, or employers are sure to learn it from their "friends." The advent of callout culture and cancel culture means you risk categorical social ostracism if you say the wrong thing at the wrong time about the wrong person.
• I think Kosoff is right. Millennials are going along to get along. Risk averse and team oriented, Millennials are taking care to smooth over the edge that young Xers cultivated and suppress the careless remark that came so naturally to young Boomers. On the good side, yes, this trend is likely to generate a calmer and more constructive public space by the time Millennials reach midlife and (so to speak) take control of America. What Kosoff leaves unmentioned are the long-term costs of this repressive, self-censoring behavior. My prediction: Millennials themselves will be called out as a generation by their own coming-of-age kids, sometime in the 2040s. I can hear the passionate screaming now. Welcome to America's next awakening.
• Nearly a third (32%) of Americans 21 and under say that they’re dissatisfied with the effectiveness of health care treatment they’ve received, far higher than any other age group. Young adults are also the most likely to prioritize transparency and convenience and to want doctors to prescribe medication that they expect or request—in other words, an on-demand system that’s more like ordering from Amazon than making an appointment at a clinic. (Accenture)
• Walmart is looking to launch its own in-house ad business instead of relying on outside vendors. The mega-retailer’s pending entrance into the already-crowded digital advertising market poses a problem for firms (hello, Google and Facebook) that earn most of their revenue from ads. (The Wall Street Journal)
• NH: As we predicted a year ago (see: "The Next Big Thing: Danger Ahead for Google and Facebook?"), Amazon has now become the biggest digital ad-sales threat to the combined duopoly of Google and Facebook. Amazon has now surpassed Google in the share of all initial product searches by consumers. But hold on. It's not just Amazon. Now here comes Walmart, who also figures it may as well sell ads on its own fast-growing e-commerce site. Sure, Walmart's digital sales (at $16 billion last year) are not yet one-tenth of Amazon's, but they continue to grow at a 40%+ YoY clip. And then there's eBay and Etsy and Hulu. And for a real game changer, think about an ad-supported version of Netflix.
• The threat to Google-Book is not just all the fresh viewer territory now for sale. (Recall how opening up the west caused land prices to fall.) It's also the fact that these companies want to take over the sale of ads--and not just hand the transaction over to the two giants. This in turn will cut into Google-Book's margins. In a related bit of tough news for FB investors (which we previewed in January; see: "The Next Big Thing: Google-Facebook: It's Not Over"), Mark Zuckerberg is doubling down on his determination to move toward private, encrypted communications, leaving onlookers wondering how this future is going to generate revenue.
• A recent NYT piece sheds light on the growing share of young adults who are “bankrolled” by their parents. Despite its taboo reputation, receiving assistance (whether in the form of cash or unpaid labor) from one’s parents is an increasingly vital safety net for a generation that graduated into a tough post-recession labor market. (The New York Times)
• NH: We already covered the Country Financial survey cited in this article. (See: "Trendspotting: 7/2/18.") Another survey, by TD Financial, asks "How Millennial Parents Raise Kids Without Risking Their Own Financial Future"--and then answers: "TD Ameritrade survey reveals grandparents are the secret; providing time and money to the tune of $253 billion each year." The author correctly points out that parents and grandparents play a vastly larger role in the lives of young-adult Millennials than they did in the lives of any other young-adult generation in living memory. You see it in real estate purchases, in marriages, on vacations, and in TV programming. In the show Thirtysomething (about Boomer yuppies in the late Reagan years), I don't think I ever recall seeing a parent helping out a young adult with money. And that's because times have changed: Old people today are wealthier, and young people are poorer.
• Critics point out, rightly, that many Millennials have to pull their own weight without any family help. But that just makes the burden of parental help harder for Millennials to bear, since--rich or poor--the inequality they experience is so often a mere reflection of the inequality of their parents. A common and very Millennial response is to be open about parental help and to acknowledge that no one gets anywhere on his or her own. As Fatherly founder Simon Isaacs (age 38) puts it, “I think Millennials need to get past this narrative they’ve made it on their own and ‘I pulled myself up by my boot straps.’ It hides all the kinds of ways they have been privileged by their race or parental help.” To many older Americans, you might as well say that we all belong to the Borg. But then again, they're not voting for AOC.
• In a piece paying tribute to Luke Perry, writer Joe Donnelly says the actor’s death is personal for Generation X. For some Xer fans, Perry was their first big crush; for others, the tortured bad boy he played on 90210 was a character they related to or aspired to be as they took their own meandering paths through life. (Los Angeles Times)
• NH: It's not that other Xer icons haven't died. (Think of River Phoenix, Kurt Cobain, or Chris Cornell.) It's that Luke Perry is the first to die (seemingly) of natural causes--and not from a lifestyle set to "gonzo." In the long-running series Beverly Hills, 90210, Luke reminded many Xers of the growing-up years in which they only had each other. (How many parents ever showed up on this show?) He was the cool guy so many of them aspired to become--and the strong guy they wished they had as a friend to protect them.
• Much of the Xer commentary surrounding Perry's death focused (as usual) on whether their aging generation will ever make a difference. And whether it makes a difference that it makes a difference. Matthew Hennessey, author of Zero Hour for Generation X, observed that America's political leadership seems to be going directly from Boomers to Millennials. “It feels like the torch is being handed right over our heads.” Rolling Stone writer Rob Sheffield noted that, at the recent introduction of Bohemian Rhapsody at the Academy Awards, Mike Myers and Dana Carvey did their Wayne's World schtick as a pathetic sideshow along all the glory that belonged to Boomers like Queen.
• Let's close with the comment of still another Xer, author Neal Pollack. "Who cares? Do you really want to be in charge? If Thanos snapped his fingers and every single member of Gen X vanished, the world would be fine. Let Donald Trump and Alexandria Ocasio-Cortez fight it out in the trenches. It’s a good show."
• Russia’s brief demographic rebound is over: The country's YoY population growth rate is projected to hit -1.5% in 2019. Not even rising fertility rates can stop Russia’s historically small young adult cohorts from sending the country into net population decline territory. (MercatorNet)

• NH: In 2018, Russia reported its first overall population decline in a decade (since 2008). Vladimir Putin claims credit for reversing Russia's demographic decline. And he probably deserves credit, since Russia's total fertility rate (TFR) began rebounding from its late-1990s trough right around the time he took power. Unfortunately, that much-higher TFR can only do so much against the impact of the emerging dearth of women in the high-fertility age brackets (age 20 to 30). The best Russia can do is keep the TFR up and wait until that Yeltsin-era famine passes. (See: "Trendspotting: 1/16/18.") By the early 2030s, the children of Putin's own fertility recovery will begin to make a difference.

• Workplace “ghosting,” quitting without giving advance notice and then becoming unreachable, is on the rise. These workers are harnessing the power of a historically tight labor market in order to send a message to employers who have wronged them—or just to avoid an uncomfortable conversation. (The Washington Post)
• NH: The verb "ghost" is normally applied to dating. In the December Beige Book, the Chicago Fed used it to describe worker behavior: "A number of contacts said that they had been ‘ghosted,’ a situation in which a worker stops coming to work without notice and then is impossible to contact.” Sure, plenty of these ghosters are Millennials, who probably have a pretty good idea whether their relationship with their employer is anything better than transactional. And if it isn't, why waste everyone's time by communicating? And don't you just hate "uncomfortable conversations"? (See: "Trendspotting: 1/7/19.")
• Sustainability has gone from a “nice-to-have” to a “must-have” in fashion, with both boutique shops and fast-fashion giants jumping on board. But retailers beware: The Millennial shoppers who are making transparency and environmental responsibility key selling points are also quick to name and shame companies that they believe aren’t walking the walk. (Advertising Age)
• NH: The fashion industry, being all about image, is especially responsive to any issue that appears to reflect on social sensitivity. And the rising profile of ESG positioning says a lot about how radical Boomer values--once relegated to the fringe (or to brands like Patagonia)--have now become mainstream. (See: "The Next Big Thing: The Aging of Aquarius.") You don't have to be a cynic to wonder whether most of this image generation has anything to do with the underlying reality. Do I know, for example, whether recycling an old cloth coat actually uses less energy and water than fabricating a new one? Of course not. That's why we try to use markets with prices--adjusted for social costs. Even the old command-and-control Soviet economy used "shadow prices." But today we are satisfied with... impressions.

DID YOU KNOW?

From MTV to VIP. The music industry is changing. In the face of plummeting CD sales, some artists have optimized their business models to take advantage of the fast-growing (but still comparatively small) music streaming space. Others have doubled down on a more lucrative pursuit: live experiences. Packed arenas mean big paydays for artists—especially given the growing prevalence of premium VIP experiences. The VIP package for a recent Justin Timberlake tour included prime seats, pre-show lounge access, and on-site concierge services for $950. The cost of VIP access to high-profile acts can even reach quadruple digits—Metallica’s premium package, for instance, costs $2,500. For newer artists whose earning power at the gate is limited, VIP experiences can be even more valuable, generating as much as $100,000 in additional revenue over the course of a tour. On top of the revenue boost, VIP experiences also enable artists to connect with their fans in a more personal way—a primary concern of today’s Millennial acts.