Fostering employment of older engineers in manufacturing sector

Many manufacturing companies are boosting the employment of older engineers in order to overcome skilled labour shortages in engineering, according to a study by the Cologne Institute for Economic Research. Companies are deliberately hiring older engineers, offering incentives to remain in employment for longer and engaging retired engineers as self-employed project managers or consultants. Yet, few companies fully realise the challenges that demographic change will pose for human resources strategies.

About the study

In June 2009, the Cologne Institute for Economic Research (Institut der deutschen Wirtschaft Köln, IW Köln) published a study (in German, 75Kb PDF) on the employment prospects of older engineers and the human resources policies adopted by companies to tackle the adverse impact of an ageing workforce in engineering. The study is based on a representative survey (IW-Zukunftspanel) among 1,670 companies in manufacturing and affiliated sectors that employ engineers. More than half of the responding companies reported that at least one of their engineers was aged 50 years or older. About 23% of companies with at least 75% of their engineers aged 50 years and above will be severely affected by demographic change over the next 15 years.

Recruitment strategies

In the 1990s, early retirement schemes generally covered as many older engineers as other older employees. Nonetheless, about 19% of the responding companies reported in February 2009 that they had been forced to hire older engineers within the previous five years to cope with the lack of skilled labour in engineering. As a reason for this recruitment decision, almost every company that had hired older engineers appreciated their experience and knowledge. Four in 10 companies highlighted that younger job applicants did not have the required skills and a further 30% reported that the low availability of junior engineers.

Human resources programmes for older engineers

Around 60% of the responding companies reported that, on average, their older engineers retired before the mandatory retirement age of 65 years. Early retirement may be either voluntary or involuntary and it may be due, for example, to individual working time preferences, invalidity, preceding unemployment or leaving the job to look after family members in need of care. Companies are pursuing several human resources (HR) strategies in order to raise the effective retirement age of their engineers and to reduce the incentives for these workers to retire earlier (Table 1).

Almost two thirds (64.4%) of the companies surveyed delegate the responsibility for planning and conducting projects to older engineers so that these workers can acquire new skills and develop existing ones and thus remain employable for a longer period. Delegation of authority may also increase the incentive to stay longer at work over the life cycle. More than four in 10 companies (43.5%) offer continuous training programmes to older workers and more than a quarter (27.7%) allow for specific training on the job. The proportion of companies that offer more flexible working time arrangements in order to comply with the existing preferences of their older engineers amounts to 38%. Redesigning job profiles and reducing the physical workload for older workers have been implemented by a smaller proportion of companies – 24.3% and 15.9% respectively. The same applies to health programmes (23.9% of companies) and other strategies, such as telework (12.5%), the implementation of horizontal career paths (10.4%) and regular assessments of competencies (6.6%), with only a minority of the responding companies conducting these policies.

Note: The data cover only companies in manufacturing and affiliated sectors that employ engineers.

Source: IW Zukunftspanel, 2009

Companies that have implemented more HR measures to foster the employment of older engineers reveal an average retirement age for their engineers (63.2 years) that is almost three years above that in companies with fewer programmes geared towards older engineers.

Employment of ‘silver workers’ in engineering

The skills shortage in engineering forces companies to search for alternative strategies. In 20% of all responding companies, engineers who had already retired have returned to work as a consultant or project manager. These engineers are referred to as ‘silver workers’ or ‘silver engineers’. Table 2 shows that employment of ‘silver engineers’ is most prevalent in the manufacture of electrical products and motor vehicles (25.6%), the manufacture of machinery and equipment (23.8%), the manufacture of chemical, rubber and plastic products (23.5%), and in services related to manufacturing (23.5%).

Note: The data cover only companies in manufacturing and affiliated sectors that employ engineers.

Source: IW Zukunftspanel, 2009

Companies’ awareness of shortage of skilled engineers

Only a minority of the surveyed companies (21.4%) reported that they expected demographic change to have a strong impact on their human resources in engineering over the next five years. Not surprisingly, this assumption is mainly driven by the number of engineers expected to retire in the same period. The responses reveal, however, that companies which do not have to replace retiring engineers do not take account of the fact that the anticipated decline in the number of university graduates in engineering will spur the competition for junior engineers, leading to a probable increase in their labour market entry wages.

Oliver Stettes, Cologne Institute for Economic Research (IW Köln)