Making companies demography-proof; China’s pension reform; The cost of German border controls & US climate policies – a comparison

The working-age population across many developed countries is declining, delaying retirement could help to make companies demography-proof. Adapting to the needs of an aging workforce, therefore, is a win-win for everyone – our comprehensive analysis on the matter. Let's embrace age diversity and create inclusive workplaces that attract and retain talent across all generations – not only on International Age Diversity Day (September 24), but year-round.

Also on our radar screen this week in our What to Watch category: China's pension reform which risks not being bold enough; Germany’s recent border control measures and the costs associated with it and a comparison of the climate policies of Trump and Harris ahead of the presidential elections.

Having access to top-notch, fact-based analysis and insights is key in our volatile and unstable times. An excellent opportunity is coming up next week to exchange with senior experts during a LinkedIn live event on this year’s Global Wealth Report on Friday, September 27, 10-10:30 CEST. Looking forward to a lively debate!

Fostering age inclusion at work to make companies demography-proof

Our in-depth analysis for you here.

The EU’s domestic working-age population is set to decline. Delaying retirement could have a huge impact on making companies demography proof. Including the age group 65 to 69 into the potential labor force could close around 75% of the gap and dampen the total decline of the working-age population in the EU 27 by around 10pps from a total -13.4% to -3.3%. On average, the EU 27 will have to cope with an annual decline of -0.8% until 2040. Furthermore, a positive net migration balance could lead to an increase in the working-age population in many EU member countries – with the exception of most Eastern European member countries, which are sender countries.

Companies will need to double down on initiatives and policies to foster intergenerational inclusion. Indeed, even after the Baby Boomer generation retires, the workforce population is set to be older than today on average: In 2040, 14% of the population in the EU 27 available on the labor market will be aged between 60 and 69, compared to 9% today. The share of migrant workers is also set to increase further, not only because of efforts to attract skilled workers from abroad but also because of the retirement of today’s higher age groups, which have smaller shares of foreign workers. To successfully manage multigenerational and multicultural teams, trust as well as mutual respect and understanding are crucial. This requires understanding the differing needs of generations and cultures. This holds especially true for leadership and communication styles. Companies will have to cope with different expectations and find the balance between traditional, hierarchical styles of leadership and more collaborative ones, and between in-person meetings and phone calls and texting and social media.

Intergenerational knowledge transfer needs to be a priority. Management styles also need to become more age inclusive. Since knowledge is a strategic resource, knowledge sharing, and intergenerational knowledge transfer are crucial for the success of a company. It goes without saying that this transfer can only be successful if there is a willingness on the side of the employees to learn and change – continuously. Given the rapidly evolving technological landscape, learning requirements will increase dramatically in the next couple of years. Keeping up with the latest twists in GenAI, for example, and its possible use cases demands great agility, not least from older employees. Millennials and Generation Z are said to place a high value on development opportunities, knowledge gathering and being open to change. In addition, wisdom skills are in high demand in the workplace and should be put forward. Last, to retain young talent, companies should also reconsider their management styles and offer qualification as well as career development opportunities to all age groups. Keeping older employees for longer is an important signal to attract younger ones.

Adapting to the needs of an aging workforce population is a win-win for all employees. Given the global competition for young talent and demographic change, companies must adapt to the needs of an aging workforce. This includes investing in age-friendly equipment in the workplace and the re-arrangement of workflows, working hours and shifts. Part-time work, working from home, lifelong learning and combating (unconscious) age biases are equally important. Health-management offers are an essential supplementary means that can help to shift the onset of age-related diseases in higher ages and keep the workforce healthier for longer. And although these measures are aimed at older employees, all employees benefit, not least women. Generational relations are not antagonistic but cooperative. Age-friendly companies with mixed teams have a positive effect on the productivity of older and younger employees.

Our in-depth analysis for you here.

What to Watch this week

The complete publication for you here.

• China’s pension reform: Not bold enough. After years of discussions, China will raise the retirement age for men to 63 and for women to 55/58 (blue-collar/white-collar). Unfortunately, without any further increases, the old-age dependency ratio will be close to 80% in mid-century, and while the reform should add +0.5pp to China’s potential growth over 2025-2040, this will be insufficient to stave off China’s long-term growth slowdown. We expect potential growth at +3.9% over 2025-2040 (vs. +7.0% 2011-2020). In this context, raising the retirement age further and reducing incentives for early retirement are essential. But companies also need to adapt to the needs of an aging workforce to retain older workers for longer.
• The cost of new German border controls. The reintroduction of border controls in Germany is expected to cause significant shipping delays, adding about 20 minutes to typical Schengen crossings. The resulting higher shipping costs will likely lead to a -9.1% decline in German imports of goods and -7.8% of services, totaling EUR1.1bn annually. The educational and recreation sector would be hit the hardest (+3.5%), followed by foodstuffs (+2.6%) and trade services (+2.4%). Machinery and electrical equipment, along with chemicals and pharmaceuticals, are also projected to experience significant import reductions of EUR147mn and EUR142.1mn, respectively. Overall, this could exacerbate recession risks in an already fragile environment. Neighboring countries will not be spared due to strong supply-chain linkages: Imports from the Netherlands are likely to drop by -EUR0.2bn, while those from Poland would decline by -EUR0.1bn and those from France by -EUR92.4mn.
• Harris v. Trump: The climate story. US CO2 emissions have been steadily declining due to affordable natural gas, increased renewable energy and enhanced energy efficiency. While this trend is expected to continue regardless of who wins the next elections, the contrasting climate and energy agendas of candidates Kamala Harris and Donald Trump could have vastly different impacts on the economy and the green transition. Harris advocates for clean-energy investments through the Biden administration’s Inflation Reduction Act, while Trump favors fossil fuels and reducing support for renewables. If Trump wins, cuts to climate-research funding and global environmental contributions, as well as increased barriers to green trade, could slow progress and weaken international cooperation, leading to a "Fragmented World" transition. This could cost the global economy USD76.7trn by 2050 compared to a Paris-aligned transition that keeps global warming below 2°C.

The complete publication for you here.