Online Extra: Aging More Productively in Finland

Thanks to a farsighted, multidimensional government push, the country is now keeping vital older workers on the job much longer

Finland, the fastest-aging developed country, is a test bed for new approaches to an aging workforce. More than 55.4% of Finnish employees are over 40. If the average retirement age remains unchanged at 59, the country's workforce of 2.3 million is set to shrink by 40% over the next 15 years. Soaring pension costs and a shortage of labor threaten to severely crimp Finland's fast-paced gross domestic product growth, economists say.

The demographic time bomb spurred the Finnish government in the mid-1990s to radically reverse its favorable policies on early retirement and launch a national program to keep older workers on the job. Now the average age of retirement is rising, and the proportion of Finns age 55-64 in the workforce has jumped from 36% to 50%. As a result, economists are pointing to Finland's approach as a beacon for change in other aging societies. Following is an explanation of what Finland has done:

Q: What kinds of policies did the government use to change attitudes among Finns who were steeped in a popular culture of early retirement and thus happily stopped working at the average age of 56?

A:

Finland kicked off its four-year National Program on Aging Workers in 1998 with a broad media campaign promoting a positive image of older workers -- just 1 of 40 subprograms aimed at getting Finns to work longer. TV and radio spots blasted age discrimination, linked better health with staying on the job longer, and countered the myth that older workers are inherently less productive. The goal was to create a positive image of older workers and develop a national consensus on working longer.

Equally important, policymakers reformed the Finnish pension system, eliminating some early-retirement schemes and raising the minimum age from 53 to 57. In a second wave of pension reform that took effect on Jan. 1, 2005, the government also offered a carrot to those who stay on the job longer, boosting pension benefits by as much as 40% for those who delay retirement until 65 or longer.

Q: How did the Finnish government convince top management to change a pervasive negative bias that older workers are less productive?

A:

Policymakers designed seminars to educate the country's top management and their personnel departments about aging workers. The Finnish Institute of Occupational Health instructed managers on the looming threat of Finland's shrinking workforce and what companies could do about it.

The seminars, tailored to each company's needs and interests, highlighted how to keep older workers healthier through routine counseling and encouraged companies to implement lifelong learning programs, including some geared toward boosting the skills of older workers or retraining them. "If you look at absentee rates, older people have the lowest absentee rate," says Juhani Ilmarinen, head of the Finnish Institute for Occupational Health.

Finally, Ilmarinen's institute advised companies on how to make the workplace more attractive for older workers, through incentives and personal counseling on health and other issues. It was essential, he said, to educate middle management, especially those in charge of personnel. On the pension-benefit side, Finland also made early retirement more costly for companies, requiring that they pay 80% of early-retirement benefits.

Q: What kind of experience are Finnish companies having with older workers?

A:

Those that have revamped policies toward older workers report rising productivity, less illness, and stronger motivation among their seniors. Nationwide, Finns are working longer, until 59 today, up from 56.7 in 1997. And recent polls show most Finns in the workforce today expect not to retire until 63.

The Helsinki unit of YIT Group, a Danish engineering group, is one of many companies experimenting with "age management" programs to boost the health, productivity, and motivation of older workers. YIT encourages one-on-one mentoring programs designed to get older workers to pass on their knowledge and experience to younger colleagues.

Q: What's the government's goal?

A:

One major aim is to raise employment by 100,000 by 2007, which would increase the overall employement rate in Finland to 70%, up from 67.5% today. By 2011, Finland hopes to raise its employment rate to 75%, a move that would largely balance out an aging population's negative impact on the labor force and the economy.

Q: What's the secret of the government's success to date?

A:

Finland rallied government institutions, public opinion, and corporations simultaneously to spur change.

A key lesson was the importance of collaboration across a spectrum of government bodies, including ministries of Social Affairs & Health, Labor & Education, and the government-run Institute of Occupational Health, with its close connection to industry.

Another key to Finland's success was its strong emphasis on the concept of "age management," or good management practices adapted to workers over an entire lifespan. The goal was to get Finnish companies to overhaul outdated management attitudes and tailor work to individuals as they age. It encouraged companies to devise programs that would improve workers' health, skills, and knowledge on an ongoing basis.

And for all Finland's success, many small and midsize companies have hardly begun to rethink their practices. "Finland is on the right track. We have to speed up," says Ilmarinen. "If we do, we can pioneer best practices in the European Union."

By Gail Edmondson in Frankfurt

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE