Retire? More Finns Are Thinking Twice
It's late summer in Finland's lake country, and a group of twenty 59-year-olds are lolling around a sauna at a wooded resort in high spirits, occasionally plunging into the frigid lake. For the second year in a row, Europe's No. 2 paper manufacturer, UPM, has invited the group of aging mill hands to a two-day retreat. No, it's not a prelude to retirement. UPM is coddling the group with fine food and lectures on health, flexible work programs, and retraining in the hope that they will all stay on the job until age 65 -- if not longer. These senior workers are encouraged to mentor younger ones and pass on vital knowledge about the job that is not to be found in books or manuals. "The goal is to make sure they enjoy life at work," says Turkka Heinelo, personnel manager at UPM's Tervasaari papermill, noting that the evenings at the retreat are capped off with rounds of fine cognac.
Finland Inc. is pioneering a revolution in attitudes toward older workers. It has to: The Nordic country's workforce of 2.3 million is aging so fast that experts are predicting it will shrink by 900,000 over the next 15 years, leaving many sectors desperately short of labor and expertise as early as 2010. At UPM's plant in Valkeakoski, 200 of 820 workers will reach retirement age in five years. That exodus threatens a loss of expertise that could hurt the company's performance. The company has raised its average retirement age from 56.6 in 1997 to 59 in 2004 and aims to reach 60 in 2005.
Finland's sharp demographic reversal threatens a double economic blow -- sending the nation's pension costs soaring while diminishing the pool of productive labor by a staggering 40% over the next 15 years. Economists warn that Finland's high-growth economy, up an estimated 3.1% in 2004, could rapidly become Europe's laggard, limited to 1% growth on average, if nothing is done. "If people retire at 57 the country will be much less competitive in 10 years," says Patrik Andersson, an economist at the Organization for Economic Cooperation & Development and author of a recent report on Finland's aging policies.
But the government has been racing to stay a step ahead of the demographic curve. In 1996 it reversed a decades-old policy of encouraging early retirement, used throughout Europe to help industry restructure and ease high levels of unemployment. That scheme had saddled the country with an average retirement age of 56 and soaring pension costs. In 1998 a government task force launched the ambitious National Program on Aging Workers, including 40 schemes designed to boost the number of 55- to 64-year-olds in the workforce and eliminate the social bias against older workers. As of Jan. 1, workers who retire at 65 receive pensions as much as 40% larger than if they had retired at 62.
Seven years on, economists are holding up Finland as the country most successful at convincing workers to stay on the job longer. Finland's average retirement age already has edged up from 56.6 in 1997 to 59 in 2004, while the employment rate of 55- to 64-year-olds has jumped from 36% to nearly 50% -- one of the highest gains in the European Union.
No question, even Finland has plenty of work ahead. But the wake-up call has spurred companies to experiment as never before with getting the best out of older workers. Oras Ltd., a maker of electronic faucets and valves with 1,300 employees, has persuaded workers to stay on the job by granting them extra days off every year, starting with four more at 55 and going up to 25 for those 63 and older. The older workers felt encouraged to delay retirement, and their sick rate dropped to the lowest level for all employees. "Senior leave is profitable for us if early retirement is postponed by even one year," says Merja Helkela, personnel trainer at Oras, noting that companies are required to contribute a hefty portion to pensions for workers quitting before 63. Likewise, Helsinki construction outfit YIT Group is encouraging workers 55 to 64 to shift to less physically demanding jobs and act as mentors. "We say: Please stay with us, but be prepared for new challenges," says Leena Lomakka, vice-president for human resources at YIT. For many Finns, that's more enticing than a gold watch.
By Gail Edmondson in Helsinki