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Enticing seniors to work

Another area that businesses and government will have to gear up for is reversing policies from previous eras that encouraged the most skilled and experienced workers to leave the work force through mandatory retirement and early retirement programs, Mr. Stinson said.

“Successful companies are going to learn how to retain individuals” who have desirable talents, he said, but who otherwise might retire under company programs or as they become eligible for Social Security and Medicare benefits at ages 62 to 67. That means employers will have to raise wages and offer benefits and other enticements to keep the most productive workers on staff.

Some employers are forging the way. Most universities and government offices do not force workers to retire unless they have safety-related jobs such as firefighting and policing.

But mandatory retirement is still common in corporate America, according to the Longevity Alliance, a group that provides financial services to seniors. General Motors and Intel, for example, force their workers out at 65, while Ford and Hewlett-Packard allow their employees to work another five or so years before sending them packing.

Many baby boomers may be counting on working past retirement age because they haven’t prepared adequately for retirement. But they shouldn’t “underestimate the pervasiveness of age discrimination in the workplace,” said Laura Rossman, publisher of the Alliance’s Momentum newsletter.

“Most employers aren’t looking to hire folks in their 60s and 70s. Actually, that’s the age when people often get laid off,” she said.

Richard Berner, chief U.S. economist with Morgan Stanley, expects many baby boomers will try to prolong their careers out of necessity or love of the job, but he said that will not cure the demographic crunch.

Recent studies make it “clear that only heroic increases in geezer labor force participation will offset population aging,” he said. He added that private corporations will continue to take their cue from the retirement ages set by Social Security and Medicare, so government policy in those areas could be critical in maintaining or changing private employment practices.

Besides possibly raising the retirement age to reflect the longer life spans and better health of today’s seniors, many economists like University of California professor Ronald D. Lee, author of a book on the economics of aging, advocate reforms in pension programs like Social Security that rely on employment taxes for funding. They want to switch to private retirement savings accounts that are funded by workers themselves to ease the potentially onerous tax burden on the smaller work force of the future.

Such proposals have gone nowhere recently in Congress. Mr. Lee said the move not only would prevent the need for stultifying tax increases on future workers, but also would boost the national savings rate and increase the amount of capital available for productivity-spurring investments needed to maintain living standards.

The aging of the population “does not have to result in an economic downturn” if the retirement system is restructured that way, he said.