0:00

I mean, they're not on the cutting edge

0:02

of these things, right? On AI, they're under

0:04

pressure to do stuff because the bosses above

0:06

them think it will allow them to cut

0:09

headcount, which is what they really want to

0:11

do. But, you know, they're mainly just claiming

0:13

that they're doing things that they're not. You

0:15

know, like, we're using AI. Yeah, we're using

0:18

it. We're using a search engine. You know,

0:20

I mean, so they're claiming a lot of

0:22

stuff that they're doing. But it's really hard

0:24

to do. any examples where they will lay

0:27

out here's what we fixed and here's how

0:29

we did it and particularly did it actually

0:31

cut headcount or not it's just hard to

0:34

see because it turns out it's really really

0:36

hard to do. Welcome to the

0:38

Ripple Effect the podcast that takes

0:40

you on a journey through the

0:42

minds of Wharton faculty I'm your

0:44

host Dan Loney and in each

0:46

episode we'll be diving deep into

0:48

the inspiration behind the groundbreaking research

0:50

that Wharton professors have conducted and

0:52

exploring how their findings resonate with

0:55

the world today. We've seen a wave

0:57

of people heading into retirement in and

0:59

around the pandemic over the last few

1:01

years. Remote work obviously has become more

1:04

commonplace, although that's adjusting right now and

1:06

people are thinking about what they want

1:08

from their career as well as what

1:10

that transition into retirement is going to

1:13

look like. Pleasure to be joined here

1:15

in studio by Peter Capelli, Professor of

1:17

Management here at the Wharton School. He's

1:20

also director of the Center for Human

1:22

Resources and author of the book The

1:24

Future of the Office, Work From Home,

1:26

Remote Work, and the hard choices that we

1:28

make. Peter, great to see again. How are

1:30

you? Thank you Dan. Pleasure to be here.

1:32

This is a unique topic because every

1:35

company deals with employees who retire.

1:37

And I guess maybe I'll start

1:39

there. What's that relationship like and

1:41

process like for both the employee

1:43

about what they're thinking about what

1:46

they want in retirement, but also

1:48

how the company is thinking about

1:50

employees who are potentially going to

1:52

retire? Yeah, you know, it's an

1:55

important issue for employees as

1:57

well as the companies we've been thinking

1:59

about. about it more from the company

2:01

side. I actually wrote a book about

2:04

this a while ago called Managing the

2:06

Older Workforce. And the problem we're

2:08

trying to wrestle with there is

2:10

the fact that we now have older

2:12

subordinates and younger supervisors. But I think,

2:14

you know, in the old days, and

2:16

it's funny, these have been a long

2:19

time ago, I wonder how. if you ever

2:21

remember going to retirement dinner when anybody

2:23

retired at 65, I remember the Philadelphia

2:25

Inquirer ran a news story about somebody

2:28

who had retired at 65 and got

2:30

a gold watch. Yeah. Which is what

2:32

everybody used to do. Yeah. And what

2:35

you may not know is that mandatory

2:37

retirement was a management creation. It was

2:39

invented at the Sears robot company in

2:42

the 1930s. So the reason was... they

2:44

discovered that the senior people were not

2:46

helping the junior people figure out how

2:48

to do their jobs because they figured

2:51

the junior people are going to take

2:53

my job. So what they decided was,

2:55

okay, everybody's gone at 65. So therefore,

2:57

you might as well help these guys

2:59

because you know you're going anyway. So

3:01

it used to be a very predictable

3:03

thing, right? And I think the

3:05

problem now, it's been unpredictable for

3:07

a very long period of time.

3:09

I remember somebody at IBM told

3:11

me years ago, back in the

3:13

90s. that virtually no one at

3:15

IBM ever retired at 65. They

3:17

took early buyouts, they left

3:20

and went to work for

3:22

startup companies, they ceded the

3:24

entire disk drive industry. So

3:27

then it suddenly was, you

3:29

know, like not an issue

3:32

because nobody stayed anyway. Here's

3:34

the big change. From 1970s

3:36

through to 2018. The

3:38

unemployment rate fell below 4%,

3:41

only one year. It was

3:43

a buyer's market for two

3:45

generations almost. From 2018 to

3:47

now, it has been, exception

3:49

of that little pandemic

3:52

few months when everything was shut

3:54

down, it's been just about 4%

3:56

or below 4%. That is a

3:58

sea change, right? from a buyer's

4:01

market to something which you would

4:03

think looks more like a seller's

4:05

market. So the big change for

4:07

employers ought to be we can't

4:09

just take a big workforce available

4:12

whenever we want them for granted

4:14

anymore. And you know older workers

4:16

offer that opportunity which they

4:19

say they want for a trained

4:21

skilled workforce, good work ethic. readily

4:23

available and interested in

4:25

coming to work for us. But we've

4:27

also seen with some employees that when

4:29

they get later on in their careers

4:31

they look to make a, want to

4:33

make a shift because of wanting to

4:35

do something different and that they can

4:37

bring something to the table. So I

4:40

guess there has been a little bit

4:42

of a mind shift over the decades.

4:44

Yeah, they want to keep working. And

4:46

why do we want to keep working?

4:48

Because we're living seven years longer than

4:50

our... parents or grandparents generation and

4:52

you got to pay for that too.

4:54

So some of it is because work

4:56

is so integral to American society we

4:59

don't have this you know tradition of

5:01

age 55 you start picking up your

5:03

hobbies right that you would see in

5:05

the European Union especially so we need

5:08

to keep working and the problem has

5:10

been that employers have been resistant to

5:12

hire older workers. Even on

5:14

a part-time basis. Now the thing

5:16

is, this is so dumb, right,

5:18

because older workers actually turn out

5:20

to be better on every dimension,

5:22

except for this one tiny one,

5:24

which is solving novel problems

5:26

under time pressure when you can't

5:29

use calculators and computers. Right. So

5:31

the only time you do that

5:33

is taking SAT tests, so except

5:36

for SAT tests, older workers have...

5:38

better motivation, they have better social

5:40

skills, they have better job skills,

5:42

their absenteeism is lower, believe it

5:44

or not, their turnover is lower,

5:46

because they're not job hopping, right?

5:48

So they got everything you think

5:51

you would want, they want to

5:53

work more flexible schedules, and the

5:55

problem has been, why haven't employers

5:57

made more of an effort to embrace

5:59

these folks? you think that's the case?

6:01

Well, I've written a book about

6:03

that and the answer, the answer

6:05

at least in part, I mean

6:08

it's all variations of age discrimination

6:10

basically, and the assumption you hear

6:12

all the time, right, that older

6:14

workers are filling something bad, right,

6:16

burnt out, they're not tech savvy,

6:18

etc., etc., etc., etc., you know,

6:20

none of which is true, right,

6:22

but one of the problems that

6:25

I was... picking on is that

6:27

younger subordinates are nervous having older,

6:29

younger supervisors are nervous having older

6:31

subordinates, right? How do I manage

6:33

somebody who looks like my dad,

6:36

right? And, you know, the military

6:38

has been on this problem for

6:40

a while and they have very

6:42

good answers. Younger officers should embrace...

6:44

their older sergeants who literally report

6:47

to them, but treat this guy

6:49

as a partner, treat her as,

6:51

you know, somebody that you need

6:53

to cooperate with, and don't treat

6:55

him like somebody that you've got

6:57

a boss around, and don't expect

6:59

that you know more than they

7:01

do, right? So it's not that

7:03

hard. a solution really. So you

7:05

mentioned the technology component and obviously

7:07

we're in this time where AI

7:09

is starting to have a greater

7:11

and greater impact and obviously maybe this

7:13

is something that we will see developed

7:16

but I guess it becomes a question

7:18

as to is AI going to have an

7:20

impact in this process as well as

7:22

we move forward? Yeah, I'm a big

7:24

cynic on this, so we have not

7:26

seen it yet, and I encourage everybody

7:29

who thinks this is just going to

7:31

change overnight to remember driverless cars and

7:33

driverless trucks, right? Which, by 2019, we're

7:35

going to be so prolific that there

7:37

would be no need for truck drivers.

7:39

By 2019, now all those reports that

7:42

all the consulting companies have been taken

7:44

down off their website, so you don't

7:46

see how stupid they look now. But

7:48

the reason they were so wrong

7:50

is worth thinking about, they were

7:52

talking about what technology could in

7:55

theory do, not what was practical.

7:57

And what we're seeing now in

7:59

AI. is these claims about what

8:01

it in theory could do. So

8:04

we have an article on the

8:06

current Harvard Business Review site where

8:09

we followed a company that tried

8:11

to automate a simple clerical task,

8:13

opening envelopes, sorting out what's in

8:16

them, entering the data, pretty simple.

8:18

And they did it, it took

8:20

a year. It took... an initial

8:23

$500,000, it took a team of

8:25

six people to do it. They're

8:28

paying $200,000 a month in addition

8:30

now in AI costs, and they

8:32

cut their headcount from 45 to

8:34

41. Well, you know, it was

8:36

successful. Productivity is up because

8:39

they took in more work. But

8:41

boy, it's hard to do. And

8:43

it takes a long time to

8:45

get this right. And the interesting

8:47

finding from that, which the folks

8:49

who did it realize, is that

8:52

it's not that, it's not going

8:54

to work well if you're trying

8:56

to automate something that's cheap. Because

8:58

you can't save very much money.

9:00

Right. And that's what we think,

9:02

oh, it's going to take over

9:05

all these simple tasks. No, it's

9:07

not, because they're cheap now. It

9:09

could write all your letters. Nobody

9:11

writes these letters now. They're all

9:13

form letters, you know. Does. How has

9:16

the HR department kind of

9:18

developed and continued to transition

9:20

with all of this development

9:22

around and thought process around

9:24

retirement and employees? I think

9:26

they're mainly laying low. I mean,

9:28

they're not on the cutting edge of

9:30

these things. On AI, they're under pressure

9:32

to do stuff because the bosses above

9:34

them think it will allow them to

9:37

cut head count, which is what they

9:39

really want to do. But, you know,

9:41

they're mainly just claiming that they're doing

9:43

things that they're not. you know like

9:45

we're using a yeah we're using it

9:47

we're using a search engine right so

9:49

they're they're claiming a lot of stuff

9:51

that they're doing but it's really hard

9:53

to find any examples where they will

9:55

lay out here's what we fixed and

9:58

here's how we did it and particularly

10:00

did it actually cut headcount or

10:02

not? It's just hard to see

10:04

because it turns out it's really

10:06

really hard to do. Doesn't mean

10:08

it's not useful. It's really hard

10:10

to do. I guess though we're

10:13

also in a time and I

10:15

guess you can look at the

10:17

financial crisis and obviously the impact

10:19

of the pandemic. We saw more

10:21

people coming back into the workforce

10:23

after the financial crisis because you

10:25

know that they had to because

10:27

their retirement savings were heard. pandemic

10:29

we've seen an increase in the types

10:32

of benefits that companies are willing to

10:34

provide. And so it makes you wonder

10:36

if, and this has been talked about I

10:38

think for for years, of people wanting to

10:40

stay on longer at the workforce. Yeah. will

10:42

continue to be a trend and that

10:45

idea of retirement will continue to get

10:47

pushed off a few years, maybe closer

10:49

to seven. Yeah, interesting question. I think

10:51

the employer side, they are pushing these

10:54

folks out. And the reason they're doing

10:56

it is they're more expensive and they

10:58

think they can replace them with cheaper

11:01

people. I mean, you can, but you

11:03

know, the thing to remember is age

11:05

is really correlated with experience, right? So

11:08

if you went to the hospital... and

11:10

you said give me the oldest doctor

11:12

they would laugh at you but if you

11:15

said give me the most experience they would

11:17

say of course and you know what the

11:19

most experience are often older older. So you

11:22

know we're really hypocritical as to how we

11:24

think about this stuff right. So there's real

11:26

opportunity absolutely for employers to think about engaging

11:28

this workforce that has retired from full-time jobs

11:31

wants to keep working in some way they

11:33

want to be part-time they want to be

11:35

just in time and they work cheaper but

11:38

for some reason the employers have not Try

11:40

to engage them. But the value that

11:42

they can bring to an operation is

11:44

great is fantastic. Yeah. Yeah. Yeah. And

11:46

you know it remains an interesting problem

11:49

as to why companies have not done

11:51

this even when they're complaining about gee

11:53

there's nobody to hire we can't find

11:55

people with the right skills. So with

11:58

all of this said is the past. that

12:00

we've kind of laid out here, one that you

12:02

think is going to continue longer term?

12:04

I mean, obviously there's a value there,

12:06

but will companies actually look to bring

12:08

it in? Well, right, and that's a

12:11

very good point, that we don't want

12:13

to assume that simply because there's value

12:15

and there's a reason to go in

12:17

that direction that it will happen. You

12:19

know, there was a reason, a clear

12:22

economic story, to not discriminate. you know,

12:24

against minorities and against women. You have

12:26

this big labor pool, they were skilled,

12:28

they were eager to work, and yet

12:30

we discriminated against them until the government

12:33

made us not do it. Right.

12:35

So in this situation, it looks

12:37

like the same story. We got

12:39

this big opportunity, it's right there

12:41

in front of you. There was

12:43

a sense, I guess before, well,

12:45

Biden administration. But Obama before that,

12:47

that the lawsuits among older workers

12:49

were really going up and we're

12:51

going to start changing the behavior

12:53

of employers suing for age discrimination.

12:55

I don't think that's going to

12:57

happen now. It's going to be harder

12:59

for that to pull off the government,

13:02

certainly not going to push that. So

13:04

what is it, what will it take

13:06

for employers to recognize this opportunity? That's

13:08

a really good question. But I think

13:11

the idea that is not true, is

13:13

that simply because there's an opportunity. it

13:15

will happen. Does it potentially lead

13:17

then if the companies are not

13:19

willing to bring these people in

13:22

that it may end up benefiting

13:24

the entrepreneurial landscape to bring that

13:26

mindset into you know a framework

13:28

that may be a little bit different? Yeah

13:30

and that's a great point that

13:33

that the evidence is that older

13:35

retired people are disproportionately going into

13:37

entrepreneurship and You might say it's

13:40

because of the flexibility, but let's

13:42

be real. Entrepreneurs don't have a

13:44

lot of flexibility. They're working really

13:47

hard. 80 hours a week. Yeah,

13:49

they're blocked from getting more traditional

13:51

jobs, right? So I think the

13:53

other thing it might happen is

13:56

that labor supply companies, you know,

13:58

the least employees, do it.

14:00

companies don't want to hire

14:02

older workers, but they do

14:04

hire leased employees from companies

14:06

like Manpower, Rantstad, and you

14:09

know, are we going to

14:11

see older workers there? So you

14:13

end up hiring them, but you

14:15

don't know it. Are we going

14:17

to see that? Well, those folks,

14:20

those companies are more attuned to

14:22

labor arbitrage, you might say, which

14:24

is what's what we're talking about,

14:27

right? Does it also potentially lead

14:29

to, maybe lead to a rise

14:31

once again of contract work with

14:33

employees as well. Yeah, and you know,

14:35

it's an opportunity that's there and

14:37

it's not exploitive, right? In the

14:39

sense that these folks who are

14:41

retired, some of them need the

14:43

money, but they typically don't need

14:45

as much money. And many of

14:47

them don't need the money in

14:49

quite the same way. They do

14:52

want flexibility. The thing about contract

14:54

work is that... you know, it is

14:56

more flexible, right? You're working the length

14:58

of the contract, you know what that

15:00

is when you go in. So you

15:02

would think it's a good fit. Yeah.

15:04

And you know, again, why it's not

15:07

happening is a puzzle. Peter, great to

15:09

see you again. Thanks very much. Thank

15:11

you. Peter Capelli, Wharton Management Professor, joining

15:13

us here on Ripple Effect. Thank you

15:16

for listening to the Ripple Effect. If

15:18

you enjoy this episode, you can find

15:20

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