Millennials taking a longer view of working life
Extended longevity rates are causing some panic regarding the financing of old age
It used to be that young adults sometimes took “gap years” after graduation from university. Now the trend is to take a gap year before college even begins. What’s up with that? When my daughter asked for one I said great – go work in the salt mines for a year, and earn some money for school.
Employers have noticed a similar lack of stick-to-itiveness. Recently I interviewed Ma Chan-chi, a local banking executive. Ma worked his way through school, then studied while working, cramming for his chartered financial analyst qualification on his ferry rides to and from his first job at a bank. Steadily, he rose up the ranks. Now he notices his younger Hong Kong employees have a tendency to resign their posts to travel, or take a mindfulness course, or musical interval.
It turns out that these youngsters are not slackers, but brilliant time-horizon analysts. They may live until they are 100 years old, implying a much longer life of labour, so what’s the hurry? “Millennials get it,” says Andrew Scott, an economist at the London Business School (LBS) and a specialist in the social and macroeconomic implications of longevity.
The young buy their first car, marry and start their careers later than previous generations – all signs that they have internalised the same concept of duration that traders use to price bonds. Perhaps they also understand convexity, the rate at which things speed up or slow. They try “pop-ups”, a short-term business experiment which is excellent practice for careers that will ultimately have to span decades, and be disrupted regularly by technological change.
Scott, along with Lynda Gratton, a management professor at LBS, has written a soon-to-published book called The 100 Year Life: Living and Working in An Age of Longevity. Besides disrupting the trajectory of education and careers, extended longevity rates are causing some panic regarding the financing of old age. Governments in particular seem alarmed, with officials constantly making hand-wringing references to the “pension time-bomb”.
This is not the proper attitude, says Scott. Keep focused: deferred trips to the crematorium are actually a good thing. (Although the Harvard professor Niall Ferguson might not have gotten the message: “It’s utterly terrifying,” he writes in a blurb for the book.)
Scott discussed the 100 year life in a recent visit to Hong Kong. At a roundtable lunch I attended, one of the guests mentioned, with a furrowed brow, that the new demographics had turned Hong Kong workers into victims of the highly dissatisfying Mandatory Provident Fund. While not in a position to comment on the specifics of the MPF, Scott backed the basic principle of a forced savings scheme.
People aren’t smart enough to plan for a 100-year future, he said. And even if they are, they’ll have trouble executing the plan, just like we all know what a good diet is, yet still shove doughnuts into our gobs. “Nor can you just leave it all to the private sector,” added Scott. “The financial sector is too good at ripping off old people.”
It’s not just our savings that have to stretch longer. So do our work lives. This implies that it will not be unusual to return to school in one’s 40s and 50s, to update skills and prepare for a longer working life.
One question is whether the corporate culture is ready for such a shift. Age discrimination is commonplace, and governments often unintentionally reinforce prejudices about the effectiveness of older workers.
In Hong Kong, many companies boot employees out of jobs at the tender age of 60. This practice is influenced by the government’s longstanding retirement age. In 2014, the Hong Kong civil service raised the retirement age to 65 for new contracts, and agreed to allow existing employees to apply to stay longer than 60 – if they pass certain assessments and physical tests. Is the sixth decade thought so decrepit that a physical test is necessary? Something needs to change there.
Luckily I have a backup plan for my golden years, that my daughter supports me with the riches she will surely make as a world-class bond trader. No one understands duration and convexity like she does.
Cathy Holcombe is a Hong Kong-based financial writer