Aging and Retiring Workforce

The Society of Petroleum Engineers estimates that up to 50 percent of skilled workers could retire within the next five to seven years, presenting an immense challenge to the industry. 

With the baby boomers beginning to retire and the average age of the worker continuing to increase, companies must find effective ways to overcome this trend.

Every industry is suffering from the ever-increasing workforce age and the large scale impact of retirement.

- The Mining industry: the workforce is 6.5 years older than the general workforce of 40 years old.
- The Utilities industry: more than 50% of the workforce is 45 years old or older.
- The Energy industry: the average age of workers is near 50, and the average retirement age is 55. 

Core Issues:

“Brain Drain”

With the baby boomers beginning to retire, the transmission of knowledge from the retired workers to the replacement workers becomes crucial. The immense knowledge these individuals have needs to be passed down, examples include organizational knowledge, proprietary methodologies, training expertise, client management skills and relationships.  

Workforce Injuries 

As the workforce ages, the incidence of disability rises. The findings of a University of Wisconsin, Trace Center study showed the incidence of disability among working-age Americans is: 

- 9.5 percent for workers in the 18 to 24 year old range.
- 20+ percent for workers in the 45 to 54 year old range.
- 42 percent for workers in the 65+ age range. 

Alternatively, as the aging workforce retires, the new workforce runs the risk of becoming injured, often due to a lack of hands-on mentoring and training from their senior staff. As a result, OSHA found 51.9% of work-related accidents in the oilfield service sector involve employees with less than one year of service experience. 

Delayed Expansions 

Often a company’s expansion effort is delayed particularly because of a lack of trained sales personnel. When an experienced salesman retires, their industry knowledge, relationships, and trust often isn’t passed down to the next salesman.   

Incomplete or Abandoned Projects 

In addition to delayed expansions, potential problems result from a limited supply of skilled staff which ultimately affects project budgets and schedules. According to the University of Houston’s C.T. Bauer College of Business study, “If you assume every day a company is not drilling is a day of oil that is not generated following completion, the overall cost to producers is estimated to be $1.9 billion per year. This calculation was based on $59 per barrel oil price and an average rate of production of 30,000 barrels per day.” 

The problem arises because employers are often too focused on getting the job done and overlook whether or not they are staffed to the proper levels. The “right people in the right place” has always been a recipe for success, but often tight budgets, short schedules and bureaucracy push project completion ahead of proper resource management.  

Employer Responses 

One of the biggest issues is that employers are neither prepared for, nor aware of the impending out flux of baby boomers. According to the National Study of Business Strategy and Workforce Development conducted by the Sloan Center on Aging and Work, “25.8 percent of employers stated their organizations had not analyzed their workforce demographics at all, while only 12 percent had done so to a great extent. Over a third (36.7 percent) had made no projections about retirement, 29.5 percent had done so ‘to a limited extent,’ 24.1 percent felt they had done this ‘to a moderate extent,’ and only 9.7 percent had done so ‘to a great extent.’ Less than one-third (30.7 percent) of the employers surveyed had adopted practices to recruit employees of diverse ages to a ‘great extent,’ while 16.5 percent had not done so at all.” 

Alternative Staffing

As more and more of the workforce retires, companies will be presented with a large talent shortage. Companies will resort to hiring contractors, consultants and outside vendors to complete the necessary jobs. While this strategy may work in the short run, it is very expensive and does not produce sustainable results after the third party workforce leaves.