Executive Benefits

The Demographics Drought is About Shortfall, Not Rainfall

The Demographics Drought is About Shortfall, Not Rainfall

Author Executive Benefits Team
Date September 6, 2022

While below-average rainfall levels are making headlines, affecting crops and the economy, the demographics drought may be the drought that should concern us most.

young man with cup of coffee staying at kitchen at 2022 01 12 05 27 07 utc

Lack of rain in Brazil has increased the cost of your morning coffee, while drought conditions in Western Europe have water levels on the Rhine and Po rivers so low that both shipping and hydropower generation are compromised.*

The Wall Street Journal reports that in the southern US, “Cotton prices are rising as a punishing drought forces farmers to abandon their crops.” And across America’s Corn Belt, drought conditions have pushed the cost of grain, corn, and soybeans to near-record highs.

While rising temperatures and a precipitation dearth around the globe are driving prices higher, there’s a very different kind of drought that could create even greater issues in the US and global economies. The most valued resource in the workplace—human capital—is facing a drought of its own. 

What is a Demographics Drought?

The US labor market appears to be moving into what many are calling a sandemic or sansdemic. Although you won’t find the word in most dictionaries yet, it literally means “without people.”

  • Baby boomers are leaving the workforce faster than younger generations are joining it.
  • The Covid 19 pandemic accelerated the workplace exodus.
  • Working millennials positioned to inherit wealth from their boomer parents have less motivation to work full-time or stay in the workplace for the long haul.
  • Over the next 30 years, the US population will likely shrink as birthrates continue to decline.
  • And the fact that senior Americans are living longer actually makes the workforce problem greater, not better, as it increases demands on the Social Security and Medicare systems.

Workplace Loyalty that Flows Both Ways

Employers face a two-fold challenge: attracting talented workers and then retaining them as part of a valued and effective team. To weather the drought, organizations may need to create their own pipelines of talent into their labor pool and then ensure that it is worthwhile for these valued workers to stick around.  

In a recent article by Vice President Retirement and member of the executive benefits team, Sam Robert, Sam focused on a redefined approach to signing and retention bonuses.

Sam wrote, “In today’s workplace environment, many companies tell our nonqualified deferred compensation team that rewarding an employee on vesting schedules of 10 years or more does not provide the immediate gratification necessary to retain the employee.”

His article explained that a customized and strategic approach to deferred compensation is a way to address both the need to attract and the need to retain. “Offering half an award upfront gives the employee or prospect immediate financial gratification.” But as Sam pointed out, equally as important is the need to keep valued employees, once a company has them on board.

Employees want to be rewarded for their efforts and their loyalty. They want and need to save for their children’s education, travel experiences, and a comfortable and confident retirement.

For many companies, a nonqualified deferred compensation plan, with customized vesting requisites, provides a strategic path for employers to support employees in their savings objectives. A nonqualified plan can position plan participants to save pre-tax earnings and bonuses without the limitations that apply to saving through a 401(k) or similar qualified plan.

Read: A New Approach to Signing and Retention Bonuses

* Droughts Hurt World’s Largest Economies


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This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

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