Age brings more to the table than dribble

Over the past ten years or so it has become 'fashionable' for large companies to offer their older staff early retirement. The immediate benefits are obvious, older staff are more expensive than younger less experienced workers, younger staff are more motivated, work longer hours, have less family commitments and bring new innovative ideas to the work place and the older staff have the chance to enjoy their retirement knowing that they will still be entitled to a full pension - so win win then?

No no and thrice no

What many companies are now beginning to realise is that an older person bring more to the table than just age - they can bring common sense and a wealth of experience. Imagine the scenario, young chap/chapess straight out of business school working for a major UK Bank looks to the USA and sees that a lot of US Banks are making mega bucks by buying into the sub-prime markets. So quick as a flash they call a meeting of the great and the good and present a proposal that the bank should grab a slice of the action. Let's face how can it possibly fail, there is nothing safer than bricks and mortar now is there?

These young bloods rub their hands with glee, a lot of people in the US have made a bundle by taking a punt on this market so why shouldn't they? As a thirty year old they can't remember living in a recession, they have no experience of negative equity or high unemployment. Sure house prices in the UK are high but with mortgages of 125% based on 5 times your salary, they had no trouble buying their over priced apartment in Docklands and their annual mega bonuses pays for the flashy cars and Caribbean holidays.

But let's step back for a moment, what exactly is a sub-prime mortgage? It's a special mortgage for those people who would have been turned down by the more traditional lenders - and why? because they can't afford one that's why. But as the lenders had taken a charge on the properties they couldn't loose could they? If the mortgage holder defaulted on the loan the lender could just sell the property and get their money back. OK so the home owner would be on the streets but hey this is America and the free market rules.

So what went wrong?

In any market there are peaks and troughs and the housing market is no different. It's the old story of supply and demand. Small town America is not immune to global economics and when the largest employer in town closes the wood yard or factory because they have been priced out of the market by their foreign competitors then their employees won't be able to pay their mortgages. And who wants then to buy the house that has been repossessed? Nobody in that town for sure because everybody is now in the same boat. No job and no means to pay for a mortgage that was wholly reliant on them being in full time employment because they couldn't get the extra insurance payments that might have covered them against redundancy.

The knock on effect is that the sub-prime market then went into free fall. The major players wanted out. The value of the market was severely depressed and instead of big profits the banks were looking at huge losses. And all because the was no one saying hold on here, what if the world goes into a recession - what if there is a collapse of the housing market - what is the worst case scenario of putting so much money into a new market that doesn't have a track record of weathering even a minor financial storm. In other words there was no old bugger sitting at the board table saying let's evaluate the risk to the business in the light of 100 years of data around boom and bust in the housing markets.

I'm not saying that the current financial situation is all the fault of a lack of experience in our banks but as an ex foreign exchange dealer I can say that all the dealers I knew, whether they dealt on the money markets, commodity markets or the Stock Exchange, all had one thing in common - they were gamblers - pure and simple. Most of the time, especially in Bull Markets, they could make massive profits for their companies and huge bonuses for themselves. But, and here's the rub, in a Bear market they took a hit and depending on how experienced they were and who was monitoring their dealing book, they either weathered the storm or in the worst cases, went under.

The sub-prime market was massive with billions of dollars being traded - big profits then for the lucky ones but equally big losses for the unwary,unlucky or let's face it inexperienced.

So what's the answer? In the short term I don't think that there is an easy answer. Until employers realise that age brings more to the table than just a cantankerous old git who stands in the way of progress and starts to value the experience that they have, we are stuffed.

That is unless they bite the bullet and start re-employing some of the senior managers again. Let's be innovative here, let's say to the 52 year old give us two days a week, we will respect your work life balance and won't expect you to be at your desk for 60 hours a week, but we need your experience and your steadying hand on the tiller again. Or is that too radical for a forward thinking company in the 21st Century?