A surge of baby boomers reaching retirement age won’t affect the labour market as much as previously thought but businesses still need to plan in advance, according to a new report.

In the Treasury’s 2010 Intergenerational Report, it’s estimated the ageing population will cause the labour force participation rate to remain just above 65% until about 2017 before starting to decline.

But recent analysis by economic forecaster BIS Shrapnel suggests this view is now too pessimistic.

According to BIS Shrapnel’s latest Long Term Forecast Update, the participation rate will increase from its current 65.2% once demand for labour picks up later this year.

It will continue to trend upwards, the report said, peaking at around 66.5% just after the middle of the decade before returning to its current level by the middle of the next decade.

BIS Shrapnel senior economist Tim Hampton says the forecast upward trend in participation can be attributed to rapidly increasing participation rates in older age brackets, for both sexes.

“The female participation rate for those in the 60 to 64-year age bracket has increased by 25% over the past decade to 45%, and by 12% to 62% for males,” Hampton says.

“Participation rates are also increasing rapidly for those in their mid to late 60s. This reinforces the long-running upward trend in female participation rates more generally.”

Over the next few years, Hampton says the increased participation rates for most age brackets will counter the effect of baby boomer retirement and push up the aggregate participation rate.

But it’s not all good news. While many people will be working later in life, many will choose to work fewer hours than they do currently, pushing down aggregate average hours worked.

This means growth in the labour supply will slow even if the participation rate continues to increase.

“Businesses... need to start responding now,” Hampton says.

“They will have to find more innovative ways to meet their staffing needs, including sourcing more of their staff from offshore and incorporating more part-time staff onto their payroll.”

According to Hampton, only the retail trade and accommodation and food services industries have shown a “significant movement” toward using more part-time employees.

“Other industries, including goods-producing industries, will need to find a way to follow suit,” he says.

“Businesses will also need to ensure that they extract all of the relevant institutional knowledge from their experienced staff before they do finally leave the labour force.”

The research comes on the back of another report, conducted for the Financial Services Council – which represents financial planners – and based on a survey of 500 workers.

According to the report, three in 10 of the workers surveyed aged 50 and over have suffered age discrimination, most commonly by being sacked or made redundant before others.

According to the study’s author Nicholas Wright, the problem of age discrimination is most prevalent among those in the “middle” of the Australian workforce, namely white-collar men.

Inflexible employer attitudes, which saw white-collar male employees as “fulltime or nothing”, contribute to the problem of early retrenchment of older workers, the report said.

Wright says businesses need to consider ways older workers can transition to part-time roles, as mentors or “elder statesmen”.