General Motors is cutting its payroll by 30,000 workers, Ford by 4,000 and the pharmaceutical giant Merck & Co. by 7,000. Verizon says it will save $3 billion by freezing guaranteed pensions for 50,000 managers and trimming future retiree health benefits. This reflects the combination of competition, globalization, technology and demographics that is upending the workplace.

John Challenger, chief executive officer of Challenger, Gray & Christmas Inc., an employment consulting firm in Chicago, talked with AARP Bulletin about the changing workplace and what it means for employees and employers.

Q. Corporations have tried to control rising pension and health care costs, in part by letting go of their older employees through attrition and early retirement. What other alternatives do they have?

The country has to come to a new way of handling retirement and health care for older workers. The system, which includes the government and employers, is going to have to change.

We're going to have to rethink the idea of younger generations paying for the health care of older generations in some new ways. There are just not enough young people to do that.

We're going to have to rethink compensation so that you get paid in both salary and health care benefits. So someone who's younger might get paid more in salary, and as you get older you'd get paid more in health care.

Q. With the first of the nation's 77 million baby boomers turning 60 this month, the concept of retirement is changing. But will the business view of retirement change, too?

The idea of retirement—where you hit a certain age and you stop working—that's no longer workable. It doesn't reflect what people need or what the economy needs. As the populations within companies shift and as companies listen to what their workers need, and as a greater percentage of their work force is over 60, the culture will adapt to the needs of these workers. They must adapt; companies have no choice.

Companies will need to create systems with much more flexibility in scheduling, with different balances between work and personal life, telecommuting, worker training, sabbaticals, elder care. There will be different runways into retirement, more gradual programs that support phased retirement.

Q. How can businesses be persuaded to recruit and retain older workers?

There needs to be government initiatives to encourage companies to hire older workers, to push the system forward in the form of tax incentives, training [and] programs to bring women back into the work force who left during their childbearing and rearing years.

We should continue to punish the companies and people who act with bias [toward older workers].

Q. What problems do companies face in creating programs for workers over 60?

Institutional inertia and not understanding the dimension of the problem. Companies that are the savviest and smartest will gain a competitive edge because they're developing programs to meet the needs now rather than running headlong into it "x" years from now.