UK makes good progress on fuller working lives – but still scope to improve further

11 September 2017

By John Hawksworth

New data released by the DWP on 7th September showed that the UK has made good progress on extending working lives, particularly for women. Twenty years ago, the average age at which women exited the workforce was around 60 – now it is 63.

The gradual rise in the female state pension age this decade from 60 to 65 has no doubt played a part here, but it also reflects a more general trend towards greater female participation in an increasingly services-dominated economy.

Men are also retiring later in response to rising longevity – at an average age of around 65 now compared to around 63 in 1997.

Linked to this, employment rates for the over-50s have been rising steadily since the 1990s. Over 70% of 50-64 year olds now work compared to only around 55% in the 1980s. And over 10% of over-65s are now working compared to only around 5% in the 1980s.

Interestingly, the Great Recession of 2008-9 put only a minor dent in this structural upward trend in employment rates for older workers – whereas it hit young people much harder.

Are longer working lives a good thing?

Working for longer will not be for everyone, particularly where this is driven by financial necessity due to inadequate retirement incomes (whether due to failure to save enough earlier in life or just bad luck given current exceptionally low annuity rates). But enabling those who want to work for longer to do so can bring medical as well as financial benefits, helping them to keep mentally and physically active in later life.

Boosting employment rates for older workers is also important for the economy and the public finances in a country like the UK with an ageing population. This will be even more important if Brexit leads to lower net immigration of younger workers from the EU.

By continuing to pay taxes and deferring the point at which they start to rely on state benefits, older workers can help to support a stronger, earnings-linked state pension and rising health and long term care spending without requiring large future tax rises on younger generations.

But there is still scope for further improvement to match best OECD performers

While it is good to see the UK making progress on fuller working lives, analysis in our latest Golden Age Index report suggests that we still lag behind top international performers like Iceland, New Zealand and Sweden.

Iceland and New Zealand are relatively small, isolated islands where a long-standing culture of self-sufficiency and hardiness is likely to be associated with longer working lives. But Sweden, as a medium-sized EU economy, may be a more realistic benchmark for the UK to aim for.

The main reason for Sweden’s relatively high ranking in our index is that not only do significantly more 55-64 year-olds work there than in the UK, particularly women, but more are working full-time. Indeed 72% of Swedish women aged 55-64 who are working are in full-time employment compared to an OECD average of only around 50%. This reflects a working culture and public policy regime that is strongly supportive of high female employment rates at all ages in Sweden and indeed other Nordic countries.

At the same time, Sweden also offers tax incentives to both individuals and employers for people to keep working beyond 65, while also having relatively high rates of training for over-55s compared to the UK and most other OECD countries.

Matching Swedish employment rates for older workers will not be quick or easy, but we estimate that – if the UK could do this – it would boost annual GDP in the long run by over 4%, or around £80 billion at today’s values.

The latest DWP data suggest that the UK is moving in the right direction to achieve these gains – and indeed has already closed some of the gap with Sweden over the three years since we started publishing our Golden Age index. But there is still significant scope for further progress towards the long-term goal of enabling and supporting all older people who wish to work for longer to do so.

John Hawksworth:
Read profile | Contact by email | Tel: 020 7213 1650

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