Working longer: an economic and social imperative

22 June 2018

It is good news that we are living longer. But we know that an ageing population puts significant financial pressure on health, social care and pension systems which will only increase over time in the UK (as recognised by the government’s recent announcement on NHS spending plans). What’s more, giving up work can impose social costs: work can help to improve the health and wellbeing of older people as they keep mentally as well as physically active.

So what can be done to improve older worker participation rates? One valuable approach is to learn from other countries facing similar issues. Our latest Golden Age Index – a weighted average of seven indicators that reflect the labour market impact of workers aged 55 and over in 35 OECD countries – shows that the UK has achieved its highest index score since 2003, but its ranking has fallen from 18th to 21st over the period because other countries have improved at a faster rate.

Figure 1: Major movers in Golden Age index rankings since 2003

Chart 1

Indeed, if the UK could raise its full-time equivalent employment rate for those aged 55 and over to match rates in New Zealand, the second best performer in our index (behind only Iceland, which is rather an extreme case), it could boost UK GDP in the long run by around an estimated 9%, equivalent to around £180 billion a year at today’s GDP values.

Over recent years, the UK has already made progress in improving the labour market prospects of older workers through legislation and a range of incentives:

Removing barriers to entry: legislation such as The Equality Act (2010) which has made it illegal to discriminate against employees by age. Removing the mandatory retirement age (2011) has also allowed employees to continue working past 65. Coupled with increasing the state pension age, these policies have increased the retention of older workers.

Incentivising people to work longer. The new ‘Fuller Working Lives’ strategy is aimed at highlighting the need to ‘retain, retrain and recruit’ older workers by working with job centres and businesses. Support is provided for older workers through guidance on returning to work and through upskilling training provided by Jobcentre Plus.

Highlighting the economic benefits of older employees. The UK government has appointed the ‘Business in the Community Age at Work leadership’ as Business Champion for older workers to promote the benefits of older workers to employers. By using existing evidence, community engagement and campaigns to highlight the benefits, policymakers are attempting to increase awareness to businesses.

But the UK still performs slightly below the OECD average on our index which means there is more to be done. Based on our analysis, there three key areas for action:

Increase focus on education and training: analysis of the UK Labour Force Survey suggests that older workers are less likely to receive training than younger employees, with only 45% of those aged 65 and over having received one day of training in the past 12 months. With rapid progress and the adoption of AI technology, substantial retraining to adjust to technological change will be critical, particularly (but not only) for older workers.

Incentivise the recruitment of older workers: employers sometimes have negative perceptions of the productivity of older workers. Financial incentives to employers who hire and retain mature age employees may increase employment for older workers. For example, Australia’s Restart Campaign, which was launched in 2017, gives $10,000 to employers to hire over 50s.

Increasing the labour force participation of older women with caring responsibilities: women still face significant barriers to entry after childcare (and elder care). Both government and employers need to promote more flexible working policies to accommodate this. In addition, policy needs to be aimed at retaining older female workers who are at risk of exiting the workforce due to caring responsibilities for their spouse or grandchildren.

With this three-pronged approach, the UK can close the gap with leading performers like New Zealand and make meaningful strides towards unlocking the potential £180 billion prize from enabling longer working lives.

Rachel Taylor | Partner
Profile  0) 78 4178 3022

Twitter
LinkedIn
Facebook
Google+

Comments

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated and will not appear until the author has approved them.