PwC’s new Golden Age Index – the potential $2 trillion prize from longer working lives
June 20, 2017
By 2050, the number of people aged 55 and over in OECD countries will grow to over 500 million. It is great news that we are living longer, but this demographic shift is already beginning to put a significant strain on our public services, healthcare systems and pensions. Longer working lives would help mitigate the pressure on government finances, while at the same time providing financial and health benefits to individuals. So, how can policymakers and businesses encourage and enable older people to remain in the workforce for longer?
To explore how well different countries are harnessing the potential of their older workers, we have updated our Golden Age Index – a weighted average of seven indicators that reflect the labour market impact of workers aged over 55 in 34 OECD countries, including employment, earnings and training.
Here are six key things you need to know:
- Iceland, New Zealand, Israel and Sweden take the top four places on the Index
Israel, Germany and Australia have been the biggest risers in the index since 2003, increasing incentives to remain in work for longer through pension reform and the introduction of anti-age discrimination law. Many of the Nordic countries (Iceland, Sweden, Norway) also continue to perform strongly, with each occupying a place in the top 10. In contrast, Mexico, Greece and Turkey have experienced falls in the rankings since 2003, with each country seeing a decline in their employment rates of older workers over the last decade.
Figure 1: Biggest risers and fallers on the index since 2003
- Matching Swedish employment levels for older workers could boost total OECD GDP by around $2 trillion in the long run.
Sweden is the top ranking EU economy in our index, with employment rates of 55-64 year olds standing at 76% compared to the OECD average of 59%. By raising employment rates to Swedish levels, we estimate that the OECD as a whole could experience a long-term gain to GDP of up to $2 trillion, with the largest potential gains being in low performers like Greece, Belgium and Slovenia (16%, 13%, 12% of GDP respectively).
- The UK continues to occupy a middling position in the index and could boost GDP by around £80 billion by matching Swedish performance
We estimate that if the UK increased its employment rate of 55-64 year olds to match Swedish levels, it could raise GDP by 4.2% (or approximately £80 billion). The UK has made progress over the last decade, increasing the employment rate of 55-69 year olds by 8 percentage points since 2003, and has also made improvements in the full time earnings and training rates of older workers. The UK government has demonstrated its commitment to further improving the employment prospects of older workers with the launch of its ‘retain, retrain, and recruit’ strategy already encouraging firms to increase the amount of older workers they hire by 12% over the next 5 years.
- There is a large regional variation in the employment rates of older workers in the UK
In the UK, there are considerable disparities in the employment rates of older workers across the country, ranging from 74.5% in the South East, to 63.6% in Northern Ireland. Our analysis suggests regions with higher older worker employment tend to be associated with greater economic output per head, greater educational attainment and greater female employment rates. This suggests government policy should focus on boosting the economic potential of lower performing regions, ensuring the provision of high quality education and that women are sufficiently supported to return to work after having children.
Figure 2: Regional variation in employment rates of 50-64 year olds in the UK
- Flexible working practices are a key feature of our top performers
Promoting flexible working opportunities is fundamental to supporting the recruitment and retention of older workers. For instance, being accommodating to changes in working preferences, such as working from home or shorter hours, can encourage older people to either return to or continue to work. This is particularly true for older women, who often face employment barriers when looking to return to work after childcare. It is perhaps no surprise that the Nordic countries, who have a very flexible and open working culture, also occupy the top 3 spots on our Women in Work index.
- Lifelong learning is important to helping older workers adapt to a changing workplace, especially in light of technological change
Lifelong learning is crucial to help older workers remain competitive in a changing labour market. Iceland, New Zealand and Sweden all focus on providing education and training to older populations, which improves their employability and provides them with the skills necessary in the current labour market. This will be particularly important over the coming years, as rapid technological progress and the rise of automation put many existing jobs at risk.
Boosting the employment rates of older workers would deliver significant economic benefits across the OECD. For these benefits to be realised, governments and businesses will need take an active role now, dismantling the employment barriers that older people face and equipping workers with the necessary skills to contribute in an increasingly technological workplace.