Three quarters of local authorities plan to make redundancies. An estimated 160,000 local government workers will be made redundant. A study by Wise Owls, a support agency for the over fifties, has revealed that councils, including Newham, Tower Hamlets and many others are making more employees in their fifties redundant than those in other age groups. Will these individuals ever find employment again and how do we help them to do so?
If council employees are made redundant at age 50 plus it can be up to fifteen years before they will receive their state pension. Even if local authorities make up the Local Government pension contributions of those made redundant aged over 55, many ex council employees will need to work in the private sector for ten to fifteen years to supplement their income until they begin to receive the state pension. The Government recognises citizens will need to work longer to provide for their retirement and plans to scrap the default retirement age of 65 (from October 2011) to enable all citizens to work for longer.
The problem is how to find work for those over fifty year olds that have lost their jobs. It will be particularly acute for those who have been employed in roles commonly referred to as ‘non jobs.’ After twenty years as a diversity monitor, an access coordinator or a bouncy castle attendant these employees may have few transferable skills that the productive private sector requires. The tragedy of the non-jobs is not just that the community are taxed to pay for jobs that produce no wider communal economic or social benefit; it is also that individuals who undertake these roles make themselves less employable.
Clearly not all or even most of those who lose their jobs will have been employed in non-jobs. In particular, there are profound reasons why the absolute number of over fifties made redundant will be higher than other age groups regardless of the council field of expertise they are employed in. In many areas a higher proportion of local authority workers are in their fifties than is the case in other vocations. Consequently we would expect the absolute number of over fifties being made redundant to be higher than other age groups because their age group makes up a greater proportion of the total council workforce. This is even if the percentage of employees made redundant in each age group were the same.
However, there are clear reasons why the proportion of workers in their fifties made redundant will also be higher. Older workers tend to cost more to employ, in terms of pay, pensions and insurance. Councils can achieve greater savings if they make more of the more expensive employees (who tend to be older) redundant rather than the less expensive employees (who tend to be younger). Councils can then minimise the number of redundancies, which many seek to do (because it takes fewer redundancies to achieve their cost savings total).
The immediate cost of making older workers redundant can be higher to the council because older workers are often offered more generous voluntary retirement deals (in respect of their long service and their right to greater statutory payments if they were made compulsorily redundant). However, the on-going savings are often greater than making younger employees redundant. Council employers are also more likely to favour voluntary over compulsory redundancy deals and given the over fifties group are offered a more attractive package of voluntary redundancy it is not surprising that more of them will take up these offers.
These older ex council employees are likely to experience a permanent reduction in their status and income, often this is unavoidable. However, councils need to think about how to prevent yesterday’s diversity monitor from becoming tomorrow’s welfare recipient. These individuals should not be expected to drop out of the labour market prematurely (unless they wish to). Our responsibility to these now ex employees extends further than awarding a golden goodbye compensation package.
I think councils should invest in retraining the staff that they make redundant. To do this they need to raise sufficient financial capital and develop a structure to disperse it. There are a number of ways to do this. First, councils could direct part of the savings achieved by their redundancy programme to invest in a fund for all ex council staff to access finance for retraining. Second, councils could raise a bond on private capital markets to fund these retraining programmes. Third, councils could earmark funds raised from sales of council assets to fund this scheme. Fourth, councils could prioritise funding these retraining programmes when receiving any bridging funding from Central Government to smooth the transition to a lower central government grant. They could favour this training programme over maintaining funding to existing services.
Councils could disperse these funds in a number of ways. First they could match fund the training of ex council employees now employed in private firms up to a specified amount over a designated period of time. Second they could provide a transition grant to private firms wishing to hire ex council employees, meeting the costs of employing these individuals for a while subject to these individuals being trained in a transferable skill during their employment. Third councils could provide loans direct to ex-employees who could be referred to the scheme as part of the redundancy process. All funding granted to ex council employees could be repaid to the local authority plus interest if the council operated a loan based scheme in which these workers repaid the costs of their training once in employment.
Capitalism has ensured material progress and prosperity wherever it has been deployed. The legitimate role of Government is not to give complete job security to public sector staff, to minimise public sector job losses or protect overly generous pay, conditions or pensions. Employing fewer people to produce a similar level of output is how businesses become more productive, why should the government be any different?
Where local authorities and government have a legitimate and unique role is in smoothing this process of creative destruction. This means investing in retraining council employees that have been fired to ensure they have the skills to obtain private sector employment. Unions that care for their members should campaign for finance to be provided to retrain workers so they can gain private sector roles and enlightened councils should implement such measures.
The views expressed above are my personal views and not those of my employer or any other organisation with which I am associated.