Few topics in British public policy attract cross-party consensus. However on extending working lives successive Governments seem to have agreed – we all need to work for longer.
Following Lord Turner’s pensions report, Labour chose to increase the State Pension Age to 68 by 2050. George Osborne has proposed going further by linking the State Pension Age to life expectancy, reflecting the reality that the cost of living longer cannot be entirely borne by the taxpayer.
These changes have not been without controversy. A campaign, 68 is too late, has begun to fight against increases in the pension age, and some commentators have joined this position, wrongly trying to portray working later in life as a source of intergenerational conflict. This position depicts “job-hogging” older workers as an obstacle to younger workers struggling to enter the workforce.
This view is short-sighted. In an ageing labour market a failure to prevent large amounts of skill and experience leave the workforce would hurt the businesses who are still hungry for the best talent. At the same time the constraints on government and individual spending mean that earlier retirement would see incomes fall, decreasing the capacity for spending in the economy.
Instead of providing vacancies for younger workers to step into, allowing large number of older workers fade into inactivity would simply see the economy shrink, decreasing opportunities for everybody. Supporting the opportunities of older workers who wish to retire later is therefore essential to maintaining an economy which faces the prospect of a shrinking workforce.
The question therefore lies not in whether people should work later in life, but whether they can, and the support that they need to do so. This is the subject of a new Policy Exchange report that looks at the changing role held by older workers and the help that they require.
There is certainly some good news. Benefitting from childhoods which were less disrupted by the wars which interrupted the educations of previous generations, the current cohort of older workers is considerably more educated than those that came before. Combined with the ongoing evolution of the UK jobs market, this has resulted in significant falls in the number of older workers who are engaged in manual professions and a decline in the probability of an older worker having to leave work for health reasons.
In this respect the picture is rather positive and presents a major opportunity for the UK to mitigate the costs of an ageing workforce. However the news is not all good. The key problem is that once older workers become unemployed, they can face significant barriers to re-entering work.
These problems seem to be larger, on average, for older workers compared to other age groups. The probability of an unemployed person aged 50 or over finding work within the next year is only 40%, compared to more than 60% for under-25s. This demonstrates the significant problems affecting older jobseekers, led by issues such as age discrimination and the decline of the professions in which a number of older workers built their careers.
Here there is the possibility of conflicts between the interests of different age groups. With the Government’s capacity for intervention limited, the majority of extra support has been given to workers under the age of 25. This was the natural choice for intervention while the headline labour market statistics pointed to the plight of younger people entering the workforce. However this increased support comes at the expense of the needs of large numbers of older workers. A failure to provide support based on targeting the barriers to work of the most needy means that many will miss out on the support that they require.
It is clear that, whilst there are reasons to be optimistic about the ability of older workers to mitigate the effects of Britain’s working age population shrinking in coming years, there are however major barriers faced by large numbers of older jobseekers. Politicians must understand the needs of older workers and the changing nature of retirement. A failure to address these problems will be damaging to the economy and affect large numbers of people who wish to work longer in life.