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1
Older Workers: evidence from OECD countries
Raymond Torres, OECD
2
Outline of presentation
A. Demographic trends: challenge and possible impact
B. Responding to the challenge through a strategy to promote employment of older workers
C. Key policy dilemmas
This work is being published in “Live Longer, Work Longer”, based on 21 OECD country reviews
3
A. The ageing challenge
Cohort effect: young cohorts are getting smaller than older cohorts:
In the US and UK, by 2020, the size of the 20-24 age group will be smaller than that of the 60-64 group
In Canada, this will happen in 2015, in France in 2010, and in Italy, Germany and Japan it is happening now!
Longevity effect: irrespective of the cohort
effect, people live longer –life expectancy tends to improve 2 years every 10 years
4
US
%20-24
%60-64
0
2
4
6
8
10
12
14
16
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
Cohort effect: by 2020, less youth than older people in the US…
5
Japan
United Kingdom
%20-24
%60-64
0
2
4
6
8
10
12
14
16
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
… as well as in the UK
6
Japan
Canada
%20-24
%60-64
0
2
4
6
8
10
12
14
16
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
The curves will cross in 2015 in Canada…
7
Japan
France
%20-24
%60-64
0
2
4
6
8
10
12
14
16
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
… in 2010 in France, …
8
Japan
Germany
%20-24
%60-64
0
2
4
6
8
10
12
14
16
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
…and now in Germany, Italy and Japan!
9
Japan
Italy
%20-24
%60-64
0
2
4
6
8
10
12
14
16
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
10
Japan
Japan
%20-24
%60-64
0
2
4
6
8
10
12
14
16
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
11
Individuals aged 65 and over as a percentage of the population aged 20-64
US
Japan
EU
0
10
20
30
40
50
60
70
80
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Longevity: by 2050, the 65+ will be 40% to 70% of the 20-64 group, compared with less than 30% today
12
Possible impact on growth and living standards
If nothing changes, labour force growth will be cut by half in US and will contract in size in EU and Japan
Economic growth will decelerate
There will be pressure to raise pension and other social spending, while the tax base will shrink
=> This is unsustainable
13
Annual percentage changeLabour force growth under the constant scenario
US
Japan
EU
-1,5 -1,0 -0,5 0,0 0,5 1,0 1,5 2,0
1950-2000 2000-2020 2020-2050-1,5 -1,0 -0,5 0,0 0,5 1,0 1,5 2,0
14
Economic Growth –a simulation based on unchanged policy
Average economic growth rate in% 1970-2000 2000-2030
US 2.2 1.7Canada 2.0 1.3France 2.1 1.1Germany 2.2 1.5Italy 2.2 0.8Japan 2.6 0.7UK 2.1 2.0
15
Meeting these challenges will require mobilising more fully the labour resources of older people
Percentage of the population who are employed, 2004
0
10
20
30
40
50
60
70
80
90
100
Icelan
d
Sweden
Norway
New Z
ealan
d
Switzer
land
Denm
ark
Japa
n
United
Sta
tes
United
King
dom
Canad
a
Korea
Finlan
d
Austra
lia
Mex
ico
Portu
gal
OECD
Czech
Rep
.
Irelan
d
Nethe
rland
s
Germ
any
Franc
e
Spain
Greec
e
Luxe
mbo
urg
Slovak
Rep
.
Hunga
ry
Austri
a
Belgium Ita
ly
Poland
Turke
y
50-64 25-49
16
B. Three key barriers to working at an older ageB. Three key barriers to working at an older age
Negative attitudes
High labour costs
Strict job protection rules
EARLY EXIT FROM LABOUR
MARKET
Financial disincentives
Employer barriers Weak employability
Public pension rules
Formal & informal early retirement schemes
Few options for phased retirement
Obsolete skills
Inadequate help for older jobseekers
Unsuitable work conditions & poor health
17
1. Work disincentives Pension systems and other early retirement schemes
penalise work at older ages Effective age of retirement is below official age in most
countries
Effective age of retirement and the official age, 1999-2004
55
57
59
61
63
65
67
69
71
73
75
Mex
ico
Korea
Japa
n
Icelan
d
Switzer
land
Portu
gal
Irelan
d
Denm
ark
New Z
ealan
d
United
Sta
tes
Sweden
Turke
y
Norway
Canad
a
Austra
lia
United
King
dom
Greec
e
Czech
Rep
ublic
Spain
Nethe
rland
s
Germ
any
Poland Ita
ly
Finlan
d
Slovak
Rep
ublic
Franc
e
Belgium
Austri
a
Luxe
mbo
urg
Hunga
ry
Effective age Official age
18
Ensure greater neutrality in work-retirement decisions
Moving towards actuarial neutrality Taking account of rising life expectancy
Improving incentives to continue workingImproving incentives to continue working
Reduce early retirement options
Raising pension age Phasing out formal early retirement schemes Ensuring that other welfare benefits are not used as early
retirement pathways
Beyond neutrality – actively promote participation
Increasing pension rights with age Part-time pensions Combining work and pensions
19
Key issues:
Actuarial neutrality raises difficult issues concerning initial age, equity and adequacy of benefits.
Are measures to promote later retirement sufficiently targeted?
How to increase the flexibility of work-retirement decisions while discouraging early retirement?
How to deal with the stock of older people already on long-term benefits?
Improving incentives to continue workingImproving incentives to continue working
20
2. Employer barriers Hiring and retention rates decline steeply after 50,
reflecting: Negative employer attitudes
Seniority wages and hiring rates
30
1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8
Ratio of male earnings 55-59/25-29c
USA
GBR
CHE
SWE
ESP
NOR
NLDLUX
KOR
JPNITAIRL
HUN
DEUFRA
FIN
DNK
CZE
CAN
BELAUT
AUS
0
2
4
6
8
10
12
14
1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8
Ratio of male earnings 55-59/25-29**
Hiring rate of men 50-64 (%)*
Correlation coefficient: -0.64
AUT
BEL
CHE
CZE
DEUDNK
ESP
FIN
FRAHUN
IRL
ITA
JPN
LUX
NLD
NOR
SWE
UK
0
1
2
3
4
5
6
7
1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8
Ratio of male earnings 55-59/25-29c
* Ratio of employees with less than one year of tenure to all employees, 2004.
** Full-time workers only.
Labour costs that rise with age faster than productivity
21
Tackle negative employer attitudes
Through age discrimination legislation And through information campaigns and guidelines
Align labour costs closer to productivity
Link earnings more closely to individual performance Avoid wage subsidies that are simply targeted by age
Focus on enhancing employability of older workers rather than on job protection
Reassess impact of job protection rules on labour mobility and hiring of older workers
Changing employer practices
22
Key issues:
Age discrimination legislation is no panacea.
Should wage subsidies go to employers or to older workers via an earnings top-up?
Important role for non-governmental organisations.
How can good practices be promoted among SMEs?
Changing employer practices
23
3. Weak employability Inadequate employment services
Percentage of employees in age group who received job-related training over the previous year
Obsolete skills Training declines sharply with age
0
5
10
15
20
25
30
35
40
Sweden
Switzer
land
Finlan
d
Denm
ark
United
King
dom
Norway
Nethe
rland
s
Austri
a
Belgium
Franc
e
Luxe
mbo
urg
Italy
Czech
Rep
Irelan
d
Slovak
Rep
Germ
any
Poland
Hunga
ry
Portu
gal
Spain
Greec
e
50-64 25-49
24
3. Weak employability
Many older workers report poor working conditions
Percentage of employees with unpleasant working conditions*
0
10
20
30
40
50
60
Greec
e
Spain
Portu
gal
Irelan
d
Finlan
d
Luxe
mbo
urg
Italy
United
King
dom
Belgium
Austri
a
Franc
e
Sweden
Germ
any
Nethe
rland
s
Denm
ark
50-64 25-49
* For between one-half to all of the time, exposed in main job to at least one of the following: vibrations from hand tools or machinery; loud noise; high or low temperatures; breathing in vapours, fumes, dust or dangerous substances; handling dangerous products; and radiation such as X rays, radioactive radiation, welding light or laser beams.
25
Ensure older unemployed are actively seeking work in exchange for better employment services
General exemptions from looking for work should be abolished
More resources should be devoted to helping older job seekers
Encourage greater take-up of training
More flexible courses
Better opportunities for lifelong learning
Improve the work environment
Greater flexibility in work hours
Adapting working conditions
Strengthening employability
26
Key issues:
For older workers, the returns to training may not be high, thus need to invest more in lifelong learning. But how to do this? Who should pay for training and how can the more
disadvantaged groups be encouraged to train?
How best to encourage public and private employment
agencies to give more priority to helping older
jobseekers find jobs?
How can employers – especially SMEs – be encouraged to improve working conditions for both younger and older workers?
Strengthening employability
27
THE BOTTOM LINE
Older workers must be given better incentives and opportunities to carry on working