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No country for old men – and women? The end of default retirement need not be a burden to employers

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It is one of the least surprising trends of recent times, already recognised and analysed: the demographic shift that means all societies in the developed world will include a growing proportion of older people. What is a surprise is the lack of preparation for the change.

We have entered a new era of longevity and societies will need to adapt themselves to be 'fit' for the situation, in terms of work culture, housing, urban planning and healthcare.

Within a short space of time, men and women across Europe have added 10-15 years to their life expectancy. As a result of this significant rise in longevity - coupled with the 'bump' in numbers from the baby boomer generation and a reduction in the number of births - by 2025, about one-third of Europe's population will be aged 60 or over, it is predicted. This, together with the financial impact of the recession and the process of globalisation, leaves us at a tipping point, where the effects of economic inactivity by older workers could be economically catastrophic. As noted in an OECD briefing in the European Industrial Relations Review (2006), if there is no change in work and retirement patterns, the ratio of older inactive persons per worker will almost double (for OECD countries), from around 38% in 2000 to just over 70% in 2050. For EU member states, the ratio could rise to almost one older inactive person for every worker over the same period. This article will explore the evidence that suggests certain demographic groups - such as women, and individuals of low socio-economic status - are over-represented in the category of 'older inactive persons'.

The underlying problem is one of attitudes - a lack of appreciation of how longevity can be an asset to a country such as the UK. Too often, the debate is framed in terms of 'burden' and how this might be mitigated. The World Health Organisation (WHO) recognises increases in longevity as a result of significant improvements in health and the environment, but also makes the crucial point that: 'years have been added to life; now we must add life to years'. And this should mean everyone, regardless of gender, ethnicity or social and economic status.

The workplace is one of the central areas of potential opportunity for both an extended participation by those older people who choose to work for longer, and as a means of supporting economic stability for the long term. People working longer can be a critical factor in avoiding a pensions crisis and for economic growth in the EU in general. Figures from EU statistical body, Eurostat, suggest the number of people aged 55 to 64 will increase by 14 million between 2005 and 2030, while the total of working age population (15-64) will fall by 20 million.

At the same time, a key target of the EU Lisbon Strategy for the decade 2000-2010 was to increase labour market participation of workers aged 55-64 to 50% by 2010. Figures in 2011 reveal that, while there has been some progress, the target has been only partially met - with 41% of men and 59% of women in this age group still inactive. The UK is above the European average for the number of older people in work, but behind many Scandinavian countries.

Differences between groups in society remain across all ages, but they are increasingly evident for older workers, where those with lower education are less likely to be employed. Older workers are more likely to work part-time, with 28.1% of those in part-time work aged 50-64 and 68.1% of those aged 65+, compared with 21.9% for 25-49 year olds (according to 2010 Labour Force Survey figures). Self-employment is also more common: some 17.9% of those in work aged 50-64 are self-employed, compared to 12.6% of 25-49-year-olds and only 4.1% of 16-24-year-olds.

Having a uniform pension age makes little sense in our era of diversity - where people have more varied patterns of employment, and don't just follow the traditional pathway of education followed by work and then retirement. Increases in statutory retirement ages in European countries have only addressed part of the problem, and so far it is impossible to gauge whether they have had any effect on actual retirement patterns.

There are conflicting examples from Germany, where recent changes in retirement benefits seemed to directly correlate with changes in the behaviour of individuals, and from Finland, where partial retirement rules backfired. Policy-makers, and also employers, need to understand the psychology behind people's decision-making processes around pensions and retirement and ensure that policy and practice respond to this.

Older people are an asset for employers, and on one level the ageing of the workforce can have many positive effects. The challenge is about appreciation and understanding of what older staff bring to an organisation and offering the kind of flexibility of working conditions that make it attractive for them to keep working, and keep that experience on board.

More needs to be done to make work places more 'age-friendly'. This can be done in a number of ways: encouraging employees to want to work longer by providing a culture that is more flexible and positive about older workers; looking at the potential for age discrimination within organisations and how this can be avoided; and general support for people of all ages (if they're not older employees themselves, they are all 'future old') to stay fit and healthy while they continue to work.

As a foundation of change, HR professionals need to understand much more about older workers as a distinctive group, what motivates them, how the knowledge and experience can be retained, when they want to retire - all the issues that will be increasingly important as the numbers of imminent retirees continues to swell. Older workers will have different situations and different needs, and the mistake will be to treat them as one amorphous grouping. They are more likely to be looking for flexible work patterns and flexibility of offering. Personalised planning will be an important part of any HR provision aimed at older workers.

Increasingly, older people will be actively looking for 'employers of choice', who offer age-friendly conditions and an attractive pension offering. We know that women are more likely to suffer age discrimination early than men, so links to this area of work need to be considered. We also know that older workers move jobs less frequently than younger workers so due consideration to their training and developmental needs is key. Promoting lifelong learning and workplace wellbeing programmes will help to ensure all employees are able to make a significant contribution to the organisation.

With the current challenges of youth unemployment, inevitably there are going to be related generational pressures on which groups get the available career opportunities. There is no evidence to suggest that older people 'prevent' younger people from jobs in the workplace - all the evidence points to the contrary, that the continued engagement of experienced employees contributes to a more buoyant economy, resulting in more job opportunities, not less.

For the future, age auditing will become essential as a barometer for more organisations to test to what extent they are 'age-friendly' and identify any areas where they can improve. This needs to cover all elements of HR, from recruitment and selection, equality and diversity, to training and development and retirement planning.

Organisations can then make use of the data to benchmark themselves against their peers, to help ensure they are going to be attractive to potential older employees and retain staff who might otherwise have taken the retirement option.

Most critically, all organisations need to be alert to the value of older employees and what they can contribute to business performance and development. There is yet to be any assessment of what the end to the default retirement age will mean for UK firms. But what's likely - for those with the right attitude and commitment - is tangible business returns. A default retirement age has meant an officially sanctioned brain drain. Keeping experience, contacts and knowledge within organisations for just one more year, particularly in a challenging economic environment such as this, will mean another year of added value, continuity, security, more opportunities to pass on expertise and a platform for growth.

Christine Broughan is co-director, Age Research Centre, Coventry University. On 27 September 2012, she will be speaking at an ACAS/Coventry University conference, 'Life after the removal of the Default Retirement Age: balancing generational employment issues' (http://bit.ly/MkSdVm)