Live Longer, Work Longer: Ageing and Employment Policies

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• Live Longer, Work Longer Ageing and Employment
  Policies

Mark KEESE Employment, Labour and Social
Affairs, OECD

Presentation to the High-level OECD
Parliamentary Seminar on the Policy Implications
of Ageing Populations, 23 February 2006
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If nothing is done, labour supply will grow more
slowly or contract leading to labour shortages,
slower economic growth and unsustainable rises in
public social expenditures

Projected change in labour force, 2000-2050
Index (2000 100)
Assuming participation rates by age and gender
remain unchanged at their current levels
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• Key conclusion Meeting these challenges will
  require mobilising more fully the labour
  resources of older people

Percentage of the population who are employed,
2004
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Key policy directions to encourage work at an
older age
Reward work
Pension reform to cut implicit tax on working
Restrict other early retirement pathways
Better options for phased retirement
GOVERNMENT EMPLOYERSUNIONSNGOs
Improve employability
Change employer behaviour
Tackle age discriminationAlign labour costs
with productivity Protect employment
opportunities not jobs
Suitable training opportunities at all
agesBetter help for older jobseekersSafe
healthy working conditions
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Population ageing is occurring in all OECD
countries
Ratio of the population aged 65 to the working
age population (20-64)
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If nothing is done, labour supply will grow more
slowly or contract leading to labour shortages,
slower economic growth and unsustainable rises in
public social expenditures

Projected change in labour force, 2000-2050
Index (2000 100)
Assuming participation rates by age and gender
remain unchanged at their current levels
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OECD work on ageing

• General guidelines for reforms
• Maintaining Prosperity in an Ageing Society
  (1998)
• Overview of country reforms
• Reforms for an Ageing Society (2000)
• Link between pensions and other welfare benefits
  on participation
• Burniaux et al. (2003), Coping with Ageing a
  Dynamic Approach to Quantify the Impact of
  Alternative Policy Options on Future Labour
  Supply in OECD Countries, OECD Economics
  Department Working Papers, No. 371.
• Macroeconomic consequences of ageing
• Oliveira Martins et al. (2005), The Impact of
  Ageing on Demand, Factor Markets and Growth,
  OECD Economics Department Working Papers No. 420.
• International comparisons of pension systems
• Pensions at a Glance (2005)

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• Key conclusion Meeting these challenges will
  require mobilising more fully the labour
  resources of older people

Percentage of the population who are employed,
2004
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• Key policy response Living longer must mean
  working longer
• But how to achieve this?

• OECD has carried out a major study of Ageing and
  Employment Policies consisting of
• 21 separate country reports
• Identifying work disincentives and barriers to
  employment of older people
• Setting out policy recommendations
• A synthesis report, Live Longer, Work Longer,
  which was presented to a High-Level Policy Forum
  in Brussels, 17-18 October 2005
• www.oecd.org/olderworkersforum

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Three key barriers to working at an older age
Financial disincentives
Public pension rules Formal informal early
retirement schemes Few options for phased
retirement
EARLY EXIT FROM LABOUR MARKET
Employer barriers
Weak employability
Negative attitudesHigh labour costs Strict
job protection rules
Obsolete skills Inadequate help for older
jobseekersUnsuitable work conditions poor
health
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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
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Improving incentives to continue working

• Ensure greater neutrality in work-retirement
  decisions
• Moving towards actuarial neutrality
• Taking account of rising life expectancy

• 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

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Improving incentives to continue working

• 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?

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2. Employer barriers

• Hiring and retention rates decline steeply after
  50, reflecting
• Negative employer attitudes
• Labour costs that rise with age faster than
  productivity
• Strict Employment Protection Legislation (EPL)

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Changing employer practices

• 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

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Changing employer practices

• 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?

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3. Weak employability

• Inadequate employment services

• Obsolete skills
• Training declines sharply with age

Percentage of workers who participated in
education or training during the previous year
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3. Weak employability

• Many older workers report poor working conditions

Percentage of employees with unpleasant working
conditions
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.
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Strengthening employability

• 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

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Strengthening employability

• 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?

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THE BOTTOM LINE

• Population ageing is both a challenge and an
  opportunity
• It will put upward pressure on public
  expenditures while dragging down economic growth
• But it is also a tremendous opportunity for all
  of us to spend more rewarding years at work and
  in retirement.
• Seizing this opportunity will require the
  co-operation of government, employers, trade
  unions and civil society