Population ageing and employment policies: an OECD perspective

1
Population ageing and employment policies an
OECD perspective

John P. MartinDirector for Employment, Labour
and Social Affairs
Washington, 7-8 June, 2007
2
Key messages in the presentation

• U.S. in relatively good position but no room for
  complacency
• More needs to be done to help older Americans
  carry on working
• Experience of other OECD countries points to a
  number of measures that should be taken
• Raise early retirement age
• Change employer attitudes and employment
  practices
• Revamp employment programs for older jobseekers
• Expand training of the low-skilled and mid-career
  workers

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• Population ageing is occurring in all OECD
  countries but less rapidly in the U.S.
• US blessed with (a) higher fertility and (b)
  higher immigration than most other OECD countries

Proportion of the population aged 65 and over,
2000 and 2050 ()
4

• But no room for complacency
• Labour force growth will slow and the number of
  workers retiring will rise relative to new
  entrants
• Leading to lower economic growth, rising skill
  shortages and pressure on public finances

Labour force growth, 1950-2050Annual average
change
Labour force entrants (aged 15-29) and exiters
(aged 50) in the US, 2005-2050 As a percentage
of the labour force
Assuming labour force entry and exit
behaviour by age and gender remain unchanged.
5

• To meet these challenges, employment at an older
  age must be encouraged not discouraged
• Good news relative to many other OECD countries,
  a high proportion of older Americans are working

Percentage of the population in each age group
who are employed, 2006
6

• But there is scope to raise employment rates
  further
• Especially among some ethnic groups and the
  low-skilled

Percentage of the population in each group who
are employed, 2006
7
Key policy directions OECD countries are taking
to encourage working longer
Rewarding work
Pension reform to cut implicit tax on
workingClosing other early retirement
pathwaysGiving better options for phased
retirement
Changing employer practices
Improving employability
GOVERNMENT EMPLOYERSUNIONSNGOs
Providing suitable training opportunities at all
agesGiving better help for older
jobseekersImproving the work environment
Legislation and information campaigns to promote
age diversityAligning labour costs with
productivity Protecting employment
opportunities not jobs
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Rewarding work

• Pension reform has been widespread some common
  features
• Higher pension eligibility age for men and women
  (e.g. Denmark, Germany, Italy, Japan, Korea, US)
  or for women alone (e.g. Australia, UK)
• Improved incentives to delay retirement (e.g.
  Australia, France, Germany, Italy, UK)
• Tighter qualifying conditions for retirement
  (e.g. France, Italy)
• Links to life expectancy or financial
  sustainability
• in earnings-related schemes (e.g. Germany, Japan)
• in qualifying conditions (e.g. France)
• through notional accounts (e.g. Italy, Poland,
  Sweden)
• through defined-contribution schemes (e.g.
  Australia, Hungary, Mexico, Poland, Slovakia,
  Sweden)
• Direct cuts in generosity
• lower accrual rates (e.g. Austria, Japan, Korea)

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Rewarding work (cont.)

• But pension reforms are often phased in slowly
  and early retirement may be possible through
  other welfare benefits
• Consequently, effective retirement age well below
  official retirement age in many countries

Effective age of retirement for men and the
official age, 2000-2005
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Rewarding work (cont.)

• Where early-retirement pathways have been heavily
  used, notably in Europe, a number of reforms have
  taken place
• Access to formal early retirement restricted or
  closed (e.g. Austria, Belgium, France)
• Tighter qualifying conditions for other pathways
  such as disability benefits (e.g. Australia,
  Denmark, Netherlands, UK) and unemployment
  benefits (e.g. Austria, Finland, Netherlands)
• Country experience shows that, unless reform is
  comprehensive, risk of substitution between
  early- retirement pathways
• The phasing out of formal early retirement
  schemes in Belgium and France has been offset by
  a rise in the number of older unemployed exempt
  from active job search
• Disability benefits still a major
  early-retirement pathway in many OECD countries
  incl. in US.

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Changing employer practices

• Anti-age discrimination legislation now
  widespread in OECD countries (except notably in
  Japan)
• But no panacea employers need to be told not
  just what they cant do but also what they should
  be doing in terms of managing age diversity
• Several countries (e.g. Finland, Netherlands, UK
  and, recently, France) have also carried out
  major information campaigns but close
  co-operation with employers, unions, NGOs is
  required to be effective
• Also important to tackle objective factors
  driving employer decisions such as labour costs
• In some countries (e.g. France, Japan, Korea),
  seniority wages are an obstacle to the retention
  of older workers
• In US, also an issue as some non-wage labour
  costs rise steeply with age such as health
  insurance

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Improving employability

• Measures to encourage training
• More flexible courses (e.g. use of modular
  courses in Australia and recognition of prior
  learning)
• Better opportunities for lifelong learning (e.g.
  Norwegian competence reform, right to skills
  audit and training leave in France)
• More resources to help older job seekers
• Special programs such as New Deal 50 in UK
• Wage subsidies (e.g. in Austria, Korea, Spain)
  and employment subsidies (e.g. Japan, UK) but
  not always well-targeted
• Incentives for private employment agencies to
  place older job seekers (e.g. Australia)
• Improvements in the work environment
• Campaigns to improve occupational health and
  safety and to adapt working conditions to older
  workers (e.g. VETO program in Finland)
• Measures to reduce long work hours (e.g. Japan
  and Korea)
• Greater incentives for phased retirement (e.g.
  Belgium) but subsidies for part-time may be
  counter-productive

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What should the U.S. be doing?

• Measures to improve work incentives
• Speed up the transition from 65 to 67 for the
  full retirement age
• Raise minimum age for social security
• Ensure disability benefits do not become an
  alternative route to early retirement
• Limit tax advantages in private pension schemes
  for taking early retirement
• Encourage employers to hire and retain older
  workers
• Develop guidelines and promote good practice with
  respect to age diversity in the workplace
• Provide more information on current and
  prospective skill shortages
• Eliminate the Medicare as secondary payer rule

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What should the U.S. be doing? (cont.)

• Measures to improve employability of older
  workers
• Strengthen training opportunities for low-skilled
  workers training declines with age but is very
  low for high-school dropouts of all ages
• Evaluate the effectiveness of employment services
  provided to older jobseekers older workers are
  under-represented in active labour market
  programs
• Improve the knowledge base on health, well-being
  and safety at work and remove regulatory
  impediments to phased retirement

Participation of workers in job-related
training, 2001 ()
Exiters from WIA programsas a of the
unemployed, 2003-04
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For further information
http//www.oecd.org/els/employment/olderworkers