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Two contrasting stories are told about older people and the workplace. One goes like this: people are living longer; they should therefore be working longer; the State Pension is becoming too much of a burden. And, besides, younger people are receiving a raw deal from the current settlement. This can be reset by reducing the generosity of pensioner entitlements, including requiring people to work for longer.
Another version emphasises the barriers to change. It highlights the stark variations in lifespan with life expectancy with a 65 year-old man in Harrow likely to live an additional 20.9 years, six years more than his equivalent in Glasgow City. It notes that we cannot assume that future improvements in lifespan will lead to improvements in health. While the life expectancy of women at birth increased by 1.3 years between 2005 and 2010, the number of years spent without disability only increased by little more than a month. These figures are given a human face by the high profile concerns voiced by women affected by equalisation of State Pension age. They report being unable to work, being forced to draw on limited savings or face the limited support and demanding conditions of claiming working age benefits.
This report shows that both narratives are missing the point. The face of the labour market is changing, with older workers (which we define as those aged over 50) playing an increasingly important role in the workplace. But around half of all workers still leave the workforce before State Pension age, often many several years before. This suggests that public policy should address the twin challenges of enabling those older workers who want to work to do so. And ensuring that those who cannot work are provided for. Seeking to use an increased State Pension age as a crude tool to encourage longer working is likely to be both ineffective and risks increasing hardship among older people.
The backdrop is the implementation of longstanding plans to raise State Pension age. Women’s State Pension age is gradually being raised to reach 65 by November 2018. From December 2018 the State Pension age for both men and women will start to increase to reach 66 by October 2020. It will increase again to 67 between 2026 and 2028. A key aim of this policy has been to improve the public finances.
The Independent Review of State Pension Age led by John Cridland will consider what should happen to State Pension age after 2028, which could set in train another set of reforms.
Potential changes to State Pension age have implications for how long older people are expected to spend in the labour market. So an analysis of the experience of older people in the workforce should be at the centre of policymakers’ thinking. This means understanding labour market patterns and how these vary across the population, whether by gender, occupation or region.
And if an aim of public policy is facilitating people staying in the labour market for longer, then policies that allow them to do so, and provision made for those who may be unable to work into their later years, are both crucial.
This paper examines in detail one of those elements key to this discussion: the rise of the older worker and interrogates the extent to which this trend is widespread. For we need to understand how older workers are faring now to assess whether and how to encourage older people to stay economically active for longer. It pays particular attention to the role that illness and disability plays in older people’s detachment from the labour market.
We find that:
· Over the last 15 years the ranks of older workers – those aged over 50 – has increased by nearly three million or 44 per cent to 9.6 million.
· There remains an enormous drop in participation in the labour market from well before State Pension age. Barely half of 60-64 year olds are economically active.
· There are nearly half a million people within five years of State Pension age who are too ill or disabled to work.
· Up to a third of older people from manual occupations who are economically inactive ahead of retirement cite sickness or disability as the reason. This is twice the rate of those in some white collar categories.
The TUC believes there is a good case for seeking to increase further the number of older people in work while defending the right to retirement. As an economy, we have the challenge of maintaining a stable dependency ratio – the number of workers compared to non-workers - with the retirement of the large babyboomer generation. We can benefit from retaining skills and experience built over decades.
Often it is argued that to keep the dependency ratio in check, the State Pension age must continue to rise. But dependency ratios depend on people’s ages when they actually leave work. As we show in this report, nearly half of people leave the workplace by State Pension age, many a long time before. This is often due to illness or disability, particularly for those in manual occupations.
If policymakers want to ensure that people stay in the labour market for longer, this will require policy interventions to overcome the barriers and discrimination that many face.. Simply pushing up State Pension age risks leaving more older people in hardship while many will continue to draw on state resource through the working age benefits system.
We have made a number of suggestions, including:
· Making all jobs flexible by default to accommodate the needs and choices of the worker.
· Developing mid-life career review so that they become effective vehicles for ensuring older workers receive the support to continue their careers.
· A right to retrain for older workers.
However, it is clear that further major initiatives are also needed in the arena of public health and in reducing inequality more generally if we are to reduce vast disparities in health and therefore the ability of people to work into their later years.
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Issued: 5 September, 2016