Comprehensive strategies for active ageing - mutual learning ...

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SUMMARY Active ageing is not an issue that affects older workers in isolation but all members of society and a wide range of policy fields. Odile Quintin stressed that to age actively you have to start young! Maarten Camps agreed with the points made by Odile Quintin in her opening statement and expressed the wish for concrete examples policies to attract and maintain people in the labour market. He argued that the evidence suggests that a range of incentives, for employers to maintain older workers in the workforce and for employees to remain in work, could be effective and that it was therefore important to discuss and disseminate these. 3. Thematic Expert Paper “Incentives to take up work and remain in work longer” – Jaap de Koning The Implications of the ageing process on the labour market Jaap de Koning’s paper focused on the implications for the labour market of demographic ageing. He outlined the possible impacts of the ageing process on the relative size of the workforce, on participation rates and on productivity and innovation. He then looked at the role of incentives to keep older people in work, and at the challenges posed by ageing and policy responses to them. The impacts of the ageing process on the relative size of the population of working age between now and 2050 are: a huge increase in the old age dependency ratio (i.e. the number of people over 65 divided by the number of people of working age); a rise in the share of the very old (80+); and a decrease in the share of young people. The latter may reduce pressure on the dependency ratio in countries with extremely low birth rates (e.g. some of the new member states), but accelerate the effects of ageing of the workforce. These impacts will lead to an upward pressure on age-related public expenditure, a growth in the share of the active labour force needed for care activities, negative effects on macro-economic productivity and higher tax rates (which may, in turn, generate a vicious circle reducing incentives to work and thereby pushing tax rates up even higher). Currently the participation rates of 50-65 year-olds in the workforce are low (57.7% EU average in 2002). If one assumes that the current low labour market participation of this age category continues, the impacts of demographic ageing would be a drop of 10% in overall participation rates between 2000 and 2050 2 . The effect would be particularly acute for the countries of Central Europe. However, it is likely that the share of 50-65 yearolds in working age population will increase although the all-age participation rate will decline. Thus the overall impact of demographic ageing on participation rates will have a negative effect on the size of the labour force, and the level of employment, as well as macro-economic output and income. In terms of the impact of ageing on innovation and productivity, the existing evidence suggests that an older workforce has negative effects on productivity and on innovation and productivity growth. However, the observed patterns may not be inevitable. Learning capacity stays intact if people continue to learn, older workers perform equally well as younger workers in certain fields (which is an argument in favour of job mobility), and mobility and training throughout one's life positively affect performance later in life. Policy to date Incentives for employers to employ older workers are insufficient. The productivity-wage ratio is seen as unfavourable for these groups. Both younger and older workers appear to cost more than they produce whereas middle-aged workers produce more than they cost. Although there may be an 'implicit deal' between employers and employees regarding productivity-wage ratios over time, employers are unlikely to respect this if the government offers the option of using social benefit schemes as exit routes for older workers. In addition, older 2 Burniaux, Duval and Jamotte (2004) 20 April 2005 Thematic Review Seminar Comprehensive strategies for active ageing 2
SUMMARY workers may be less adaptable and less able to cope with organisational and technological change. The high separation costs of older workers discourage employers from hiring them in the first place. Training older workers is often not very attractive for employers because the pay-off period is typically shorter than with younger workers. Even though it can be argued that older workers may be less likely to quit than their younger (upwardly mobile) colleagues, employers may still be wary of investing in them. There is also a common belief among employers that older workers get sick more frequently than younger ones. The behaviour of employers is, it can be argued, partly based on bias. The incentives for older employees to stay in employment are also insufficient. Early retirement was encouraged for many years in Europe in an attempt to reduce unemployment and provide jobs for the young. Jaap de Koning argued that such a policy was based on false assumptions (the so-called 'lump of labour fallacy') since it did not take into account that a reduction in supply can itself lead to a reduction in demand. Many countries, e.g. the Netherlands, developed early retirement schemes which made it possible for workers to retire between the ages of 55 and 60 with a relatively small decline in net income. The fact that, at this age, children have usually left home and mortgages are paid means that employees faced with this choice would often opt for leisure. Older workers have, in the past, tended to have relatively easy access to disability and unemployment benefits. These were also used as unofficial 'exit routes' by employers. Many EU member states (e.g. the Netherlands and the UK) have, in recent years, introduced stricter checks on people claiming disability benefits and have made it more difficult for people to remain on unemployment benefits until retirement without actively looking for work. The incentive to remain in employment or to look for work is thus heightened. Older employees often have the same negative attitude towards training as their employers, and may also believe that the individual pay-off period is too short to get positive returns from investment in training. Policy response The above analysis leads to the conclusion that the ageing process poses considerable challenges to society and that new policy measures are needed to ensure the future stability of per capita income growth. Jaap de Koning suggested that such policies should focus on two main objectives: – to increase labour force participation, in order to compensate for the expected decline in the labour force, and – to increase labour productivity and productivity growth. The fact that some countries (e.g. Sweden) have high rates of employment among older workers suggests that policy measures can make a difference. What might these be? Incentives to older workers to stay in work for longer. These may include the following measures: – Blocking the road to unofficial early retirement through social security benefits (disability and unemployment benefits) – Stimulating investment in human capital (training), in particular targeting individuals (e.g. through initiatives such as individual learning accounts and learning vouchers) – Making benefit entitlements and levels dependent on previous investment in human capital Incentives to employers. These may include: – 'Experience-rating' in social security schemes, under which in the contributions paid by employers increase according to the number of older workers they lay off – Reducing separation costs in combination with tax bonuses for employers who hire older workers – Subsidising wage costs or reducing social contributions/taxes – Increasing government support for training and mobility Other measures to encourage the participation of older workers in the labour force, include: – Active labour market policies raising the pension age – Making early retirement financially less attractive and making work pay 20 April 2005 Thematic Review Seminar Comprehensive strategies for active ageing 3
Page 1: SUMMARY 1. Introduction Comprehensi
Page 5 and 6: SUMMARY Qualifications are a decisi
Page 7 and 8: SUMMARY holistic approach to policy
Page 9 and 10: SUMMARY Lifelong learning Lifelong
Page 11 and 12: SUMMARY Policy response In spite of
Page 13: SUMMARY In the ensuing discussion,

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