The report Too Much to Lose: Understanding and supporting Britain’s older workers by Matthew Tinsley published on policyexchange.org.uk examines the position of over-50s in the UK labour market. It outlines the large barriers to work that they face and highlights that the majority of these barriers remain unaddressed by government support. It argues that without reforms to address these issues, growth in the UK economy will be lower than it might otherwise be and, on average, the population of over-50s could see a fall in living standards.
Some progress but large problems remain
Before addressing the barriers facing the over-50s in the labour market, it is important to realise that significant progress has been made over the last two decades. As well as becoming larger, the older workforce is now more educated, works in more skilled roles and is less likely to be affected by health problems than ever before. This puts older workers in a far stronger position and is likely to have been a major factor behind the rising employment that the older workforce has seen.
However, despite these apparent improvements in employment outcomes, those over-50s currently unemployed are much less likely than any other age group to find work in the next year. We cannot underestimate the scale of these problems. At the end of 2011 there were 189,000 over-50s who had been out of work for a year.
This means that 43% of unemployed people over the age of 50 were long-term unemployed; the equivalent figure for 18 to 24 year olds is 26%, and 35% for 25 to 49 year olds. The over-50s figure would be even worse if we accounted for those invisible unemployed who had simply left work and fallen out of the labour market completely, either into forced early retirement or due to ill health. The report estimates that, on average, fewer than 40% of all unemployed over-50s find any form of work within a year.
There are currently 428,000 over-50s out of work; we therefore expect that more than a quarter of a million of these will not work in the next year, and many will never work again. As well as the short-term effects of unemployment we have also analysed the unemployment scars felt by workers of different ages, addressing the lack of research that exists in this area. Older workers may have a greater need to return to work quickly because of greater financial responsibilities from mortgages or dependent children, so wages will suffer as they may take work at relatively low levels of pay. At the same time age discrimination could significantly limit the opportunities that an older jobseeker has as they look to get back to work.
Using data from 18 years of the British Household Panel Survey and a methodology that allowed us to control for unobservable characteristics across workers of different ages, the report found scars that varied significantly across different age groups. Our results indicate that there is a significant scarring effect of unemployment on future wages for older workers and that this is larger than for other age group. A six month spell of unemployment is estimated to reduce an older worker’s future wages by close to 8%.
In order to understand this unemployment scarring we have to recognise the barriers to work facing older jobseekers. One of the most obvious obstacles for older workers is age discrimination, with employers potentially showing a bias, whether deliberately or unconsciously, toward younger workers. To measure this we undertook a major piece of original research to attempt to identify the scale of the discrimination that is faced by older workers. We applied for over 1,200 jobs as both an older and younger worker, using a randomisation process that ensured that the CVs received by potential employers were identical in every way apart from the date of birth. We then measured the number of responses that showed an interest in the applicant.
The responses showed a very large bias against older workers, with the 51 year old applicant getting positive responses less than half as often as the 25 year old. These results are similar to results from other studies which also find biases against older workers in some positions.
It is startling to see that this discrimination happens even though the UK has very clear laws designed to prevent it (primarily the Equalities Act 2010) and it suggests that there is a culture of bias against older workers.
These barriers to employment are particularly concerning given that the over-50s labour market is more important than ever before. As a result of the 1950s and 1960s ‘baby boom’, Britain’s older population is growing and the number of people over the age of 65 is expected to rise by 49% to over 16 million in the next 20 years.
A key problem is that the growth in the younger population has not matched this and, as a result, Britain’s ability to pay for an increasing population of pensioners has fallen.
The wider economy also depends heavily on the skills and experience of the older workforce. By 2020, significantly more jobs are expected to be created than there are entrants to the workforce. There is, therefore, significant demand for older workers to work for longer.
At the same time there is a concern that skills gaps will emerge as a large number of older workers approach retirement, with sectors such as manufacturing, education and healthcare heavily reliant on older
As well as these labour market issues, ensuring that older workers have the opportunities to work in a manner that suits their needs is also important for improving personal and social outcomes. Work plays a clear role in reducing pensioner poverty and the relationships and support that work can build are vital
to ensuring wellbeing later in life…
The report outlines the vital importance of older workers in the economy. In order to maintain living standards, promote inclusion and health in our ageing population and drive growth in the economy we need to open up opportunities for older workers to increase their working lives. The report also outlines the severe personal and economic costs that unemployment can have on older workers and the difficulties faced by older jobseekers when they try to find work. The size of impacts involved, on both the part of the individual and the wider economy, mean that failing to tackle these problems is not an option.
The report proposes measures to ensure that those already in work can approach their employers to discuss future working plans and that those out of work can get the support they need. On the part of older jobseekers, they would require them to seek any work that is available, gain more experience, consider changing roles or sectors and take on all the support that is available to them. Most of all, the reforms would push the government to ensure that employment support is targeted by need and not by age and to promote the status of older workers in the UK economy. If the government fails to do this they risk letting down older workers and the country. Without these reforms, and by focussing all of our attention on a potential ‘lost generation’ of young people, we risk losing far more. Older workers are crucial to maximise UK economic capacity and hold vital experience and expertise. If we fail to support them, we might condemn a generation of older workers to far greater risks of poverty and declining living standards.