Finland has taken important steps to remove the barriers to employment of older workers, according to a new OECD publication Ageing and Employment Policies in Finland. Since the early 1990s, Finland has introduced programmes to support the employment of older workers, notably the National Programme on Ageing Workers. It has also recently undertaken a major reform of the old-age pension system and will phase out early retirement schemes.
However, more needs to be done. Finland’s old-age dependency ratio (population aged 65 and over as a proportion of the population aged 20-64) is projected to increase from 25% in 2000 to 43% in 2025 compared with an OECD average of 22% in 2000 and 33% in 2025. Raising employment rates, especially among the older population, will be the key to meeting these challenges.
At present, only around 30% of people aged 61 are working – a drop of more than 50 percentage points compared with individuals aged 51. This steep drop in employment rates can primarily be explained by the fact that Finland has too many pathways to early retirement, notably unemployment benefits, unemployment pension, disability pension and individual early retirement pension. Already at the age of 50, 18% of individuals are receiving either unemployment or disability benefits, increasing to more than 46% by the age of 60. Moreover, in the age group 60-64 most unemployed persons transfer to the unemployment pension with a further 20% relying on disability benefits and about 10% rely on the individual early retirement pension.
The OECD report calls for a comprehensive reform strategy to improve the employment prospects of older workers. This strategy should encompass not only measures to remove the remaining incentives to early retirement that are embedded in the tax and welfare systems, but also policy actions directed towards employers (to encourage greater hiring and retention of older workers) and towards older people themselves to improve their employability:
The welfare system.
Too many easily accessible pathways out of the labour market exist. Consequently, the report calls for a review of the proposed easing of eligibility rules for receiving disability benefits. It also suggests that the subsidy of part-time pensions should be abolished. Instead, it calls for reforms which would make it possible to combine the old-age pension with income from a full-time or part-time job as a way of promoting a flexible work-retirement path. Moreover, the report calls for a strengthening of job-search requirements for the older unemployed. Today, these are almost negligible, which means that older unemployed workers can remain essentially inactive and receive a benefit for 8‑10 years before receiving an old-age pension.
Measures to increase the willingness of employers to hire and retain older persons.
Social security contribution rates for older workers paid by the employers should be set equal to those of prime-age workers. Moreover, age-management training and information campaigns alerting managers to the need to retain older workers and make the best use of their skills and experience should be promoted further. At the same time, there is need to evaluate rigorously the effects of such measures and to adapt the design and scope of such training/information programmes accordingly. Further, employers should be encouraged to provide greater training opportunities for their adult employees, paying specific attention to the needs of mid-career and older workers and, where possible, re-organise work tasks so that workers have the time to participate in training.
Change the attitudes of older workers.
It is vital that older workers and the cohorts coming behind them in the labour market change their attitudes to work and retirement, and no longer see early retirement through either the disability or unemployment systems as an acquired right. The report suggests that older unemployed should have full access to both active labour market programmes and vocational rehabilitation and that they should participate in these measures to a much greater extent than at present.