18/10/2005 - Faced with population ageing, longer working lives must be encouraged. This was the key issue addressed by OECD Employment Ministers at a meeting in Brussels held the 17-18 October.
If nothing is done, the number of retirees will increase significantly over the coming decades while the number of persons in employment will stagnate. In European countries, it is expected that, by 2050, for every person in retirement there will be only one person in employment. This will put pensions at risk and increase tax pressures on the working population. Moreover, the prosperity of OECD countries will be put at risk. While all countries are faced with similar challenges, the solutions must take account of national circumstances.
Improving the employment prospects of older people aged 50-64 is the key to meeting this challenge. Today, more than 4 out of 10 older people in the OECD are unemployed or inactive – nearly double the figure for persons aged 25-49. This situation is a result of a number of barriers to the employment of older workers.
To begin with, remaining in work at an older age is not sufficiently rewarded and, as a result, older workers prefer to retire or take advantage of other early pathways out of the labour market. In the past, early retirement was seen as a way to “make room for younger workers”. However, the reverse has occurred, since unemployment rates of young workers remain particularly high in countries where early retirement has been widely used. Moreover, there are still incentives to retire before the official age of retirement or to withdraw from the labour market through other means such as disability pensions or unemployment benefits combined with exemptions from job-search requirements. The result has been a sidelining of a substantial number of older workers, many of whom could have and would have continued to work.
Ministers agreed that these practices need to be stopped, while taking into consideration long working careers or physically demanding jobs. Instead of subsidising inactivity, policies should on the contrary address measures to enhance the employability of older workers. To achieve this, a lifecycle approach is necessary.
It is also the case that employers are often reluctant to hire and retain older workers. As well, older workers are subject to mandatory retirement. And once unemployed, older workers often have difficulties in finding a new job.
This situation is partly explained by negative employer attitudes towards older workers. Some employers believe wrongly that older workers are not capable of adapting to technological change and new work patterns.
But there are also other objective factors such as the fact that older workers often cost more than younger workers. In certain countries, wages tend to rise with age or seniority. In other countries, social security contributions and sickness insurance premiums rise with age. Of course, this can be compensated for by wage subsidies or increases in the productivity of older workers, but few of them benefit from training measures.
Working conditions are often not well adapted to the needs of older workers. Improving working conditions would help older workers maintain their health and improve their prospects for working longer. Moreover, greater flexibility such as part-time and self-employment can facilitate a more gradual transition from work to retirement.
Ministers recognise the need for reform in this area. However, they also call upon the social partners to help remove the barriers to employment facing older workers. More fundamentally, the attitudes of employers and older workers themselves need to change. The myths that older workers are resistant to change and that their early exit from the labour market will create job opportunities for young workers need to be dispelled.
The OECD’s excellent report on older workers highlights the need to reform retirement systems and other social security benefits to reward longer working lives and to adapt workplace practices to create better employment opportunities for older workers. Such a strategy will not only meet economic objectives but also social objectives, as it will ensure the sustainability of social protection systems. It would be useful if the OECD could pursue its work in this area and follow-up on the implementation of reforms by member countries in order to identify best practice. The results of this Forum should provide a useful input to the re-evaluation of the OECD Job Strategy.
For further information, journalists are invited to contact the OECD Media Relations Division (tel. 33 1 45 24 97 00).
More information on the Forum can be found at www.oecd.org/olderworkersforum