In June 2014, the Government published its report “Fuller Working Lives”. This details the Government’s strategy to reduce the numbers of people leaving the labour market early.
Out of the 10.2m people aged between 50 and the state pension age, 2.9m of these (28%) are out of work. But of those, just 375,000 are officially unemployed (i.e. are looking for work). There are 1m who do not work because of sickness or disability, 420,000 who care for someone and 330,000 who haven’t fully retired, but aren’t even trying to find employment. The reasons why older people fall out of the labour market are complex.
Men leave the labour market earlier now than they did in the 1950s and 1960s, often not by choice but by circumstances beyond their control. Rising life expectancy means that older people spend 5-10% longer in retirement, compared to the late 1990s. Pension funds become stretched as they have to cover a longer period, so putting living standards at risk.
Yet it’s in the economic interest that people stay working for longer; GDP could have been £18bn higher in 2013 if the employment gap between people in their 40s and people in their 50s and older was halved, and currently £7bn is spent on out of work benefits for those aged between 50 and 65. Moreover, research suggests that youth unemployment is in no way related to older unemployment, so it is a potential win-win situation.
In order to try and reduce the numbers of people leaving the labour market early, the Government is pursuing a number of initiatives, set out in the report according to a number of different categories. Some of these are set out below, with commentary where appropriate.
Health and disability
Health is one of the factors reducing the numbers of older people in employment. Where older people work for SMEs that are unable to afford occupational health, they can fall out of the labour market when long term health problems go untreated. The Government has proposed a new Health and Work service which will provide free occupational health advice for those off sick for four weeks or more. Whilst the service will cover all employees, not just older ones, it is expected to be of particular benefit in keeping more older people in work.
In addition, and in the spirit of bringing a bit of evidence to the policy making process, the Government plans to use Randomised Control Trials for Employment and Support Allowance to test the effectiveness of different techniques of keeping older workers in work: support for two years from a Work Programme provider, support for two years from a health care professional, and increase in Jobcentre Plus Work Coach Support. There are expected to be 1,000-2,000 older people taking part in this trial, so the data that is returned should be useful.
The Government is also looking at the potential for inventors and SMEs to develop new and improved assisted living technology (“ALT”). The report states that many disabled people rely on such technologies, but that uptake is slow and ALTs are not being used to their full potential. As health, disability and age are linked, it is hoped that a series of pilot programs will be able to reveal what technologies may help particular groups.
The report says that the Government will also develop a new guidance toolkit to help employers support older workers in the workplace. The report namedrops a plethora of acronymic bodies that the Government will work with in developing this guidance: the CBI, CIPD, ENEI, ACAS, TUC, IoD and FSB. Government guidance can sometimes fail to hit the mark. It ranges from overly simplistic that it is not of any practical use, to overly complex and long with confusions, inaccuracies and mistakes creeping in. Nevertheless, the idea of developing free, balanced and practical toolkits to help employers is a good one, so cautious optimism should be reserved for this initiative.
Back to work support
Around a quarter of economically inactive people aged 50 or over were made redundant from their last job. The report states that older people are not significantly more likely than younger people to be made redundant, but are much less likely to find work again afterwards (see the latest in our series of studies for comment on this).
There was also a “Older Claimants’ fortnight” run by DWP in June 2014, said to include a range of internal and external communication activities to demonstrate the benefits to business of employing older workers (this happened at the same time as rheumatoid arthritis week). Given that a Google search gives just a handful of results (at the time of writing), “Older Claimants’ Fortnight” was of minimal impact.
The Government is testing a number of other initiatives, including a randomised trial of adviser led in work support and tailoring Jobcentre services for older job seekers.
Skills and workplace factors
Fewer older people engage in work-based training. They will often de-select themselves from opportunities and are less likely to change jobs voluntarily. Jobcentre Plus evidence cited in the report suggests that older people are less confident in having up-to-date skills compared to younger people.
The report refers to Professional and Career development loans. These loans of up to £10,000 are repayable one month from the end of the course. For an older person – or indeed, anyone – taking out a big loan with no guarantee of recouping your costs afterwards is a massive risk. These probably have very limited impact as a means of helping employment of older workers.
Older people need to have the skills to compete in today’s labour market. Training makes good business sense as it gives business as a more skilled (and usually more motivated and productive) workforce. Because of this, a business will usually want to train its staff, but be restricted by practicalities, such as the cost of the course and the cost of lost work by having staff out of the business. Perhaps the Government should conduct a trial to explore the effectiveness of measures that make it easier and cheaper for employers to provide training, as well as making it easier for those out of work to learn valuable skills in new areas and gain high quality, recognised qualifications.
The report also refers to the Government implementing a communications strategy and working with the Older Workers’ Champion to ensure that the business benefits of fuller working lives are more fully understood, so aiming to make older workers more desirable to employers.
Financial security and incentives
As stated above, 420,000 over 50s do not work due to caring responsibilities. At present, carers allowance ceases when an individual earns more than £102 a week, so deterring anyone from doing much more work. With the advent of universal credit, this will change. The benefit will be withdrawn smoothly, improving the ability of careers to combine paid work with caring responsibilities.
The state pension age is increasing to 67, which is referred to in the report as something that will help fix the older-exit issue. However, there is no suggestion or argument as to how this will boost employment rates of over 50s and it is difficult to see how delaying the state pension age would do this. Perhaps the contention is that extending the age at which someone is entitled to a pension will deter people from stopping work in the first place? It would be useful to know why the Government thinks that this will help resolve the early retirement issue.
A lot of the measures are measures that are applicable to all, for example universal credit, pension auto-enrolment and career development loans. The report reads as if every measure that might have any impact upon employment of any age groups has been included, whereas it might be better if a more selective approach were taken where only those measures of particular relevance to the issues the Government is trying to resolve were included.
Nevertheless, the reports refers to a number of randomised control trials and pilot initiatives being rolled out, that are more targeted. Trial and error initiatives are a necessity. Data must be collected, analysed and then used to develop new measures, before the process is repeated. The problem that is trying to be resolved is a complex problem with no simple answer and, to the Government’s credit, no simple “one size fits all” approach is suggested.