Governments must promote more and better job opportunities for older workers in order to protect both living standards and the sustainability of public finances, according to an OECD report.

A new OECD report, “Working Better with Age”, says that the employment of older workers is vital if prosperity is to be maintained.

More and better opportunities to work at an older age

By the mid-2050s, the median age of a citizen in the OECD will be 45, compared with 40 today, and there will be 58 retired people for every 100 workers, up from 41 today – a 40% increase.

In some countries such as Italy, Greece and Poland, there could be more retired people than workers.

However, delaying the average age at which older workers leave the workforce, as well as reducing the gender gap in labour force participation at younger ages, this average rise for the OECD area could be cut to just 9% – or under 45 retired people for every 100 workers.

The fact that people are living longer and in better health is an achievement to be celebrated. But rapid population ageing will require concerted policy action to promote active ageing so as to offset its potentially serious consequences for living standards and public finances.
— Stefano Scarpetta, OECD Director of Employment, Labour and Social Affairs

It is too hard to bring - and win - a claim of age discrimination

The OECD says that age discrimination and negative employer attitudes remain major obstacles to longer working lives. Although age discrimination is banned in nearly all OECD countries, many report being victims of age discrimination. In 2015, a survey in the EU showed that 60 of respondents, including managers, think that an older age is a factor that puts job applicants at a disadvantage.

The OECD report says that the effectiveness of laws against age discrimination in the workplace is hampered by difficulties in proving that discrimination takes place. Although this can be an issue in jurisdictions like the US and Australia, this statement is of limited application in Europe. In the EU, directive 2000/78/EC (Framework Directive) says at Article 10 that the burden of proof in discrimination claims shifts to the respondent. Provided that facts from which discrimination can be inferred can be shown, it will be for the employer in a discrimination claim to show that no discrimination occurred.

It may be that the cost and procedural barriers that are also highlighted by the OECD act as a bigger deterrent.

Progress towards increasing older worker participation

The report acknowledges the progress that has been made in supporting older workers to continue up to and beyond 65 years of age.

However, in virtually all OECD countries, the effective age at which older people exit the labour market is still lower today than it was 30 years ago, despite a higher number of remaining years of life.

This can be explained by a combination of employer reluctance to hire and retain older workers (age discrimination), poor incentives to continue working at an older age, and underinvestment in developing the skills and employability of workers throughout their working lives.

Governments must do more to ensure that work at an older age is encouraged and not penalised. The OECD recommends that regulations be reviewed and, where necessary, reformed in order to boost labour demand for older workers.

Flexible working and investing in skills

The report stresses the importance of increasing flexible working to promote higher participation at all ages. For example, long working hours may deter some older people from working longer and prevent some women, returning from child-rearing breaks, from pursuing longer work careers. Poor working conditions at a younger age may lead to poor health and earlier retirement at an older age.

It is also important to invest in older workers’ skills, says the OECD. Many of them exhibit lower levels of digital readiness than their children and grandchildren, and they participate much less in job-related training than younger workers.

One key factor preventing older workers from closing the skill gap with younger employees lies in the fact that the employers usually do not see the benefits of investing in the training of their older employees. Providing good opportunities for workers to upgrade their skills and learn new ones throughout their working careers is a key requirement for fostering longer working lives in good quality jobs.
— Stefano Scarpetta, OECD Director of Employment, Labour and Social Affairs

What should governments do to increase opportunities for older workers?

The OECD recommends governments take action in three broad areas:

Encourage employers to retain and hire older workers

This should be done by:

  1. addressing age discrimination in recruitment, promotion and retention;

  2. encouraging good practice by employers in managing an age-diverse workforce;

  3. seeking a better match between the labour costs and productivity of older workers by working with the social partners to review pay-setting practices and eliminating special employment protection rules based on age

Promote the employability of workers throughout their working lives

Tackling this requires:

  1. providing effective employment assistance for older workers facing job loss or wishing to find another job.

  2. improving access to lifelong learning and skills recognition; and

  3. improving working conditions and job quality at all ages

Reward work at an older age

The measures suggested by the OECD are:

  1. ensuring that the pension system encourages and rewards later retirement in line with increased life expectancy, and providing more flexibility in work-retirement transitions;

  2. ensuring welfare benefits are used to provide income support for those unable to work or actively seeking work and not as de facto early-retirement schemes.

  3. restricting the use of publicly funded early-retirement schemes and discouraging mandatory retirement by employers; and