1

Live Longer, Work Longer: Ageing and employment policies

Patrik AnderssonEmployment, Labour and Social Affairs, OECD

Thessaloniki, 12-13 October, 2006

2

Population ageing is occurring in all OECD countries

Ratio of the population aged 65+ to the working age population (20-64)

EU

United States

Japan

OECD

20

30

40

50

60

70

2000 2050

%

3

If nothing is done, population ageing may result in a falling labour force, leading to labour shortages and slower economic growth

Projected change in labour force, 2000-2050 *Index (2000 = 100)

* Assuming participation rates by age and gender remain unchanged at their current levels

EU

United States

Japan

OECD

55

70

85

100

115

130

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

4

In addition, age-related public spending is projected to rise from already high levels

Change 2000-50 (%- points)

0 2 4 6 8 10 12 14

Levels in 2000 (% of GDP)

0 5 10 15 20 25 30

LuxembourgIreland

UKSpain

NetherlandsPortugalGreeceEU-15

BelgiumGermany

ItalyFinlandFranceAustria

SwedenDenmark

5

Key conclusion: Meeting these challenges will require mobilising more fully the labour resources of older people

Percentage of the population who are employed, 2004

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Ages 50-64 Ages 25-49

6

OECD has carried out a major study of Ageing and Employment Policies consisting of:

21 separate country reports Identifying work disincentives and barriers

to employment of older people Setting out policy recommendations

A synthesis report, Live Longer, Work Longer

www.oecd.org/olderworkersforum

Key policy response: Living longer must mean working longer

7

Incentives facing older workers to continue working

Employer reluctance to hire and retain older workers

Helping older workers to remain in jobs or find new

jobs

Key issues to working at an older age

8

Low work incentives mean early retirement

Effective and official retirement age for men, 1999-2004*

55

57

59

61

63

65

67

69

71

73

75

Mex

ico

Kor

eaJa

pan

Icel

and

Sw

itzer

land

Por

tuga

lIre

land

Den

mar

kN

ew Z

eala

ndU

nite

d S

tate

sS

wed

enT

urke

yN

orw

ayC

anad

aA

ustra

liaU

nite

d K

ingd

omG

reec

eC

zech

Rep

ublic

Spa

inN

ethe

rland

sG

erm

any

Pol

and

Italy

Fin

land

Slo

vak

Rep

ublic

Fra

nce

Bel

gium

Aus

tria

Luxe

mbo

urg

Hun

gary

Effective age Official age

*The effective age of retirement is the average age at which workers over the age of 40 withdrew from the labour force over the period

9

Strict EPL may reduce hiring of older workers

b) Overall OECD index of the strictness of job protection rules in 2003.

a) The hiring rate refers to the ratio of employees with less than one year of tenure to all employees. The data refer to 2004.

10

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

EPL strictnessc

USA GBR

CHE

SWE

ESPSVK

PRT

POL

NOR

NLD

KOR

JPN ITAIRL

HUN

GRCDEU

FRA

FIN

DNK

CZE

CAN

BELAUT

AUS

0

2

4

6

8

10

12

14

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

EPL strictnessb

Hiring rate of men 50-64 (%)a

Correlation coefficient: -0.50**

0

1

2

3

4

5

6

7

8

9

10

0.00.51.01.52.02.53.03.54.0

EPL strictnes

sc

The relation between employment protection and hiring of older workers

10

Older workers participate less in training

Percentage of workers who participated job-related training, 2002

0

5

10

15

20

25

30

Sw

itzer

land

Icel

and

Uni

ted

Kin

gdom

Finl

and

Den

mar

k

Sw

eden

Nor

way

Net

herla

nds

Slo

vak

Rep

ublic

Irela

nd

Luxe

mbo

urg

Cze

ch R

epub

lic

Bel

gium

Aus

tria

Italy

Ger

man

y

Pol

and

Hun

gary

Spa

in

Fran

ce

Por

tuga

l

Gre

ece

50-64 25-49

11

Key policy directions to encourage work at an older age

Tackle age discrimination

Align labour costs with productivity

Protect employment opportunities not jobs

GOVERNMENT EMPLOYERS

UNIONSNGOs

Reward work

Change employer practices

Improve employability

Pension reform to cut implicit tax on working

Restrict other early retirement pathways

Better options for phased retirement

Suitable training opportunities at all ages

Better help for older jobseekers

Flexible, safe & healthy working conditions

12

Ensure greater neutrality in work-retirement decisions

Moving towards actuarial neutrality Taking account of rising life expectancy Make it possible to combine work and pensions

1. Reward work

Reduce early retirement options

Phasing out formal early retirement schemes Ensuring that other welfare benefits are not used as early

retirement pathways

Beyond neutrality – actively promote participation ?

Increasing pension rights with age Subsidise part-time pensions

13

Tackle negative employer attitudes

Through strict age discrimination legislation And through information campaigns and guidelines

Align labour costs closer to productivity

Link earnings more closely to individual performance not age Avoid wage subsidies that are simply targeted by age

Strengthen employability of older workers rather than on job protection

Reassess the impact of job protection rules on labour mobility and hiring of older workers

2. Change employer practices

14

Ensure that older unemployed are actively seeking work in exchange for better employment services

General exemptions from looking for work should be abolished

Programmes should be better targetted to individuals

Encourage greater take-up of training

Do not exclude older workers from participation in training

More flexible courses

Better targeting to individual needs and the job

Better opportunities for lifelong learning

Improve the work environment

Greater flexibility in working hours

Adapting working conditions

3. Improve employability

15

THE BOTTOM LINE

Population ageing is both a challenge and an opportunity

It will put upward pressure on public expenditures while dragging down economic growth

Seizing this opportunity will require the co-operation of government, employers, trade unions and civil society