Sunday, January 18, 2004
Grey power plugs the job market
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

Age is suddenly a hot issue. The current issue of America’s Newsweek magazine has a feature, “Sex, Love and Nursing Homes”, about the rise of post-retirement hanky-panky. BBC Radio 4 has been serialising the sexual adventures of Jane Juska, a retired English teacher, again in America.

Whether such things are happening here I can’t say. I’m sticking to Gardeners’ Question Time. But older people are becoming active in other ways.

Official figures show that the fastest-growing area of employment is among people above the normal retirement age of 65 for men and 60 for women. “Pensionable age” employment has risen by 73,000 in the past year, out of a total rise of 186,000 in the number of people in jobs. Nearly 1m now work beyond the age when they are entitled to a state pension.

Some of that is due to women working beyond 60, with the normal female retirement age due to go up to 65 in a phased change between 2010 and 2020. But mostly it is explained by the interaction of economics and demographics. Pensionable-age employment among women has risen 8.4% over the past year but the increase among men, 7.7%, is not far behind.

Longevity is increasing at a time when pension prospects, despite the stock market’s recovery, have taken a turn for the worse. People are in good health for longer; no more do most people reach normal retirement age fit only for Dunworkin’, a grim bungalow somewhere on the south coast, and the job-market equivalent of the knacker’s yard.

And this, for once, chimes in with the needs of employers. While many in the past have equated the over- fifties with over-the-hill, a change of attitude has been forced by the tight labour market — claimant unemployment at 3% is close to “full” employment. Now, growing numbers are urging older workers to stay on for at least a couple more years.

On this issue, though, we have barely scratched the surface. New legislation on the way could soon mean that staying on at work becomes the norm, not the exception. Under the European employment directive, the government has to bring in legislation by the end of 2006 to combat age discrimination.

A new set of proposals on this subject is due soon from the Department of Trade and Industry. The first set, on which the DTI finished consulting late last year, drew howls of protests from business. At its heart was the abolition of normal retirement ages. Retirement, in other words, would in every case become a matter of negotiation between employer and employee.

In instances where the employee did not want to retire, the company would have to make the case for doing so, by proving that Old Joe had a tendency to fall asleep at his desk in the afternoons, and so on. Protests from the CBI, which believes this would lead to a flood of tribunal claims and make retirement an issue for the lawyers, may mean the DTI will soften its proposals.

Even so, the trends are clear. Retirement will become a more flexible concept. People will stay longer in work, although they may wind down in terms of hours and responsibilities before retiring.

In the second half of the 20th century, retirement ages fell because many people were able to give up work before the normal time for retirement. Successful pensions, deindustrialisation, rising unemployment, and the need to make way in the job market for baby-boomers all pushed older people out. The Saga generation was born, and few complained. Futurologists told us we would end up with 20-year working lives, the main challenge being how to fill our leisure time.

That may happen one day, but the trend for the first half of the 21st century seems clear. The population is ageing, with the number of people of pensionable age due to increase by nearly 50% over the next 30 years, from 10.9m to 15.2m. Already, for the first time, we have more over- sixties than under-sixteens. How do we respond to this? The House of Lords economic affairs’ committee, with ages ranging from 50 (Lord Newby) to 95 (Lord Roll) was clear in its just- published report about the right way forward.

We cannot, it said, hope to counter the trend towards an ageing population through immigration. Net migration into Britain would need to be 500,000 a year from 2010 (against official projections of 100,000 a year) to stabilise the average age of the population. As it is, official statisticians expect the average age to rise from 39.3 now to 43.6 by 2031.

The committee also had some harsh words to say about pensions, particularly state pensions, saying that the present system is probably the most complex of any industrialised economy. It consists of a low basic state pension, bolstered by an array of means-tested benefits and “increasingly anachronistic” age- related “gifts” from the government such as the winter fuel allowance and free bus passes. It needs a thorough overhaul.

The committee also described the Treasury’s boasts about the fiscal sustainability of Britain’s pensions system as “vacuous”. In his pre-budget report last month Gordon Brown trumpeted the fact that state pensions will cost only 5% of gross domestic product in 2050, compared with 15% in France and Germany.

David Willetts, the shadow work and pensions secretary, will this week elaborate on this point, arguing that if all age-related “pension” spending is taken into account, notably means-tested benefits, or the assumptions varied slightly, the true figure for Britain is likely to be 10% of GDP or more. The Lords argue that holding down state pension spending at a time when pensioner numbers are increasing is nothing to be proud of.

The committee’s biggest barbs, however, were reserved for society as a whole, which it said was riddled with age discrimination. Unlike the CBI, it wants normal retirement ages to be scrapped. It also questions the widespread assumption that workers become less productive as they get older, pointing out there is no hard evidence for this. Specific areas of discrimination — apparently you can’t get a student loan if you are over 54 — should be outlawed.

That is the way things are heading. Age discrimination has been a kind of luxury, possible when the population was younger and workers in greater supply. The sharp rise in pensionable-age employment shows things are already starting to change. There is a lot further to go.

PS: Boca Raton in Florida — the name means “rat’s mouth” or more politely “rocky inlet” — is a long way from the Louvre in Paris. But some in the currency markets are hoping that the upcoming Group of Seven meeting in Florida, on February 6-7, will do the same for the dollar as that legendary meeting in France in 1987. The Louvre meeting succeeded in stabilising the dollar after a two-year fall that the G7 (or rather its predecessor the G5) had prompted in 1985. The Louvre also marked the start of Nigel Lawson’s period of “shadowing” the D-mark.

Will Boca Raton stabilise the dollar? The markets have become more wary about selling the greenback in recent days, not least because the European Central Bank (ECB) has begun to express concern about the euro’s rise. A new Starbucks index from The Economist, complementing its Big Mac index, suggests the euro is 33% overvalued against the dollar while the pound is 17% too high.

But analysts are cautious about a Boca Raton accord on the dollar. Nariman Behravesh, chief economist at Global Insight, says America will agree to stabilise the dollar only if the ECB agrees to cut interest rates. For the moment the American authorities seem untroubled by the dollar’s slide. So the euro is heading above $1.40, he says, implying a dollar-sterling rate above $2.

From The Sunday Times, January 18 2004


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