UK businesses could face a shortage of up to three million workers in the coming decade if they fail to adequately support older workers, according to new research from Aviva.
The analysis used new data from the Office for National Statistics (ONS) which found the percentage of the UK population in later-life age groups is increasing.
According to the ONS, the UK’s old-age dependency ratio (OADR), or the number of people who are state pension age (aged 65+) per every 1,000 of the working-age population (those aged 16 to 64), is steadily increasing. The OADR was 289 in mid-2017, up from 244 in 2007. This rise coincided with falling fertility rates, as well as a decline in immigration.
Based on these trends, Aviva estimated seven million new workers could enter the UK labour market in the coming decade, but 10 million could exit, driven by retirement and a drop in employment participation from older workers, leaving a shortage of three million workers.
Alistair McQueen, Aviva’s head of savings and retirement, said this means the UK will “increasingly have to turn to its older workers to meet its employment needs”.
“We can no longer justify this waste of talent, experience and expertise,” McQueen said. “To do so could result in a shortage of up to three million workers in the coming decade. This is not good for our people, nor for the competitiveness of the UK on the global stage.”
Statistics from the Department for Work and Pensions (DWP) released earlier this month also showed a sharp decline in employment rates among those over 50, with over four-fifths (85 per cent) of people aged 35 to 49 employed, decreasing to 71 per cent for those aged 50 to 64.
However, the data also revealed that twice as many older workers are in employment compared to 20 years ago.
Between 1998 and 2018, the number of people aged 65 to 69 in employment increased from one in 10 (11 per cent) to more than two in 10 (21 per cent), and employment among workers aged 70 to 74 more than tripled from 3 per cent to 10 per cent.
Earlier this year, research from Aegon revealed more than a quarter of people (27 per cent) think they will still be in full or part-time employment when they are 70. Almost half (46 per cent) believed they would be healthy enough to continue working at 70.
Steve Webb, director of policy at Royal London and former pensions minister, warned of a “sharp divide” between those who continue working because they want to and those who cannot afford to retire.
“Many people value the opportunity to stay in work because of the social side and the intellectual stimulation, not necessarily because of the money,” Webb said.
“For others, working on may be a necessity, especially for those who never had access to a final salary pension and have been slow to build up their own pension pot. Firms will need to engage more actively with older workers to make sure they are able to make choices that work for them and for the employer.”
However, Nathan Long, senior pension analyst at Hargreaves Lansdown, told People Management he expected the number of people who thought they would be working at 70 to be higher.
Based on his research, he said two-thirds of his clients “think they might have to work part time” in the future.