The fastest-growing employment segment in many developed economies is the over-55s, which means a much larger percentage of older workers are now in employment than ever before. In the UK, the over-55s represented more than 50 per cent of the employment growth in the decade to 2018, a trend that is expected to continue in the next 10 years.
There are several reasons older workers are remaining in the workforce in advanced economies:
- Slowing birth rates have put pressure on labour markets. With fewer young people entering the workforce, there is greater demand from employers for older workers to remain in their posts. In Japan, the archetypal ageing society, a period of continuous real economic growth, combined with a falling working-age population, has led to more jobs available than workers to fill them. Retaining older workers is one solution to this problem.
- Life expectancy is increasing. Many employees want to remain working while they feel in good health and wish to continue to enjoy the social, financial and health benefits of work.
- Pensions and savings are not keeping pace with life expectancy. WEF research shows that people (especially women) in the US, the Netherlands, the UK, Australia, Canada and Japan will likely run out of money some eight to 20 years before they die. Over the past decade, pension savings have been hit by low global interest rates, fewer tax concessions and legislation to delay access to public sector pensions.
Covid-19 poses a particular threat to older workers. In China, the mortality rate from the virus among the over-80s is around 15 per cent, compared with less than 1 per cent in the under-50s – largely as a result of underlying health conditions among the elderly. The mortality rate in the UK is also likely to be higher among the elderly for the same reason. Employers with older workers in their organisations will need to take extra measures to protect these individuals. Below we consider some of the short and longer-term considerations for the labour market.
For immediate consideration
The first priority should be slowing the spread of the virus and shielding the most at-risk individuals through social distancing measures. Many employees are able to work remotely, but for those who cannot, consider the following:
- Can pay be continued? An unprecedented intervention by the UK government will protect 80 per cent of workers’ pay – if they remain employed.
- Can workers draw on any pension payments to supplement reduced income? Do pension plans allow partial drawdown of pension, or is more flexibility required?
- What support can be provided from social security sources?
- Should additional financial planning advice be made available?
- Will workers comply with government directives to reduce infection rates?
- What can be done to reduce the impact of self-isolation on mental health?
- Are there any fast-track worker succession plans that can be implemented? How will knowledge transfer be facilitated in essential jobs?
- Are older workers covered by insurance policies, or does existing provision end at a certain age? Are there policy exclusions for chronic conditions?
- Given the increasing likelihood that workers will be caring for ill relatives, what provisions exist for carers’ leave?
For long-term consideration
Bringing the Covid-19 pandemic under control is likely to take months and the economy will look very different once this is accomplished. The following issues for older workers will need to be resolved:
- Will older workers want to return to the workforce? Will their health or new regulations permit them? Will any rehabilitation programmes be required?
- If unemployed older workers wish to return to work, will they be subject to age discrimination?
- How will older workers readjust to the workplace after periods in isolation?
- How will investment downturns affect pension pots? Will people be able to recoup these losses?
- How will firms plan for the succession of older workers choosing not to return?
- Is there flexibility in enabling older workers to return on a part-time basis, while also drawing on their pensions?
The longer-term economic impact of losing older workers to coronavirus is currently impossible to estimate. Demographic change already favours keeping older employees in the workforce for as long as possible – Covid-19 is likely to create lasting additional pressure on the labour market.
Yvonne Sonsino is partner and global co-leader of Next Stage at Mercer