Too Much to Lose

The UK’s aging population is creating a significant need for people to work later in Exchange Policy life. Too Much to Lose outlines that this, along with other trends, means that older workers will continue to play a much more significant role in the UK economy than Too Much to Lose ever before. This presents both opportunities and challenges. Today’s older workers are more educated, less likely to work in physically demanding roles and are less susceptible to health problems than ever before. However, the challenges facing older Understanding and supporting jobseekers are large: a jobseeker over the age of 50 is significantly less likely to return Britain’s older workers to work within the next year, and the cost of spells of unemployment to future wages Lose Much to Too is considerably greater than it is for younger or middle-aged workers. Matthew Tinsley This report argues that the back-to-work support provided to older workers fails to meet their needs. To tackle this, it sets out a plan for support that directly addresses the needs of older workers, at the same time as demanding that jobseekers are doing all they can to get back to work. As well as this we argue that there is a need to look at retirement differently, promoting more flexible working and supporting better communication between businesses and their employees. To facilitate these changes, the government’s approach must change. Up to now, the political focus has been centred on the problems of younger workers, and this has distracted attention away from the need to value and support older workers in the UK. This must change so that government focuses support on those with the greatest needs, rather than just targeting support by age. If implemented, these recommendations will ensure that the older workforce continues to play a major role in the UK economy in the future. Failing to act now risks marginalising a whole generation of older workers and severely damaging both their welfare and the economy as a whole. £10.00 ISBN: 978-1-907689-21-5 Policy Exchange Clutha House 10 Storey’s Gate London SW1P 3AY www.policyexchange.org.uk Too Much to Lose Understanding and supporting Britain’s older workers Matthew Tinsley Policy Exchange is the UK’s leading think tank. We are an educational charity whose mission is to develop and promote new policy ideas that will deliver better public services, a stronger society and a more dynamic economy. Registered charity no: 1096300. Policy Exchange is committed to an evidence-based approach to policy development. We work in partnership with academics and other experts and commission major studies involving thorough empirical research of alternative policy outcomes. We believe that the policy experience of other countries offers important lessons for government in the UK. We also believe that government has much to learn from business and the voluntary sector. Trustees Daniel Finkelstein (Chairman of the Board), Richard Ehrman (Deputy Chair), Theodore Agnew, Richard Briance, Simon Brocklebank-Fowler, Robin Edwards, Virginia Fraser, Edward Heathcoat Amory, David Meller, George Robinson, Robert Rosenkranz, Andrew Sells, Tim Steel, Rachel Whetstone and Simon Wolfson. About the Authors Matthew Tinsley joined Policy Exchange in September 2011 as a Research Fellow in the Economics & Social Policy Unit. Matthew’s research interests include labour market topics such as unemployment and welfare as well as wider economic issues. Prior to joining Policy Exchange Matthew gained a Master’s degree in Economics from the University of Bristol with a focus on the labour market, policy analysis and econometrics. © Policy Exchange 2012 Published by Policy Exchange, Clutha House, 10 Storey’s Gate, London SW1P 3AY www.policyexchange.org.uk ISBN: 978-1-907689-21-5 Printed by Heron, Dawson and Sawyer Designed by Soapbox, www.soapbox.co.uk 2 | policyexchange.org.uk Contents Acknowledgements 4 Executive Summary 5 Introduction 12 1 Why are Older Workers Important? 14 2 Closing the Gap 19 3 The Future: Not So Bright? 31 4 Supporting Older Workers 40 5 Improving Back-to-Work Support for Older Workers 52 6 Too Much to Lose 61 Annex: Age Discrimination Applications Technical Note 63 policyexchange.org.uk | 3 Acknowledgments We would like to thank The Barrow Cadbury Trust for their support with this report. Thanks also go to James Kanagasooriam at Policy Exchange, Avanta, PRIME, BT, G4S, Ingeus, Mark Taylor and The Recruitment and Employment Confederation for their advice on this subject. The conclusions and any errors remain the author’s. Various data sources are used throughout this publication: z British Household Panel Survey, Waves 1–18, 1991–2009. University of Essex. Institute for Social and Economic Research, [original data producer]. Distributed by UK Data Archive. z Office for National Statistics. Social Survey Division and Northern Ireland Statistics and Research Agency. Central Survey Unit, Labour Force Survey. Distributed by UK Data Archive. z Office for National Statistics (references where relevant). 4 | policyexchange.org.uk Executive Summary This report examines the position of over-50s in the UK labour market. It outlines the large barriers to work that they face and highlights that the majority of these barriers remain unaddressed by government support. It argues that without reforms to address these issues, growth in the UK economy will be lower than it might otherwise be and, on average, the population of over-50s could see a fall in living standards. Some progress but large problems remain Before addressing the barriers facing the over-50s in the labour market, it is important to realise that significant progress has been made over the last two decades. As well as becoming larger, the older workforce is now more educated, works in more skilled roles and is less likely to be affected by health problems than ever before. This puts older workers in a far stronger position and is likely to have been a major factor behind the rising employment that the older workforce has seen. However, despite these apparent improvements in employment outcomes, those over-50s currently unemployed are much less likely than any other age group to find work in the next year. We cannot underestimate the scale of these problems. At the end of 2011 there were 189,000 over-50s who had been out of work for a year.1 This means that 43% of unemployed people over the age of 50 were long-term unemployed; the equivalent figure for 18 to 24 year olds is 26%, and 35% for 25 to 49 year olds. The over-50s figure would be even worse if we accounted for those invisible unemployed who had simply left work and fallen out of the labour market completely, either into forced early retirement or due to ill health. We estimate that, on average, fewer than 40% of all unemployed over-50s find any form of work within a year.2 There are currently 428,000 over-50s out of work;3 we therefore expect that more than a quarter of a million of these will not work in the next year, and many will never work again. As well as the short-term effects of unemployment we have also analysed the unemployment scars felt by workers of different ages, addressing the lack of research that exists in this area. Older workers may have a greater need to return to work quickly because of greater financial responsibilities from mortgages or dependent children, so wages will suffer as they may take work at relatively low levels of pay. At the same time age discrimination could significantly limit the 1 ONS March 2011 Labour Market opportunities that an older jobseeker has as they look to get back to work. Statistics, Sheet 9(2). Using data from 18 years of the British Household Panel Survey and a 2 Calculations using the Labour Force Survey, illustrated in Figure methodology that allowed us to control for unobservable characteristics across 14 of this paper. workers of different ages, we found scars that varied significantly across different 3 ONS March 2011 Labour Market age groups. Our results indicate that there is a significant scarring effect of Statistics, Sheet 9(2). policyexchange.org.uk | 5 Too Much to Lose unemployment on future wages for older workers and that this is larger than for other age group. A six month spell of unemployment is estimated to reduce an older worker’s future wages by close to 8%.4 These findings agree with the significant effect of unemployment on wages of older workers found by Ball (2011).5 In order to understand this unemployment scarring we have to recognise the barriers to work facing older jobseekers. One of the most obvious obstacles for older workers is age discrimination, with employers potentially showing a bias, whether deliberately or unconsciously, toward younger workers. To measure this we undertook a major piece of original research to attempt to identify the scale of the discrimination that is faced by older workers. We applied for over 1,200 jobs as both an older and younger worker, using a randomisation process that ensured that the CVs received by potential employers were identical in every way apart from the date of birth. We then measured the number of responses that showed an interest in the applicant.6 The responses showed a very large bias against older workers, with the 51 year old applicant getting positive responses less than half as often as the 25 year old. These results are similar to results from other studies which also find biases against older workers in some positions.7 It is startling to see that this discrimination happens even though the UK has very clear laws designed to prevent it (primarily the Equalities Act 2010) and it suggests that there is a culture of bias against older workers.

Load more