Employment Promotion Policies for Older Workers in the EU Accession Countries, the Russian Federation and Ukraine

EMPLOYMENT PAPER 2003/50 Employment promotion policies for older workers in the EU accession countries, the Russian Federation and Ukraine Mariangels Fortuny Alena Nesporova Natalia Popova Employment Sector INTERNATIONAL LABOUR OFFICE GENEVA 1 “To ensure that the values of this World Assembly on Ageing are fully taken into account we must rid ourselves of the subjective stigma attached to the word retirement. In a way that is both revealing and unjust, this term links the moment at which an individual acquires the right to a pension with final exclusion from the life of his or her enterprise, community, society, or even family.” Juan Somavia, ILO Director-General, Second World Assembly on Ageing, Madrid, 8-12 April 2002 1. Introduction In the course of their transition to a market system in the 1990s, the countries of Central and Eastern Europe (CEECs) have experienced a significant fall in employment. Systemic and structural changes have led to large job destruction, which has only partially been counterbalanced by new job creation. The majority of employed persons have voluntarily or involuntarily changed their jobs, either directly from one job to another or after an unemployment spell. However, a certain portion of the redundant workers have not been able to find a new job and remained long-term unemployed. Older unemployed workers often “solved” their situation by accepting old-age pension through early or disability retirement. The availability of early retirement or pre-pension benefit schemes has frequently become the way of mitigating tensions connected with an enterprise downsizing at the expense of older workers. A hope that jobs vacated by older workers would increase employment opportunities for young labour market entrants facing even harder labour market problems was entertained. This led to a substantial drop in the average age at which individuals retire from the labour market, which was already rather low at the beginning of economic transition. However, a substantial decline in employment rates has sharpened the problem of the financial sustainability of national social security systems as the proportion of persons benefiting from the system to persons contributing to the system has reached very high levels. Many transition countries have thus increased statutory retirement age for men and even more so for women to counterbalance negative dependency trends. However, the positive effect on pension funds so far has been limited. This is due to the fact that the change in the age when people really retire has been minimal due to persistent unemployment problems, employers’ discrimination against older workers and pressures to maintain early retirement schemes or to use disability pensions for the above- mentioned reasons. After a temporary decline experienced by a number of transition countries, average life expectancy is on the increase again, which makes the prolongation of working life even more important for providing decent income to the retired persons while ensuring longer-term sustainability of the pension systems. Currently, low pensions push many pensioners back to the labour market to earn additional income, plus a large number of them prefer work to inactivity for societal and psychological reasons. Therefore, a key challenge is what type of policy should be used in order to promote higher participation and employment of older workers, instead of their labour market withdrawal, by extending their working life and at the same time improving and making the best use of their capacity. 2 This paper’s aim is to reflect on the complex phenomenon of ageing in some CEECs and its effects on social security and pension systems as well as on labour markets. It will analyse the importance of increasing the flexibility and employability of older workers, especially by means of improving their access to vocational training and retraining adjusted to their special needs and limits. The paper will also recommend appropriate reforms in national education and training systems laying the basis of lifelong learning for all workers. The countries covered by the paper are the 13 EU accession countries – Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, Slovenia and Turkey - and two CIS countries – the Russian Federation and Ukraine. For simplicity this group is called the EU accession countries although for the last two countries the accession is still much ahead. In all these countries the ILO launched a small survey last year, directed to labour market institutions at the national and local level and to several enterprises. The questionnaire is included in Annex 1. The purpose was to find basic labour market data on employment performance of older workers, collect relevant information on national labour and social legislation concerning this age category of workers. The attitudes of labour market institutions and employers towards older workers, the assessment of their skills, work performance and adaptability to new conditions was considered. Furthermore we looked into the existing labour market, training and social policies and their targeting at older workers and desirable modifications in these policies from the point of view of labour market institutions and employers. The findings of this survey are summarised in the report and compared with the experience of the European Union member states. We are fully aware of the relevance of a comprehensive discussion on pension systems and pension reform options, as well as their economic and social feasibility, to the topic of this paper. However, due to restraints concerning the length of the paper, these issues will not be covered in an extensive manner.1 The paper is structured as follows. First, it describes the main demographic trends in the region to show that the share of older persons in total population is rapidly increasing in all the studied countries. These trends will call for the extension of productive age and an increase in economic participation of older persons in order to prevent future labour shortages and the collapse of national pension systems. The third chapter will present and analyse the key labour market data on older workers such as labour market participation, employment, unemployment and educational attainment for the total population as well as disaggregated by sex. Chapter 4 analyses the conditions for recruitment and termination of employment of older workers as fixed by national legislation and their enforcement in reality. This chapter concludes with some considerations on desirable changes in national employment protection legislation and collective bargaining, which could overcome discrimination against older workers and promote their longer and better employment. The next chapter discusses the controversy between policies encouraging withdrawal of older workers from the labour market in order to moderate labour market tensions and new pension reforms as well as other policies encouraging older workers to stay longer in employment. It analyzes statutory and effective retirement age and their 1 An extensive discussion of pension systems and pension reform options, see e.g. Gillion et al. (eds.), Social security pensions – development and reform. International Labour Office, Geneva, 2000. 3 changes within the group of the 15 countries and compares them with the situation and trends in the EU countries. It also studies national early retirement schemes and the application of disability pensions for labour market purposes. While such schemes are still necessary for certain groups of workers unable to cope with new labour demand conditions the overall policy trend should be towards replacing such passive approaches by activation of older persons, providing them with effective employment services and active programmes to improve their flexibility and employability and to stimulate them to extend their productive working life. Finally chapter 6 makes a review of existing active labour market policies focusing on older workers in the accession countries and assesses them as to their appropriateness for solving employment problems of older workers. By using examples of good policies applied in the EU countries, the chapter draws on relevant policy recommendations for the improvement of existing policies or the introduction of new policies to promote employment of older workers. Chapter 7 deals with the importance of skill development for older workers. It discusses the importance of implementing policies - both public as well as enterprise based - to train and retrain older workers in order to help them adapt to new demands and opportunities. It also explores the potential of new technologies to open up employment and training opportunities for older workers. Finally, it emphasizes the importance of lifelong learning as a long-term preventive strategy given the need to renew and update skills on a continuous basis. The chapter presents examples from both accession and OECD countries. Chapter 8 discusses how to combat negative attitudes and stereotypes towards older people as principal obstacles which older workers face in the labour market. It argues that the extension of working life in decent and satisfactory conditions demands changes in attitudes towards older workers among employers, colleagues, the older workers themselves and the society as a whole. It notes that the media has a crucial role to play in this respect and that changes are becoming noticeable. Finally it reviews

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