Older Workers: Trends and Prospects

The Geneva Papers on Risk and Insurance Vol. 27 No. 4 (October 2002) 512–533

by Philip Taylor, Sol Encel and Masato OkaÃ

1. Introduction This article focuses on policy developments towards older workers and on age and employment in Australia, Japan and the United Kingdom. Each country is in the process of developing a range of policies in this area, although approaches differ somewhat. The article examines these approaches and identiﬁes the lessons that can be learned for policy-makers elsewhere.

2. Population aging in the case countries As a result of declining or stable fertility rates and an increase in life expectancy the populations of the case countries are set to age markedly over the next 50 years. Table 1 shows fertility rates and life expectancy at birth in the case countries between 1980 and 2000. Fertility rates fell between 1980 and 2000, and markedly so in Japan. Among the countries Japan also has the longest life expectancy at birth. Table 2 reports the proportion of the population of the case countries between 1980 and 2050 aged over 60 and 65. This shows that each country is set to age markedly over the next 50 years. Japan will have the most aged population, with over one-third of its population aged over 60 or over 65 by 2050.

Table 1: Fertility rates and life expectancy Life expectancy

Fertility rates Men Women

1980–1985 1995–2000 1980–1985 1995–2000 1980–1985 1995–2000 Australia 1.9 1.8 71.9 75.5 78.7 81.1 Japan 1.8 1.4 74.2 76.8 79.7 82.9 U.K. 1.8 1.7 71.0 74.5 77.2 79.8

Source: World Labour Report 2000, ILO.

Ã Philip Taylor, University of Cambridge; Sol Encel, University of New South Wales; and Masato Oka, Yokohama City University.

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Table 2: Population aged over 60 and 65 Population over 60 (% total pop.) Population over 65 (% total pop.)

# 1980 2000 2010 2030 2050 1980 2000 2010 2030 2050 02TeItrainlAscainfrteSuyo nuac Economics. Insurance of Study the for Association International The 2002 Australia 13.7 16.2 19.2 26.1 28.4 9.6 12.1 13.4 20.0 22.6 Japan 12.9 23.1 29.3 34.2 37.6 9.0 17.1 21.5 27.3 31.8 U.K. 20.1 21.0 23.5 30.0 31.3 15.1 16.0 17.1 23.1 24.9

Source: World Labour Report 2000, ILO. 513 514 TAYLOR, ENCEL AND OKA

3. The labour market and older workers This section of the article discusses trends in labour force participation, employment and unemployment rates among the case countries. Table 3 shows trends in labour force participation rates among men and women between 1979 and 2000. This shows that since 1979, in Australia and the U.K., there has been a marked decline in labour force participation rates among older men. In Japan there has been a slight decline, but from a high level. There is evidence that this decline in participation has reversed slightly in Australia and the U.K. This is not the case for Japan. Table 3 also shows that labour force participation among older women is increasing. However, as with men, it shows that participation rates in Australia and the U.K. are some way behind that of Japan, although catching up. It should be noted that early exit has been both a male and a female phenomenon. For example, between 1960 and 1995 the average retirement age of men and women in Australia fell by approximately four and ﬁve years respectively, approximately one year in Japan for both men and women and four years for men and three for women in the U.K. (Auer and Fortuny, 2000). The decline in labour force participation among those aged 55 and over has been attributed to a number of economic, political and social factors. Older people have tended to be over-represented in declining industries and under-represented in industries experiencing growth and thus to be affected by a reduced demand for unskilled workers (Jacobs, Kohli and Rein, 1991; Trinder, 1990). During periods of economic expansion and contraction, when labour demands have grown and receded respectively, the labour force participation of older people has ﬂuctuated accordingly. There is evidence that the age structure of the employed work force changes during a recession. As employers cut back on recruitment it is younger workers who are predominantly affected (Lindley, Wilson and Villagomez, 1991), but if an employer has to shed staff it is older workers who are affected disproportionately (Leppel and Heller Clain, 1995).

4. Older workers’ employment Table 4 shows trends in employment/population ratios between 1979 and 2000 among men and women aged 55–64. Regarding men, Australia experienced sharp increases in employment/population ratios between 1995 and 2000, albeit to levels far below those seen in 1979. Similarly, regarding women, Australia has experienced marked increases in employment/population ratios since 1995. In the U.K. the increases have been more modest and in Japan there was a slight decline from 1995 to 2000 among older men while the picture for women was static.

5. Unemployment and long-term unemployment Table 5 presents unemployment rates among men and women aged 55–64 between 1979 and 2000. It is notable that unemployment rates among older men and women in Japan increased markedly between 1995 and 2000 and exceeded those of the other case countries. Table 6 shows that long-term unemployment in the year 2000 was signiﬁcantly higher among those aged 55 or over than among other age groups. The incidence of male long-term unemployment was lower in Japan than Australia and the U.K., whereas the U.K. had the lowest rate of female long-term unemployment.

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Table 3: Labour force participation rates among men and women aged 55–64 between 1979 and 2000 Men Women

# 1979 1983 1990 1995 2000 1979 1983 1990 1995 2000 02TeItrainlAscainfrteSuyo nuac Economics. Insurance of Study the for Association International The 2002 Australia 69.5 62.0 63.2 60.8 61.5 20.3 20.5 24.9 28.6 36.3 U.K. – 71.5 68.1 62.4 63.3 – – 38.7 40.8 42.6 Japan 85.2 84.7 83.3 84.8 84.1 45.4 46.1 47.2 48.5 49.7

Source: OECD Employment Outlook (various). 515 # 516 02TeItrainlAscainfrteSuyo nuac Economics. Insurance of Study the for Association International The 2002

Table 4: Employment/population ratios among men and women aged 55–64 between 1979 and 2000 Men Women

1979 1983 1990 1995 2000 1979 1983 1990 1995 2000

Australia 67.4 59.6 59.2 55.3 61.5 19.8 19.9 24.2 27.4 35.4 U.K. – 64.3 62.4 56.1 59.8 – – 36.7 39.3 41.4 Japan 81.5 80.5 80.4 80.8 78.4 44.8 45.1 46.5 47.5 47.8

Source: OECD Employment Outlook (various). ALR NE N OKA AND ENCEL TAYLOR, LE OKR:TED N PROSPECTS AND TRENDS WORKERS: OLDER

Table 5: Unemployment rates among men and women aged 55–64 between 1979 and 2000 Men Women

# 1979 1983 1990 1995 2000 1979 1983 1990 1995 2000 02TeItrainlAscainfrteSuyo nuac Economics. Insurance of Study the for Association International The 2002 Australia 3.1 3.8 6.3 9.0 4.9 2.3 2.9 3.0 4.0 2.4 U.K. – 10.1 8.4 10.1 5.5 – – 5.0 3.7 2.8 Japan 4.4 5.0 3.4 4.7 6.8 1.2 2.1 1.4 2.1 3.6

Source: OECD Employment Outlook (various). 517 518 TAYLOR, ENCEL AND OKA

Table 6: Incidence of long-term unemployment in 2000 among men and women in different age groups (per cent) Men Women

15–24 25–54 55 plus 15–24 25–54 55-plus

Australia 17.8 36.6 45.5 16.0 28.3 56.0 Japan 26.3 29.4 35.6 14.8 13.8 37.5 U.K. 17.4 40.3 46.1 9.9 22.9 30.5

Source: OECD Labour Force Statistics database.

6. Public policies towards older workers Among the case countries there is an increasing emphasis on extending working life. There have been several drivers of this: demographic change, concerns about the future viability of pension systems, current or predicted skills and labour shortages, labour force trends, a general shift from passive to active employment policies, and a growing recognition of the problem of age discrimination in the labour market. A detailed discussion of trends among the case countries is presented in the following sections.

7. Australia 7.1 Concern with mature-age unemployment Mature-age unemployment represents a significant social cost to the community, particularly because it tends to persist over long periods. Although unemployment rates among young people are higher, their duration is much less and the discrepancy has increased steadily in the past 25 years. By comparison, people who lose their jobs in their 50s may never find employment again. Government policy in Australia has long treated mature-age unemployment as a minor issue. Attention has been focused much more strongly on youth unemployment. In this regard, governments largely reflect public opinion, where the conventional wisdom appears to be that the exit of older people from the workforce will provide opportunities for younger people. This view remains solid despite considerable evidence to the contrary, in particular the fact that youth unemployment has increased despite the exit of older workers. In the past three years, however, there has been a surge of concern with the issue of long- term unemployment, reflected in a proliferation of official inquiries into the subject. The following reports have appeared since 1999: • Employment for Mature Age Workers, issues paper, published by the Australian Minister for Aged Care (1999); • Age Counts, report by the House of Representatives Standing Committee on Employment, Education and Workplace Relations (2000);

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• Age Matters, report by the Human Rights and Equal Opportunity Commission (2000); • Age Limits, report prepared for the State Equal Opportunity Commissions of Victoria, South Australia and Western Australia (2001); • Population Aging and the Economy, report prepared by a private consultant (Access Economics) for the Australian Minister for Aged Care (2001); • Too Young to Go, report prepared for the New South Wales State Committee on Aging (2002). Changing attitudes at the governmental level are influenced by the combined effects of demography, fiscal pressures, and workforce changes. The following trends are evident: • a general decrease in the participation rate for men; • a general increase in the participation rate for women; • a general move from full-time to part-time employment; • a rise in the age at which women have their first child; • an increase in the number of women returning to the workforce after child rearing; • an increase in early exit from the workforce. A demographic study of women’s labour force participation suggests that the following factors are relevant: • changing attitudes by employers towards women; • growth of occupations (e.g. in the information industry) which favour female employment; • increased access to childcare; • later ages of marriage and childbirth; • changes in marriage rates, including rising numbers of never married and divorced women (Young, 2000). Faced with these changes in socio-economic and family patterns, governments are increasingly concerned with the long-term effects of a declining birth rate and an aging population. The Australian Treasury has estimated that there will be a rapid decline in workforce growth within the next 10–15 years. Whereas the working age population currently grows by approximately 170,000 persons per year, the estimated growth for the entire decade 2020–2030 will be no more than 125,000. At the same time, the number of people aged 65 and over is expected to increase from its present figure of 12 per cent of the population to 18 per cent in 2021 (RIM, 1999).

7.2 Employers’ attitudes Ofﬁcial reports and academic studies alike make it clear that mature age workers are a disadvantaged group (van den Heuvel, 1999). A review of the literature indicates a high degree of consensus on the following points: • employers continue to discriminate against older workers, in spite of the fact that they generally recognize the value of experience, reliability and stability; • employers consider that older workers are more difﬁcult to train or retrain, and that it is not worth their while to invest in training; • legislation to ban age discrimination has had little effect in improving job opportunities for older workers;

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• downsizing affects older workers disproportionately; • recruitment agencies are reluctant to accept older workers as clients, and correspondingly reluctant to recommend them to employers (Encel, 1997, 1998). The reluctance of employers to take on older workers remains powerful, despite the fact that all Australian States and Territories legislated to ban age discrimination, and to abolish mandatory retirement, during the 1990s (Encel, 2001). The Age Limits report, cited above, looked speciﬁcally at the effect of legislation on the behaviour of employers, and reached the following general conclusions: • both older workers and employers are unclear about their rights and responsibilities under the law; • older workers commonly reported that recruitment agencies screened applicants according to age criteria; • discrimination was commonly covert and evasive. Code words, such as ‘‘overqualiﬁed’’, were often used, as was the question ‘‘How old are your children?’’; • community attitudes lagged behind the legislative abolition of mandatory retirement. Covert and overt pressures were exercised to induce early retirement, encouraged by ageist stereotypes. Recruitment agencies came in for particular criticism. A recruitment consultant interviewed by the researchers commented that older applicants were often advised to remove their age from applications and to truncate their work history. One respondent claimed that recruitment agencies merely go through the motions according to an ‘‘identikit picture’’ of what employers want (Age Limits, 2001, p. 13).

7.3 Older workers and retirement incomes The fact that labour force participation rates, especially among older men, have declined has led to a variety of interpretations and policy responses. One argument is that fiscal provisions, especially the availability of lump sum retirement benefits, make it both possible and advantageous to retire early. A government economist argues that community attitudes have been broadly supportive of early retirement for many years. In turn, they are reflected in the provisions governing access to superannuation and social security payments, and also in employer behaviour and workers’ expectations. One effect of the means-tested age pension (which has existed in Australia since 1909) is to encourage people to use up superannuation assets before pensionable age (commonly known as ‘‘double dipping’’) (Ingles, 1999). Another version of this argument has been put forward by Khan, in a reviewof Australian pension and superannuation schemes. According to his analysis, Australian workers have a considerable incentive to retire early and live off superannuation savings, so that they can then claim an unreduced pension at age 65. This process of double dipping, he maintains, is encouraged by the tax system, especially because of high marginal tax rates which reduce the incentive to continue working (Khan, 1999). A contrary view is argued by Perry (a former official of the Department of Social Security, now known as Family and Community Services). Perry emphasizes that double dipping is only available to people with significant assets and accumulated superannuation payments. It is clearly not available to people with a history of unemployment or broken employment. In addition, as a number of other observers have remarked, a large component of early exit is involuntary. In the long run, policies which induce older people to leave the

# 2002 The International Association for the Study of Insurance Economics. OLDER WORKERS: TRENDS AND PROSPECTS 521 workforce are destructive. Retirement income policies should be complemented by strategies to encourage prolonged employment, which will increase total employment, reduce ﬁscal pressures on the social security system, and prevent the leakage of valuable human capital from the labour market. Policy in this area, Perry notes, is characterized by a range of mixed messages: Taxation provisions for approved early retirement schemes, superannuation, employment and training programs for both the unemployed and people with disabilities are not designed to encourage and facilitate continued participation, but rather favour early retirement and give stronger emphasis to employment of younger people. These ... mixed messages are further compounded by ambivalent attitudes on the part of governments, employers, unions and service providers towards older workers, and the diverse attitudes of older people themselves. An integrated approach needs a coalition of interests to rebuild the culture of longer working life. (Perry, 2001)

7.4 Government policy Although there is a long history of active labour market programmes at the national level, these have largely ignored the special issues relating to older workers. During the 1996 Federal election campaign, however, both major parties produced detailed proposals relating to older workers. The election was won by the Liberal-National coalition parties, which had adopted the following proposals in their election platform: • a network of Career Transition Centres to provide mature-aged people with a range of services; • funding for community-based organizations to assist mature-aged people to develop job skills and undertake training; • immediate eligibility for people aged 45 and over to enter labour market programmes and receive case management services; • removal of restrictions on voluntary work; • a pension bonus plan to encourage people not to retire at 65, but towork an extra five years, which would entitle them to a bonus on top of their pension; • abolition of compulsory retirement. In the years since 1996, some of these undertakings have gradually been fulfilled. Compulsory retirement in the Australian Public Service was abolished in 1999, bringing the Australian Government into line with the States and Territories. The pension bonus scheme was introduced, at the rate of 9 per cent. The take-up has been very low, probably because the financial incentive is insufficient. The rate of early exit from the workforce has hardly changed. Older unemployed persons are largely free of the restrictions on eligibility for unemployment benefits imposed on younger people. No further proposals have come forward at elections since 1996, except for the undertaking given by the Prime Minister during the 2001 election campaign that national legislation to ban age discrimination would be introduced. It is understood that the legislation will come before the Australian Parliament during 2002. Since the election, a special unit has been set up by the Department of Employment and Workplace Relations to co-ordinate action relating to older workers. The situation at the State level is rather different, and there are now a number of State- based schemes directed specifically at older workers. The State of New South Wales set up a

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Mature Workers Programme in 1989, and most of the other States have followed suit since 1999.

New South Wales: This programme is aimed at people aged 40 and over, who become unemployed, are entering or re-entering the workforce, or changing careers. In 2001–2002, the programme had a budget of $A3.13 million, to provide assistance for an estimated 7,500 people. The average success rate since the inception of the scheme has been 70 per cent, two- thirds of these being placed in employment and one-third in education or training. The programme provides funding for community-based organizations which conduct training courses or mount community employment projects. Approximately one-half of the participants are aged 45–54, and 19 per cent 55–64.

Victoria: The Community Business Employment Program provides employment assistance for targeted groups, including the young unemployed, people aged 45 and over, and people from non-English-speaking backgrounds. Another programme, entitled ‘‘40 Plus’’, was inaugurated in 1999 but attracted insufﬁcient applicants and was wound up in 2001 after a change of government. The new government introduced a Community Jobs Programme which supports community organizations, local government, and other government agencies to employ local job seekers on community projects.

Queensland: The government introduced two programmes aimed at mature age workers in 2001. The Mature Age Wage Subsidy, which uses the slogan ‘‘Experience Pays’’, provides a subsidy for employers who take on workers aged 45 and over, for a period of 12 months. The Mature Age Job Ready Programme, using the slogan ‘‘Back to Work’’, provides 50 hours training and support in job-seeking and basic computer skills. The service is free for people aged 45 and over who have been unemployed for at least three months. Another scheme, the Community Employment Assistance Programme, supports community organizations which serve the long-term unemployed. People aged 40 and over make up 30 per cent of participants.

South Australia: In 1999, the government introduced several labour market programmes. The Mature Age Employer Incentive Scheme offers a subsidy to employers who take on unemployed older worker for an average of 20 hours or more for a minimum of six months. The Mature Age Skills Training Grant provides subsidies for unemployed people aged 40 and over to undertake retraining. Apart from these recently established programmes, the South Australian Government has, since 1980, supported a community organization, DOME (Don’t Overlook Mature Expertise), which provides specialist employment assistance to mature-aged persons. It maintains a job bureau, mutual support, information and referral services, training in ofﬁce skills, contact with employers, and newsletters. DOME’s success rate has ﬂuctuated between 500 and 1,000 placements per year.

Western Australia: The Western Australian Government also launched a programme for mature workers in 1999, under the slogan of ‘‘Profit from Experience’’. It provides five elements: a network of access officers; a career restart scheme for retrenched workers; a skills redirection programme; a ‘‘cyber job link’’ for remote communities; and a skill recognition process which may lead to formal retraining. An evaluation of the programme by a private consultant found that 40 per cent of clients had been placed in employment. Following a change of government, the programme has been extended beyond its original one-year

# 2002 The International Association for the Study of Insurance Economics. OLDER WORKERS: TRENDS AND PROSPECTS 523 duration to at least three years, and its work has been integrated into the broader framework of State Government employment policies. While the State Governments have moved well ahead of the Federal Government in relation to mature-age employment and unemployment, the Federal Government is, however, under increasing pressure to act along the lines of its election undertakings in 1996. In August 2001, the Prime Minister acknowledged in a speech to the National Press Club that the loss of experienced and highly skilled older workers from the labour force (to whom he applied the sobriquet of ‘‘gold collar workers’’) was economically and socially damaging. Although the pace of action remains slow and halting, it is fairly clear that policy changes are on the way.

8. Japan 8.1 Older workers and retirement Retirement for Japanese male workers is a gradual process. Sixty years of age has an important meaning for employees because most enterprises have the Teinen system which terminates the tacit contract of lifetime employment at the age of 60. The pension eligibility age is also 60 as of 2000. However, Teinen does not necessarily mean that workers withdraw from the labour market at this age. Some are re-employed by the same company with a new finite employment contract, some are hired by a subsidiary firm, while others seek new jobs by themselves. Surveys suggest that the majority of men want to continue work until age 65 or more in order to maintain their health and ‘‘Ikigai’’ (purpose and meaning of life) (Miura, 1997). However, as was shown above, the labour market situation of older workers in Japan is currently difficult.

8.2 Features of public employment policies toward older workers A remarkable feature of Japan’spublic employment policy toward older people since the 1960s can be summarized in one word: ‘‘promotion’’. Here are some facts. During the 1960s the policy focus was on the problem of unemployment among the middle-aged and old amid strong economic growth. The 1966 Employment Act encouraged employers to make efforts to hire those aged 35 and older, and also gave a special allowance for those among this age group who were going to change their jobs and/or working places. Since then, the policy focus has shifted to the extension of Teinen age from 55 to 60 by means of subsidies for firms and consistent government guidance. These were: first, the subsidy for encouragement of Teinen extension in 1973, which was paid to firms actually implementing the extension of Teinen age; second, the quota rule for the employment of older persons in 1977, requesting firms’ best efforts to raise the percentage of regular employees aged 55 and older by up to 6 per cent or more; third, the grant for the employment stabilization of older persons in 1978, offered to employers who hired those of age 55–64 as regular employees through the Labour Exchange (Shimizu, 1991). Together with these measures, the Unemployment Insurance Law was replaced by the Employment Insurance Law in 1974 and its aims were enlarged into the field of active employment policies, including prevention of unemployment and promotion of Teinen extension. The Employment Insurance Fund has been collecting a special contribution from employers for its enlarged aims. The Law Concerning Stabilization of Employment of Older Persons, the so-called ‘‘Age 60 Teinen Act’’, of 1986, was the completion of the initial policy target, though the duty of employers was limited to making their best efforts (Shimizu, 1991). Today, all large firms, or

# 2002 The International Association for the Study of Insurance Economics. 524 TAYLOR, ENCEL AND OKA nearly 90 per cent of those with more than 30 employees, have a Teinen rule of age 60 or older (Miura, 2001). After 1986 the policy focus shifted to employment promotion among mainly men in the 60–64 age group. In 1990, the 1986 Act was amended so as to encourage employers to make efforts for continued employment up to age 65. In 1994, it was amended again. The main points were: first, the legal enforcement of Teinen at age 60 or older after 1998, and second, strengthened power of the Labour Minister recommending that firms introduce a system of continuous employment up to age 65. This new policy aims to cope with the estimated solvency crisis of the public pension fund as well as to prepare for the anticipated labour shortage in the early 21st century. In 1994, two more important laws were enacted concerning the employment of older workers. The first was the Amendment Act of the Employees Pension Law, and the second was the AmendmentAct oftheEmployment InsuranceLaw.Thelatteraims totopupalowwage for the 60–64 age group with a new allowance that is formally titled ‘‘the allowance for the older persons continuously engaging in work’’. The requirements for the allowance are: (1) the applicants’ age should be between 60 and 64; (2) they should continue work or resume work after a short period of unemployment, after their Teinen retirement; and, (3) their new wage should be less than 85 per cent of their average wage earned during half a year prior to their Teinen retirement. The allowance equals 25 per cent of the new wage, if the new wage is 64 per cent or less compared to the pre-Teinenwage (i.e., the total of new wage and the allowance is 80 per cent or less compared to the pre-Teinen wage). If the new wage exceeds 64 per cent of the pre-Teinen wage, the allowance is gradually reduced, and disappears when the new wage exceeds 85 per cent of pre-Teinen wage (Kimura and Oka, 2001). The characteristics of this measure are that first, the allowance is paid directly to the older worker. This is a newapproach. Second, older people eligible for the allowance are deemed semi-unemployed, because the allowance is financed by the unemployment benefit fund. It was implemented in April 1995, and7.8percentofregularfull-timeworkersinthe60–64agegroupreceivedthenewallowance as of October 1996. About one-third of employers have considered the new allowance at the time of decision-making on wages (Ministry of Labour, 1998). As for the pension reform, this had two key elements. First was an improvement regarding the in-work pension available to workers aged 60–64. Prior to the reform, the in- work pension was reduced in proportion to the wage income and tended to discourage labour participation of the age group. Since the reform in April 1995, the limit of work earnings for the in-work pension has been raised substantially (Ministry of Health and Welfare, 1994), with evidence that this has encouraged older workers to re-enter the labour market (Ministry of Labour, 1998). A second point concerning the pension reform is that the eligibility age for receipt of a full pension is to be gradually raised for men from 60 to 65 between 2001 and 2013, and for women from 58 to 65 between 1995 and 2018. After the completion of this reform, the 60–64 age group will receive a partial pension which is the current earnings-related portion of the ‘‘employees pension’’. The remaining portion, which is called the ‘‘basic pension’’ and pays an equal amount for all eligible people, will be available after age 65 in full, and an actuarially reduced ‘‘basic pension’’ will be drawable after age 60 (Ministry of Health and Welfare, 1994). If the worker engages in work from age 60 to 64, the above-mentioned partial pension benefit will be reduced according to the wage level. However, the total income of wage, the partial pension, and the above-mentioned new additional allowance is designed to encourage the participation of the 60–64 age group as well as to encourage firms to continue

# 2002 The International Association for the Study of Insurance Economics. OLDER WORKERS: TRENDS AND PROSPECTS 525 employment of older workers through a reduced pay burden. In sum, the basic idea shown in the above measures is a Japanese-style tripartite cost-sharing among the state, employers and individual older workers toward the goal of employment promotion among older workers. The government expects to construct a society in which all healthy people engage in work until age 65 by 2010 when baby-boomers will be reaching 60 years of age. The greatest challenge for the strategy will be how to gain the acceptance of employers over such a short period. The Ministry of Labour’s current policy package for the employment security of older people consists of three main pillars. These are: first, promotion of continued employment; second, promotion of re-employment; and third, securing diverse work opportunities for persons after they leave full-time jobs at retirement age (Ministry of Labour, 1997). The first pillar aims to encourage firms to extend the employment period up to age 65 by means of various grants. These are: subsidies for the introduction of a system of continued employment; subsidies for employing large numbers of older persons; grants for preparation of continued employment; and loans for improving workplaces for older persons. The second pillar includes measures to enhance labour market conditions for older persons by strengthening the government’s employment services as well as measures for promotion of re-employment assistance by employers. ‘‘Grants for employment development for specified job applicants’’ are available for this purpose. The third pillar consists of advisory services and job programmes such as those provided by the Association of Employment Development for Senior Citizens (AEDSC) and Silver Human Resource Centres (SHRC). The AEDSC consists of a head office in Tokyo and 47 offices in each prefecture. They are recognized by the Labour Minister and the heads of prefectures as advisory service providers for employers and employees on the employment issues of older people, including improvement of pay and personnel management systems, reform of workplaces, job development, and preparation for retirement life (Ministry of Labour, 1995; AEDSC website). The SHRC programme offers temporary and short-term work opportunities for retirees aged 60 and older. It is designed to provide a combination of work, a modest income, personal enrichment and social purpose for older people as well as contributing to the community. There are 1,328 centres nationwide with a total membership of 540,000 as of 1998. Sales were approximately 200 billion yen (Ministry of Labour, 2000, p. 296). The programme can be characterized as a publicly-assisted retired worker industry (Bass and Oka, 1995). During the long recession SHRC has played an important role in providing job opportunities for older people.

8.3 Employer behaviour regarding older workers With Teinen extension to age 60, large firms implemented two policies in order to cope with the aging of the work force. First, they began to put more of their middle-aged and older workers on Shukko, where a firm, while maintaining the employment contract, sends them to work for subsidiaries or related firms. According to case studies carried out at the end of the 1980s, large firms shed a considerable number of workers aged 50 and over this way. Second, regular workers aged 55 and over covered by the new Teinen age were removed from the age-oriented pay increase and promotion system. Thus, wages for workers over age 55 remained the same or only slightly increased up to age 60 (Kimura et al., 1994). In sum, older workers were treated as a secondary workforce to be utilized in the quasi-inner market of firms.

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With regard to employment extension after age 60, almost all large firms have refused Teinen extension. Instead, some of them have instituted ‘‘re-employment schemes’’ for workers reaching Teinen age. Generally speaking, firms re-employ such workers untill age 63, and in some cases, untill age 65 with an annual renewal of contract. Job offers are made on a selective basis depending on the health status and job capability of older workers. Many large firms have been reluctant to give strong job security to all workers after Teinen, in spite of requests from trade unions and the government. The case of Matsushita Electric Industrial Co., Ltd is an example of a re-employment scheme implemented by a large firm in order to cope with the increase of employees’ public pension eligibility age (Matsushita Electric Industrial Co., Ltd, 2001; Fujimura, 2001). Standard annual pay including bonus is low – 2.4 million yen – that is, approximately the same level as a high-school leaver. However, a total 4.6 million yen or 63 per cent of the income level at age 60 is guaranteed with the in-work public employee pension benefit (0.83 million yen), the wage top-up public benefit (0.45 million yen), and a supplementary benefit of the public employee pension through the Matsushita Employee Pension Fund (0.92 million yen). If a person chose retirement at age 60, the total annual income between age 60 and 64 would be 3.09 million yen. Thus, the difference between work and non-work is 1.51 million yen. Under the scheme workers are able to work until age 65, although their contract is reviewed annually. Other working conditions, including working hours, are almost the same as those of pre-Teinen years. In principle, under the programme, re-employed workers are supposed to engage in the same or similar kinds of duties as they did prior to retirement. If this is not possible, a maximum of two job offers are made for positions elsewhere in the company or in the group firms. If the worker declines the offers they are not re-employed. Therefore, choice is limited. As of March 2001, 307 or 36.7 per cent out of 837 Teinen retirees wished to join the programme. This would suggest that the scheme was not attractive to the majority of Teinen retirees. Reasons would include consideration of income difference between work or non- work and the quality of re-employment work. The actual number of re-employed workers was 201, or 65.5 per cent of applicants, due mainly to a shortage of available jobs. Matsushita state that the programme aims to make use of the special abilities, experience and skills of older workers in order to benefit the company. However, the nature of such scheme appears inconsistent with the principle of age-free human resource management policies. It can be characterized as a publicly subsidized low-pay work system. It may be a stepping-stone toward Teinen extension as the government wishes, but, however, in the worst scenario, it may further institutionalize age discrimination and prevent the development of genuine employment opportunities for older workers. Finally, some additional points should be noted. First, it is frequently reported that older job seekers are seriously affected by age discrimination. In Japan the Employment Measures Law has been amended and since October 2001 companies have been requested to carry out recruitment and hiring activities without reference to age. This measure has been supplemented by Guidelines to abolish age discrimination. These guidelines specify a number of circumstances under which age limits in recruitment are permitted. Moreover, the law simply states that ‘‘employers should make efforts not to exclude the workers in question from recruiting or hiring due to their age’’, and does not impose any penalty for violation. The guidelines conclude by emphasizing the need for future revisions to take account of the social and economic situation at the time (Japan Labour Bulletin, 2001).

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Second, during the prolonged recession early retirement schemes targeting those aged 45 and over have been spreading, particularly among large firms. The diffusion of such schemes increased from 34 per cent to 58 per cent between 1980 and 2000 among firms employing more than 5,000 people (Miura, 2001, p. 83). Though early retirees may receive a lump sum, opportunities for re-employment are limited. As the pressure of hidden unemployment is still strong, the road to employment extension to age 65 seems very steep. From this perspective, Matsushita’s re-employment scheme might be evaluated more positively. Third, it is evident that public policy is only focusing on older male workers. The majority of female workers are not covered by life-time employment even in large firms. In most cases they are forced to quit their job at marriage or childbirth. After child-rearing they usually return to the labour market as part-time workers. Thus, there is a need for policies against age and sex discrimination to be promoted simultaneously.

9. United Kingdom 9.1 Employment policy A new policy emphasis on the inclusion of older workers began to emerge at the end of the 1980s. However, there is little evidence that the policies that were introduced – wage subsidies, education campaigns among employers, removal of age barriers to government training programmes and changes to state pension rules – had much impact on older workers’ labour force participation rates. It is hard to say why this was the case since evaluations have not been undertaken for most initiatives. In the case of education campaigns among employers, where evaluations have been undertaken they point to ignorance of the campaigns and a lack of interest in the issue among employers as being important factors (Hayward, Taylor, Smith and Davies, 1997). The E.U. Directive for Equal Treatment in Employment was agreed at the end of 2000 and will be implemented before December 2006. The Directive commits the government to legislate to proscribe age discrimination. It has set up an advisory group made up of employers’ groups, trade unions and groups lobbying on age and employment issues. This began consulting on the content of the legislation in 2001. Following consultation (Department for Education and Employment, 1998) the Government launched a Code of Practice on Age Diversity in the spring of 1999. It has been an important part of government policy on age and employment and to date, 68,000 copies have been issued (Education and Employment Committee, 2001a, 2001b). It sets out principles of non-age-biased employment practices. Included are guidance on the application of the principles and examples of best practice. However, research indicates that the code has had little impact. Government- commissioned research (Goldstone and Jones, 2001) found that over three waves of an evaluation of the impact of the code, awareness of it among employers increased from 23 per cent to 37 per cent of respondents. However, a very small number of respondents, 9 per cent at wave 3, had seen a copy. More representatives of larger companies had seen a copy – one in ﬁve larger employers compared to one in twelve smaller employers. A very small number, 2 per cent at wave 3, of companies stated that they had changed policies as a result of the code. These ﬁndings can be taken as an indication of the considerable amount of convincing employers will require before they begin to implement age-aware human resource management policies. In addition to publishing its code of practice, the government has banned upper age limits

# 2002 The International Association for the Study of Insurance Economics. 528 TAYLOR, ENCEL AND OKA in recruitment advertisements in official job centres. In 1998 it also committed itself to publish annual Key Indicators showing the position of older workers in the labour market (Education and Employment Committee, 2001b). Since 2000 the government has run Age Diversity in Recruitment Awards of Excellence (Education and Employment Committee, 2001b) and has aimed to raise awareness of the issue in specific sectors via the placement of articles in trade publications, and more broadly via articles in the general business and regional press (Education and Employment Committee, 2001a). In April 2000, it also implemented a new programme for non-working older people, New Deal 50 plus, which aims to provide them with the practical assistance and support needed to compete effectively in the labour market (Department for Education and Employment, 2000). It offers employment advice to non-employed older people who have been claiming benefits for at least six months and who wish to return to work. The programme is voluntary and open to people inactive on benefits as well as those who are registered unemployed. Awide range of practical help from a personal adviser is available: help with job-search skills, costs for travelling to interview, work-based learning for adults and work trials. There is also a range of help specifically for people with disabilities. It pays an employment credit on top of a person’s wage if they take either a full-time or a part-time job. This top-up money is paid directly to the employee, not the employer. The employment credit can also be used to help set up a small business. A small in-work training grant is also available. There has been a steady increase in the take up of New Deal 50 plus since April 2000. Clients generally move into full-time employment, although a large minority – almost one- third – move into part-time employment. Take-up of the training grant is low. A major evaluation of New Deal 50 plus has been undertaken. Very early findings from interviews among a small group of clients (38) were that overall impressions of the programme were positive. The main element of the programme was felt to be the employment credit, about which views were positive. Clients felt that it was an incentive to take low-paid work both in terms of level and reliability of income. While the level of the credit was considered acceptable, there were concerns that it only lasted for one year. Few had heard of, or were interested in, the training grant element of the programme. Also, support provided by a personal adviser was less likely to be cited than the employment credit (Atkinson, Kodz, Dewson and Eccles, 2000). Further research among Employment Service and Benefits Agency staff found that as with clients, the employment credit was regarded as the key feature of the programme. It was regarded as having the effect of reducing clients’ reservation wages and increasing the number of jobs they were willing to consider. By contrast, the training grant was generally viewed as irrelevant, difficult to understand and use, and not an influence on clients’ behaviour. Aview was that the programme ended too abruptly once the client entered employment and that follow-up support would be beneficial. A further survey of 1,127 participants carried out in October 2000 (Atkinson and Jewson, 2001) found that they tended to be clustered around the lower end of the age range for eligibility (the average age was 55). Most clients were male. Confirming the earlier findings, the training grant was hardly used. This research suggested that the value of the employment credit was less clear-cut. Over half of those surveyed stated that they would have taken a job anyway, although it had encouraged almost two-thirds (63 per cent) to take a job earlier than they otherwise would, and over two-fifths (43 per cent) to stay in the job for longer than they might otherwise have done. The main factors influencing whether or not a client had entered work were that they were aged 55 or younger, female, had not had a long spell of previous unemployment, and were being convinced by the availability of the employment credit to take a job with a lower wage. Regarding what they thought they would do after the credit ended, 40

# 2002 The International Association for the Study of Insurance Economics. OLDER WORKERS: TRENDS AND PROSPECTS 529 per cent of clients felt they would probably remain in the job, 11 per cent felt that they would return to benefits, while the rest had plans to remain in work and increase their earnings. A further phase of this research (Atkinson, 2001) consisted of a telephone survey of 503 individuals in February 2001. Half of those surveyed had first been interviewed in wave 1 while the rest were new clients. Among the new clients, fewer were long-term unemployed than in wave 1, suggesting that a shift might be taking place to ‘‘flow’’ entrants. Among those who were re-contacted, survival rates for those entering work were reasonably high, with around two-thirds still in work six months after the first interview. However, among those who had not found a job six months previously, only one in five was now in one. Few of the new starts anticipated returning to benefits after finding employment and few whose credit had expired had done so. Among the re-contacted group, use of the training grant had risen but had remained very low. The main reason for not using the training grant was a belief that new skills were unnecessary for the kinds of jobs being sought. The government is also in the process of piloting Third Age Apprenticeships in some sectors (Education and Employment Committee, 2001a). A recent initiative is the Age Positive website (http://www.agepositive.gov.uk/). This was launched in 2001 and comprises a variety of informative and interactive features including employer case studies, a discussion forum, advice and guidance, updates on the government’s Age Positive campaign and progress towards legislation. The Second Chance website (http://www.dfee.gov.uk/secondchances) provides advice and guidance to older workers wishing to undertake learning activities.

9.2 Pension policy The U.K. is gradually raising the state pension age for women to that of men. In addition, to reduce public expenditure associated with an aging population, the government allows income from work and pensions to be obtained simultaneously. The ‘‘earnings rule’’ which restricted the amount those beyond pension age could earn before their National Insurance pension was reduced was abolished in 1989. Pension reform is high on the policy agenda. Advocacy organizations are calling for changes to current pension regulations to enhance flexibility and allow gradual retirement. Occupational pension scheme rules and tax laws have discouraged this, although the government recently published a consultation document which may be the first step towards encouraging much greater flexibility in retirement (Inland Revenue, 1998).

9.3 Strategic approaches Recently, the House of Commons Education and Employment Committee report, Age Discrimination in Employment, contained the following statement:

We have ... emphasised the scope for better co-ordination between supply-side measures, such as New Deal, and demand-side measures which affect employers’ behaviour. Similarly, if age diversity in employment is to be achieved, there should be synergy between regeneration activities, employment assistance programmes and anti- discrimination measures. Tackling age discrimination and the increase in the number of those claiming incapacity beneﬁts requires a co-ordinated approach which recognises the differences in competitiveness and gross domestic product per head between regions. We recommend that the Regional Development Agencies should include achieving age

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diversity as a priority within the regional employment action plans. (Education and Employment Committee, 2001a, p. ix) In fact some steps towards a whole government approach to tackling age issues have already been taken. The Better Government for Older People programme (1998–2000) aimed to improve the delivery of services to older people at the level of local government. Twenty- eight projects were established which piloted integrated inter-agency initiatives tackling a range of issues including employment and lifelong learning among mature-aged workers. The programme brought together central and local government, the voluntary sector, academia and older people. It aimed to: • improve public services for older people by better meeting their needs, listening to their views and encouraging and recognizing their contribution; • develop new ways of working across traditional organizational boundaries; • create innovative solutions to problems; • demonstrate the benefits of a strategic and ‘‘joined-up’’ approach to meeting the challenges presented by population aging. Recognizing that age discrimination impacts on many areas of policy, the government has also created a Ministerial Group for Older People to co-ordinate work across government departments. A recent report commissioned by the government and prepared by the Cabinet Office’s Performance and Innovation Unit (2000) set out a number of recommendations for the development of policies towards people in the third age. Key recommendations for government were as follows: • increase contact with and job-search assistance for people on sickness and disability benefits; • provide careers information and advice for older displaced workers; • promote the advantages of diversity and flexibility in working practices through a group of ‘‘champion’’ employers. The report recommends that responsibility for actioning its conclusions should rest with the Ministerial Group for Older People. The group is taking forward various strands of work under the banner ‘‘Life Begins at 50’’ (DSS, 2000).

10. Discussion and concluding comments This article has shown that public policies on age and employment are emerging rapidly in the case countries. Japan and the U.K. have been slightly ahead of Australia, at least at the national government level, in addressing this issue. However, there is increasingly a convergence of approach with each case study country moving towards more integrated policies aimed at tackling the issue, although messages to employers and older workers sometimes still appear somewhat inconsistent. In both Japan and the U.K. policy-makers are keen to extend working life, and one tool that is being employed is legislation aimed at discouraging age discrimination. Japan has a rather weak law in place and the U.K. is planning its legislation with a view to its introduction in the next few years. However, the lesson from Australia is that both legislation outlawing age discrimination and the ending of mandatory retirement appear to have had a minimal impact on employment and retirement patterns among older workers. Likewise, the U.K. Government’s Code of Practice on Age Diversity

# 2002 The International Association for the Study of Insurance Economics. OLDER WORKERS: TRENDS AND PROSPECTS 531 has had little impact on employer behaviour. Nonetheless, the lesson from all the case countries is that if ‘‘active aging’’ is to be achieved, then efforts aimed at encouraging older workers to re-enter or remain in the labour force must be accompanied by measures to reduce the incidence of age discrimination in the labour market. The evidence is that this will be no easy task. A key lesson from the case studies is that policy-makers have perhaps focused too much on ‘‘older workers’’ and older men in particular. In the U.K. case, for example, the evidence was that schemes aimed at supporting the reintegration of older workers appeared to be benefiting those aged in their early 50s more than those in their late 50s or 60s. Also, for Japan it was argued that policy-making has not taken sufficient account of the particular needs of women with regard to employment. Thus, there is a need to consider the needs of different groups. Simply targeting policies at ‘‘older workers’’ in general will be insufficient. Finally, a lesson that comes from the Japan case in particular is that perhaps by implementing some policies on age governments may run the risk of institutionalizing age barriers in the labour market. While the intention may be to promote ‘‘ageless’’ employment, schemes that offer employers subsidies for recruiting or retaining older workers, for example, may, perversely, encourage them to view and treat older workers differently. Rather than encouraging their integration into the labour force, such schemes may simply add yet another age barrier to those already facing older workers.

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