From the age of labor to the labor of age

LONDON/PARIS Thu Mar 25, 2010 8:53am EDT

1 of 3. Employee Sydney Prior, 95, poses for a portrait at the B&Q store in the southwest London suburb of New Malden in this picture taken March 24, 2010. The participation of older workers has increased in recent years, particularly in part-time jobs for men like Prior, whose employer, retail chain B&Q, has for decades made a public point of its enthusiasm for older staff. Picture taken March 24, 2010.

Credit: Reuters/Simon Newman

Related Video

Related Topics

LONDON/PARIS (Reuters) - Terry Robinson is about three-quarters of the way through his second apprenticeship. His first, when he was 15, was as a carpenter and joiner: now he's building the skills to attain supervisor status in retail.

He will be 71 in June.

Based near Oxford, England, he is in a minority of people who are not only still working, but also acquiring new skills as they head toward their 80s, Europe's fastest-growing age group.

Europe's policymakers hope workers his age and younger can serve as models for the citizens of an aging society.

In Paris, 63-year-old Carole Avayou would like to join that group. A technician with Air France-KLM since 1978, she had just turned 60 when she was served notice of compulsory retirement. She has taken her fight for work to court, after a vain protest including locking herself in the office.

"(I wanted them) to discuss things with me, hear my arguments. I put a piece of furniture behind the door and jammed the handle," she said by telephone.

These two stories show the contradictory realities facing older people in Europe as the continent hits a demographic milestone. This year, the number of people aged 60-65 will start to exceed the 15-20 year olds who traditionally replaced them in the labor force, according to a Eurostat data cited by Allianz.

If Europe's economies are to grow, older people will have to work for longer. But in a weak economic climate, not many employers want them.

DEMOGRAPHIC DEFICIT

A demographic cliche about China is that it will get old before it gets rich. The risk for Europe is from its richest generation, the ones who as young adults may have smoked Gitanes or sung "I hope I die before I get old" with The Who.

Having saddled their countries with debts, there's a strong chance they will lack the wherewithal to fund the "silver" consumer lifestyle typified by America's high-profile retirees. Instead, they risk forming an aging, stagnating bloc which further cripples its economies with the burden of their care.

"We are running into a serious financial problem combined with an aging and -- in countries like Germany -- a shrinking society," said Reiner Klingholz, director of the Berlin Institute for Population and Development.

"It will be very difficult, probably impossible, to generate overall growth."

Europe is the world's fastest aging major region. If it is to avert a future of decline and generational strife, economists say the only thing the old continent can do is adapt -- radically.

Klingholz and others argue that if Europe can face up to and resolve its demographic deficit first, the region may be well placed to capitalize on its experience as countries like China and South Korea run with only a short timelag toward their own, far more rapid, phase of population aging.

China's rise is driven by a population boom which preceded Mao's one-child policy, but that has also created a major labor-force gap that's now only a few years away.

"China will be in deep trouble in 15 to 25 years," said Klingholz.

But how on earth is old Europe, with its 8 trillion euros of debt, industrial age attitudes and dyed-in-the-wool labor structures, to reach this brave new world?

This article looks at the problems.

POLITICS AS USUAL

What may surprise Europeans is the fact that, at least in some countries, the demographic deficit is not a new issue.

Consider these comments from a report by a British government taskforce which examined the shape of the workforce in the context of a fast-aging society.

"We face a need for quite radical changes in long- established attitudes toward the older worker and retirement," the report said. "The change in structure of the population requires a similar change in structure of the working population."

That report was dated September 11th, 1953.

At that time, Britain found the solution to its labor force needs in married women working part-time and a wave of immigrants who, particularly in the 1960s, fueled the post-war growth that helped fund today's pensions.

"Sometimes I feel as if I've been going round and round and round this," said Bernard Casey, an economist and public policy analyst at the Institute for Employment Research at Warwick University, who has been working on age and employment for the last 30 years, in the UK, in Germany and for the OECD.

Even in Britain, which researchers have found to be relatively accommodating of older workers who are more often unable to afford inactivity, Casey's experience points to a lack of strong political will to persuade employers to keep older workers, who are typically expensive, in employment.

He notes even Britain's government suggested early retirement as a cost-cutting solution in a major 2004 review.

He also recalls how Norbert Bluem, a former German minister for labor and social affairs, steered an early retirement law through parliament in 1984 and appealed to older workers to take advantage of the opportunities "in the interests of the unemployed and of younger people."

A few days later, this time in his social affairs role, he was appealing to Germans to work longer "in order to protect the long-term sustainability of the public pension system."

"It is the contradiction between the short and the long term which is what we spend all our time worrying about," Casey said.

One might expect that as the proportion of employers facing a labor shortage increases, and more older people realize they need to keep working to build up an adequate pension, the issue would climb up the political agenda.

Voter turnout of the over-50s exceeded that of the under-50s in Europe in 2005, by between 1.02 to one in Norway and 1.41 in Portugal, according to a study published last year by the World Economic Forum.

The over-50s are already in the majority in Finland and Switzerland, the report said, and will be in France and Germany in 2015. The United Kingdom, where over-50s will make up the majority in 2040, will be last in the voter-aging wave.

"If on the one hand, you are expected to work longer but on the other you don't have the chance to, I think there will be an increasing mood of dissatisfaction," said Michaela Grimm, senior economist at Allianz. "The pressure will rise."

Casey is skeptical.

"Governments feel much more vulnerable about young people than they do about old people," he said. Youth unemployment in Europe at around 20 percent in the wake of the financial crisis is a more pressing political burden.

EFFORTS SO FAR

Part of the problem might stem from different perceptions of age. Where in some industries, the phrase "too old to work at 40" can still resonate, when politicians deal with "old" people they tend to address the concerns of the elderly.

People like the shop worker Robinson, who took up his current job after retiring from a mobile home company at 68, do exemplify moves toward the goal of retaining older people in the workforce.

"I was quite convinced I wasn't going to retire and sit behind the curtains watching the world go by -- people who do that don't seem to last very long," said Robinson, who works around four mornings a week in a home improvements store.

The European Commission has targeted a 50 percent employment rate for older workers by 2010, up from 45 percent in 2007. That average conceals very wide variations across the region, from around 13 percent in Hungary to 63 percent in Sweden, according to Allianz.

The participation of older workers has increased in recent years -- particularly in part-time jobs for men like Robinson, whose employer, retail chain B&Q, has for decades made a public point of its enthusiasm for older staff.

But even though Robinson is not the company's oldest employee -- 95-year old Sydney Prior works one morning a week -- only 28 percent of its employees are aged over 50, which as a proportion is short of their increasing number in society.

"The recent recession has in no way affected or changed our employment or retirement policies when it comes to older workers," said Leon Foster-Hill, B&Q's Diversity Adviser.

CONFLICT OF INTEREST

But one important difference between Robinson and the former Air France employee Avayou points to a harsh contrast between today's older workers and those of tomorrow.

"The reason I'm in is not monetary," said Robinson, whose work supplements what he calls a reasonable state pension, plus small funds accrued in his former job.

Avayou, by contrast, is getting by on half her former income: she is unemployed but unsure if she is entitled to a pension. Her story illustrates how the economic crisis could even exacerbate Europe's demographic deficit.

In what seems to be an consequence of clumsy legislation, she believes she is the victim of a new rule allowing people to work until 70 that takes effect in France this year. She says it sparked a drive by her employer to force a spate of workers into early retirement before it took effect.

Employers and policymakers do not always have shared interests.

"Allegedly, you can work until the age of 70. You could even raise the retirement age to 80. But as soon as you understand that the bosses can do whatever they like, it doesn't mean a thing," she said.

Air France-KLM declined to comment.

A draft government bill aimed at encouraging people to work for longer is due to be ready by September, after negotiations with unions and employers. But rather than go on paying the typically higher salaries of older workers, French unions say several companies have chosen to push employees into retirement.

"There's a system of financial incentives for companies to get rid of employees who are likely to be older and who, in their eyes, cost the companies too much," said Alain Parent, representative of national union SNTR-CGT, which represents technicians in radio and television.

"It's quite common, most companies nowadays are pursuing this policy of saying 'voila, we will put in place financial incentives around a departure plan for employees who have paid all their annuities ... and are a minimum of 60 years of age.'"

RETURN OF EARLY RETIREMENT?

It's a phenomenon that may go beyond France. Where Europe has been making progress in putting a stop to early retirement -- Greece has pledged to eliminate it as part of pension reforms aimed at curbing its budget deficit -- companies facing the need to cut costs may well find it hard to see another way.

A survey last year of more than 5,000 companies in eight European countries found most employers needing to cut costs would, as first choice, let older workers go.

"In most countries, 56 to 70 percent of employers would be in favor or strongly in favor of achieving a reduction of staff levels by early retirement of older workers," said professor Kene Henkens, who coordinated the survey, conducted by Activating Senior Potential in Europe (ASPA) and analyzed by The Netherlands Interdisciplinary Demographic Institute (NIDI).

British charity Age UK in February said over 100,000 people had been forced to retire on or after turning 65 in the recession.

So where the standard demographic story is that in future, there will not be enough young people to carry the burden of care for older people, the risk now is there may not be a chance for older people to help take care of themselves.

"They don't push them out the door," said Parent, the union official. "But they persuade the person that 'it must be hard for you to work at your age, you must be tired, it's not the same energy, the same desire (to work), so it'd be good to take up this offer and go.'"

THE INCOME GAP

Government efforts to encourage older people to stay in work pre-date the economic crisis. But the debts which accelerated as countries bailed out banks and borrowed economic stimulus have thrown into focus a widening gap between the age people tend to quit work, and the year they can expect a pension.

Seeking to cap deficits by reforming pensions, including deferring pensionable ages, has been a trend in Europe since the 1990s and further steps may be needed beyond Greece and Spain, which were slower to join the wave of reforms.

In Britain, where the state pension age is currently planned to be pushed back to 68 in 2046, consultancy PriceWaterhouseCoopers has argued a further delay -- to 70 -- would save about 0.6 percent of gross domestic product.

That would have a small "but nonetheless material" impact on the total cost of aging, which the government has put at more than 5 percent of GDP a year by 2060, PWC said in a report.

Against these deferred pension ages is the reality of the workplace. Even though early retirement was declining in the boom ahead of the collapse of Lehman Brothers, there is still a sizeable gap between the ages at which people tend to stop work and their pension year.

In most countries in Europe, employment rates start dropping between 55-59 years old and drop sharply after the age of 60, according to the European Commission. So if Europeans continue to leave the workforce early, they could be looking at a 10-15 year earnings hole before their pension kicks in.

That's a worry.

"If you ask Germans today what is their biggest concern, it is old-age poverty," Bundesbank president Axel Weber told a conference in Copenhagen this week.

Data from the European Social Survey show between 25 and 40 percent of people in Western European countries including Britain, France and Germany already say they are "very worried" about income in their old age. Women are especially concerned, and those who are most worried are also more inclined to believe it is the government's responsibility to provide.

Across the European Union, pensions amounted to just under half the income people earned before retirement in 2008, according to Eurostat. Around 20 percent of elderly people were at risk of poverty in the 27-member bloc.

NO CHOICE

Deferring pension ages is a short-term focus from the crisis -- for example, without reforms, Greece's expenditure on pensions alone is projected by Eurostat to reach nearly one-quarter of its Gross Domestic Product by 2050.

But it would be unwise to confuse it with the structural need to keep Europe's workers earning into later years.

By 2050, Europe's population of around 591 million is projected by the United Nations to have shrunk by more than eight percent while the United States and Canada, Latin America and Asia will each have grown by more than 30 percent, and Africa's will have more than doubled.

Of all the world's major regions, only Russia -- where a poor health system is slowing increases in life expectancy -- is set to lose a larger share of its population, according to the Berlin Institute for Population and Development.

Simply put, this means that if Europe's economies are to grow, they need a combination of increased immigration and higher productivity among their existing populations.

With the proportion of the over-65s heading for 28 percent in Europe by 2050 and life expectancies stretching to 82 from around 76 in 2006, the generation of that increased productivity must be shared by its older members.

"Either you try to be productive -- work longer -- or you will receive less income when you're old. There's no other way," said Klingholz. "It's not going to rain euros from the sky."

WHAT IF...?

Employees forced into retirement who may not have intended to leave -- for instance because their children are still at school -- face a sharp drop in income, a smaller pension, and could end up needing state help.

"For a company, early retirement seems to be a good idea to cut costs, but in the end more people will be claiming pensions for longer, so social costs will rise," said Allianz's Grimm.

"In the worst case, privately accumulated assets would not be enough to support the individual, which would increase the burden on social welfare."

People who leave the workforce ahead of pensionable age are unable to pay tax or contribute to pension funds, and in any case, with household debt in excess of 100 percent of GDP in most of Europe's large economies, are more likely to have debts to pay off than be ready to save extra funds.

"What worries me is we've spent the best part of two decades trying to purge early retirement out of the system," said Casey, alluding to the fundamental need to keep as many people in the labor force as possible. "Along comes the crisis and all the good work of the last two decades is undone.

"I worry that we're threatening to return to the early-retirement culture. We might have early retirement, but it will be less well compensated. That has implications in the short term for people's wellbeing, and for their future income."

Large-scale early retirement would pull the rug out from people who need to keep working. Those who in their more senior years in any case expect to sell assets to pay for their care may be forced to cash in earlier, further depressing economies.

And given circumstantial evidence that older people who are inactive tend to become more frequently ill, it may add to the strains on health systems.

"We will never kick-start the economy by depriving a maximum of people of income while there is so much unemployment," said Avayou, the former Air France-KLM employee.

"And even when you want to keep your job, you're not able to. It's disgusted me, the justice system, the politicians. They're taking the piss out of us."

(Additional reporting by John Acher in Copenhagen and Scott Barber in London; Editing by Janet McBride)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (3)
voogel wrote:
Truly Amazing!

Mar 25, 2010 5:45am EDT  --  Report as abuse
Society as a whole – whether in the West or in Asia – has to change it’s mind-set towards ‘older’ people and stop associating them with economic “dependency” and physical “decline”. As people are living longer and healthier lives, they want to be working – to maintain cognitive, physical and spiritual health, and assert some form of independence – to avoid exactly how they are viewed now by society. I agree that companies, as much a politicians, are resistant to this. Just find a better, economic model for capitalist enterprises and extend the much-vaunted ’social responsibility’ to fair treatment of the over 55s – impose a tax on businesses that won’t do it (using the tax revenue to support the ’social’ cost – just another externality dumped on society by companies). Older people don’t want tons of money in fat pay packets, just respect, dignity and the opportunity to keep working if they wish.

Mar 25, 2010 7:46am EDT  --  Report as abuse
screedwriter wrote:
Buy more buses. Then throw granny under them.Why mess around with euphanisms?Show your true colors.

Mar 25, 2010 3:24pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.