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Late career mobility: Experience from the UK

Late career mobility: Experience from the UK. Ciaran Devlin, Economist, Labour Market Directorate. Overview. UK labour market context Trends in labour market outcomes for older people in the UK, with European comparisons

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Late career mobility: Experience from the UK

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  1. Late career mobility: Experience from the UK Ciaran Devlin, Economist, Labour Market Directorate

  2. Overview • UK labour market context • Trends in labour market outcomes for older people in the UK, with European comparisons • Past, present and possible future UK labour market policy developments affecting older people in the UK

  3. UK labour market context

  4. ‘Average’ private sector earnings in the UK are amongst the highest in the world…

  5. …with only Germany of the G7 countries having higher earnings. The others earn between 10% - the US – and 30% - Italy – less.

  6. And because the UK has low direct tax & social security payments…

  7. …UK workers take home more than in every county in the world – except Switzerland…

  8. …whilst labour costs are lower than a number of major northern European countries – including France and Germany.

  9. The light employment regulatory regime in the UK tends to allow workers and businesses to adjust quantities in ways that suits both of them…

  10. ….leading to the UK having amongst the widest range of types and patterns of work in the world. This diversity allows more UK workers to find jobs that suit them…

  11. …and also enables a great deal of dynamism. With one of the highest (voluntary) turnover rates in the OECD. These very high hiring rates also allow the potential for social mobility...

  12. …with all sorts of vacancies coming up all over the country all of the time. Employ-ment 2,443,000 Employ-ment 1,749,000 1,906,000 1,778,000 1,999,000 Unemp-loyment 1,344,000 Inact -ivity 1,826,000

  13. In recent decades, the UK labour market has become more decentralised and individualised.

  14. Since 1986 a system of ‘activation’ – getting people to look for work – was re-introduced into the unemployment benefit system and has been improved since. Long term claimants have benefited in particular.

  15. And the Post War period has much lower unemployment benefits than Pre-War. Recently, from September 2002 until September 2008 - the JSA/New Deal regime delivered rates below 3% – the rate Beveridge in the Post-War period defined as ‘full employment’.

  16. Employment amongst people aged 25 & over is already around ½ million higher than the pre-crisis peak. But, because the labour market situation of young people has not improved overall employment has only just reached its previous peak…

  17. …and the groups that have seen the largest employment rate gains – lone parents, the long term disabled and pensioners – are groups that government supply side policy has aimed to bring into the labour force. Moreover, there is no real sign of sustained recession in the figures.

  18. In the 1990s these welfare to work policies were extended to ‘inactive’ benefits and have been ramped up since. The numbers are now at a 20 year low and the speed of decline is getting faster.

  19. Trends in labour market outcomes for older people in the UK, with European comparisons

  20. The focus on older workers for most of the last century was they did not have to, or ought not to, work. That focus is changing and activity rates are now picking up.

  21. Activity rates of women aged 60-64 are rising strongly, due in part to the raising of the state pension age…

  22. …and there is a similar sharp rise in the activity rates of people aged 65 & over as policies of ‘active ageing’ have been pursued by all governments in recent years.

  23. European employment rates [15-64], Q2 2012 Total employment rates are relatively high in the UK…… Source: Eurostat

  24. European Employment rates [65+], Q2 2012 ….and high employment rates are partly due to strong and strengthening participation from groups traditionally further from the labourmarket… Source: Eurostat

  25. UK employment rates 65+ since 2002 Source: Eurostat

  26. European Female employment rates [55-64], Q2 2012 Source: Eurostat

  27. UK employment rates 55 - 64 since 2002 Source: Eurostat

  28. Population growth remains strong at around 365 thousand over the past year. Population growth net of education has grown erratically but by a similar amount…

  29. We are just entering the period when the ageing population becomes a problem & an opportunity. To address this we will need to get even more of the population into the labour force and looking for work – both pre- and post-pension age…

  30. …over the next year employment with constant activity rates and constant ILO unemployment rates would grow by around 230 thousand… Level: June to August 2012 Population 16 & Over: 50,563 Thousand Activity Rate: 63.5% Number in labour force: 32,118 Thousand ILO Unemployed: 2,528 Thousand Employed: 29,590 Thousand Annual Change Population 16 & Over: + 365 Thousand Labour Force (Constant Act. Rate) + 232 Thousand Employed+ 232 Thousand

  31. …but as baby boomers move into pension age where activity rates are low this reduces the rate of labour supply growth to around 100 thousand. Population Growth: 2008 projections 2012-13 • Under 25 Years - 58 Thousand • 25-64 Years + 125 Thousand • 65 & Over + 312 Thousand • Total + 375 Thousand Activity Rates: June to August 2012 • Under 25 Years 64.2% • 25-64 Years 80.4% • 65 & Over 9.3% • Total 63.5% Growth in Labour Force+ 92 Thousand

  32. Recent and future policy developments

  33. Recent and future policy developments • Abolition of Default Retirement Age • Extending the right to request flexible working • Raising of State Pension Age from 65 (60 for women) to 68 by 2046.

  34. Abolition of Default Retirement Age Prior to 2011, UK employers could compulsorily retire workers when they reached the age of 65 • Employers can still operate a retirement age, provided this can be objectively justified • Reform aims to provide greater opportunities for people to participate in the labour market at age 65 and beyond, increasing productive potential in the economy

  35. Right to request flexible working (proposed) • Employees would have the right to make a request for a pattern of flexible working • E.g. working a different pattern of hours, working part-time, working from home etc • Could benefit older people who would like to care for grand children, or remain in the labour market but working reduced hours • Employers have duty to consider the application, but do not have to accept the request • Currently applies only to parents and carers

  36. Raising State Pension Age Currently, State Pension Age (SPA) is 65 for men, 60 for women, but reforms underway include: - Raising SPA to 65 for women by 2018 - Raising SPA to 66 for all by 2020 - Raising SPA to 68 for all by 2046 There are proposals to accelerate this planned raising of the state pension age.

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