Government and employers need to think hard about how to keep wide range of jobs accessible to older workers
When we talk about the impact of demographics on the workforce, we tend to focus on the Millennial generation who have started to enter employment in recent times. Excellent research by Deloitte and PWC has provided great insight in to the expectations this new generation of workers has and the ways in which employers need to respond if they are successfully to recruit and retain these people.
But attracting young people is only part of the challenge for employers. In the UK, we tend to think of prime working years as being between 18 and 65. Today, this represents about 66% of the population. While not all of these people are economically active, the vast majority are. By 2035, the equivalent figure will have fallen to below 59%. This doesn’t sound like much but it equates to a gap of 3 million fewer people of working age. Having more babies won’t help. 96% of the people who will be in the UK workforce in 2035 are already alive. A short-term increase in the fertility rate will make little difference to this issue.
The UK Treasury has a massive dependence on employment-related taxes. A smaller workforce would generate less government revenue, creating many difficult choices: higher taxes or fewer services; more borrowing or greater austerity.
The simplest solution would be to encourage more young people to migrate to the UK, but most of the political debate on this subject focuses on how to reduce levels of migration rather than how we can encourage more people to come here. Technology is often offered as a solution, but, as analysis of the productivity statistics demonstrates, more technology only tends to increase demand for labour – not reduce it.
One of the few viable responses to this demographic challenge is to encourage more people to work for longer. We still tend to assume that we will finish working at some point in our sixities, an assumption that was established when life expectancy was significantly shorter than today. Policy makers can help by creating “nudges” in the tax system which would encourage people to stay in work longer. An example would be to create advantageous tax rates for workers who are past the traditional retirement age.
But what can employers do? Many employers, particularly in retail, are already positively targeting older workers in the recruitment campaigns. They believe that these older employees not only deliver better customer service than their younger peers, but also help to create a better culture in the places they work.
Removing incentives for early retirement would be a good starting point. Enhanced pension contributions for employees older than 65 would be another positive step. Reviewing benefits packages would also be sensible. For example, childcare vouchers for grandparents to help them subside their grand-children’s child care costs; financial and estate planning; flexible working hours to enable them to participate in childcare, pursue other interests, or ramp down toward retirement; and sabbaticals to allow them to travel while they still healthy. All of these would all be attractive benefits for older workers.
And thinking about the kind of work older workers do will be important. Most will want to continue their existing careers, not start new ones in the mid-sixties. So employers will have to think hard about how they make a very wide range of jobs accessible to the needs of this older generation of workers.
Someone once said “demographics is destiny”. The demographics of the UK mean that we are destined to become more reliant on an older generation of workers contributing to the economy and to the success of their employers much later in life. The question for businesses is what are you doing to prepare for this future?