Thursday, January 13, 2011

Work ’til you drop

The UK Default Retirement Age of 65 is to be phased out this year. After the end of September, no employer will be able to enforce retirement on grounds of age alone.

I have mixed feelings about this. There are both advantages and disadvantages for individuals. In some cases people will be delighted to be able to carry on working. They enjoy their jobs, perhaps because they are very skilled and knowledgeable and therefore valued by their employer and colleagues, or perhaps for the social contact, or the money – or all these reasons. Others might be happy to go, but would like to work shorter hours in less demanding employment. Working can provide autonomy and self-respect, which is why the transition to retirement can be difficult.

However, not everyone is in this position. People with physically or mentally demanding jobs may be past their best by the mid-sixties, and in some cases such as firefighters or police they will have been forced to retire earlier in any case (and a compulsory retirement age may still be operated in occupations if it can be justified). Others may have been looking forward to having more time for life outside work: spending more time on voluntary work or a hobby, and having more space in their lives for friends and family. They may feel obliged to work for longer if the opportunity is there, for example for financial reasons, but it would not have been their choice.

Employers obviously gain if they can hang onto good staff. But they have expressed concern about how, to be blunt, they might get rid of people who are no longer up to the job. The government’s response has been surprisingly robust, with the Employment Relations Minister telling them to use the capability procedure and that ‘the evidence that performance and effectiveness decline after 65 is just not there’. That may be so in the aggregate, but what about individual cases? As an ex-local government worker, I know how lengthy and complicated capability proceedings can be, and my experience was that incompetent people (of any age) were worked around rather than confronted.

The government agenda is clear. No doubt politicians hope that encouraging us to work for longer will soften the blow of the rising state pension age. In future, it may become politically feasible to reduce the flat rate pension and increase reliance on a means tested element. It’s been interesting to hear the Minister’s claims today that tax payments by older workers increase tax revenue, which implies that the numbers employed will increase as a result of this measure. Although in good times that may be so, I doubt that at present the public or private sector are taking on or keeping extra workers because some of them are over 65. It’s far more likely that younger people will be kept out of jobs in the short term, or in the longer term if the economy doesn’t pick up.

But most importantly, this measure increases the size of the labour pool, thus making it possible to drive down wages and conditions. Rising unemployment and increased economic activity means more competition for every job. That can only be to capitalism’s advantage.

12 comments:

LeftAtTheCross said...

Unless there is full employment, which isn't likely any time soon, I'm not sure how there is any sense in this type of measure. The recent increase in the pension age in the Republic, with 450,000 on the live register, can only be seen as a mechanism to pay older unemployed people the at the lesser rate of unemployment benefit rather than at the higher rate of state pension. As you say in your piece, one would like to think that as one gets older that there would be an opportunity to work less, not more, and that a side effect of this ramping down could be to create more employment opportunities for younger people entering the workforce. But no, we just see this vindictive nonsense. What next, return of the poorhouse?

Jenny Muir said...

Left At - some older people will really value the opportunity to work for longer and I may well be one of them, however we always have to look at power and interests when analysing new policy. Who is really going to gain from this? In a different social context it would be fantastic to be opening up the labour market to older people but I just don't see that the government has that in mind.

LeftAtTheCross said...

Of course, some people might want to work on at that stage, but voluntary continuation in the workforce is not what's being legislated for here. As you point out, who really benefits here? And although the answer is as you identify, capitalism, one would have thought it's an unnecessary victory, as the reserve army of labour is unlikely to shrink anytine soon. I suppose this is a long-term move, catering for the ageing demographic of the future. Very far-sighted of the shock doctrinaires, to their credit, the feffers. They're not on the back foot just yet, but soon, soon...

edgeoftheunion said...

I'm not sure there is even that much thought going on. I suspect that this will be yet another case where 'The market knows best' ahem. Withe the result that ever more older professionals will stay in work and ever more young non-professionals will be unemployed or working for buttons.

nick said...

As someone nearing pension age, I welcome the chance to work as long as I want to. The problem is not that oldies are stealing jobs from the young but that successive governments have not made job creation and full employment their number one objective. So we have the obscene situation of at least five million unemployed or economically inactive. If there were plenty of jobs, oldies wanting to keep working would be a non-issue.

andrewg said...

The lump of labour fallacy rears its ugly head again. Forcing older people to retire does not automatically create jobs for younger people. When France brought in the maximum 35-hour working week it was sold as a job-creation scheme. It didn't work, and people just found ways around it.

You have already identified the real problem: the difficulty of firing people who are incompetent. Forcing people to retire at a particular age is a blunt instrument and makes no provision for individual factors.

And doing nothing is not an option. As people live longer, our pension system is becoming unaffordable. My generation will probably live until they're 85 or 90 on average. Where's the money going to come from for our pensions? Will we tax our children at 60% to pay for our retirement? Or will we take cuts in our pension payments so we're living on no better than the dole? I'd rather work.

Jenny Muir said...

whoo hoo! I go away for a couple of days, and lots of comments!

LeftAt and EdgeOf - conspiracy or carelessness? It may be a reaction to pressure on the one hand from older people who genuinely just want to work for longer, and on the other hand from the Treasury in terms of the pensions bill, but for me the interesting question is how the coalition will deal with rising youth unemployment in this context.

Nick - yes you are right, if there wer eplenty of jobs then everyone who wanted to work would be welcomes with open arms into the perfect equilibrium of a balaned labour market. But goven that's not the case, and the government is not adopting a Keynesian approach to the economic crisis, then what to do?

Jenny Muir said...

Andrew G - you are right that there is no direct interchange between older people leaving the labour force and younger people coming in. But if enough older people decided to work on, and if they start to take some of the less demanding jobs also favoured by students and entry level workers, then that's where my argument about greater competition for jobs surely applies. And yes if the economy was in better shape, I would think about buying the argument being put forward by the coalition that more money coming into the economy will create more jobs. But at the moment I suspect older people are more likely to save than spend.

And yes, pensions costs are rising. But why isn't the government adopting the Australian system and forcing us to pay into our 'super'(annuation) as they have to - although it's unpopular, it's also appreciated on retirement.

Makes me realise that the real question isn't whether older people should or shouldn't carry on working, but what will happen to those who can't or won't.

nick said...

What to do given the present circumstances? Unfortunately the answer seems to be every man/woman for themself and the others can sort out their own lives. If I'm an oldie and I'm offered a job I'll take it. If that means a younger person is jobless, that's not my responsibility, it's the government's.

Meanwhile the accumulated bonuses showered on undeserving bankers could fund thousands of jobs for young workers.

Jenny Muir said...

Nick, unfortunately that's what's going to happen. I'm certainly not going to retire on principle so that a younger person can have my jobm if the result is that I'll be poorer in my old age, given the problems likely with the welfare state in the next 10 - 20 years. And that's going to widen social division between age groups and also between classes, as skilled and healthier middle class people stay in work. Not good for social cohesion.

DC said...

What do you think about the planned changes to the NHS?

Jenny Muir said...

DC - from what I understand, it's replacing one fairly well structured purchasing system with a shambles run by people who were trained to be accountants rather than to practice medicine. And of course it'll bring in the private sector more.

But also from the point of devolution it shows that the Coalition were only able to inflict this on England, and that the health services of the four jurisdictions are going to look even more different in a few years.