Businesses around the world are chasing the grey dollar, but older people can contribute more to an economy than how they choose to spend their retirement funds.
Humans are living longer, which puts additional strain on healthcare provision, social care and pensions. And unless these issues are addressed, they could wreak havoc on economies in the future.
The thinking goes that by harnessing the potential of older workers, governments can raise additional tax revenues and increase spending power, which in turn boosts output.
Golden Age Index
PricewaterhouseCooper’s Golden Age Index assesses the impact of hiring older workers on different aspects of a country’s labour market, including employment, earnings, the gender gap and participation in training.
In the latest update of its report, PwC estimates that as much as $3.5 trillion could be added to the OECD economies overall by encouraging people nearing retirement age to stay longer in the workforce. This figure represents the potential long-term boost of raising workforce participation rates of over-55s to the same level as New Zealand.
At a national level, if New Zealand’s performance on employment of older workers were matched, the GDP boost could be as high as 23% for Greece, 20% for Belgium and 9% for the UK. Here's that in dollars:
The older worker participation podium
Iceland topped the 2018 index with 84% of the 55-64 age range employed, compared with the OECD average of 60%. New Zealand was second (78%) and Israel (66.8%) took the final podium step. At the other end of the scale were Luxembourg with 40% of the same age group employed, Greece with 37% and Turkey with 34%.
Overall, the index showed an upward trend in the number of older people remaining in work across member states.
Who hires older workers the most
Germany, Israel and New Zealand proved the biggest climbers, rising steadily up the index since 2003. Despite dropping a few places, the UK continued to make gains over the same period, absorbing 63% of the 55-64 age group (up from 55% in 2003) into the labour force and 21% of 65-69 year olds (up from 13%).
Mexico, Greece and Turkey suffered the biggest falls as each country dropped over 10 places down the index.
Incentives to keep working
So, what motivates people to work past retirement age? The answer is a mix of public policy and personal circumstances. The Golden Age Index identified three main drivers that influenced this decision.
Pension policies: The more governments spend on pensions the less incentive people have to keep working. The amount they receive and the age that workers are eligible to receive a pension also influence the decision to retire.
A 2012 study by Hurd, Mitchaud and Rohwedder found that public pensions have a negative effect on people’s savings and encourage them to retire early. The study concluded that a $10,000 increase in public pension worth reduces the average retirement age by roughly one month.
Life expectancy: Longer lives equate to more time spent working and there is a strong link between good health and participation in the workforce. Government healthcare policies and medical breakthroughs can facilitate people working to an older age.
Caring responsibilities: A person’s personal and financial situation are also important considerations. Caring for a spouse or a dependent could remove people’s freedom to keep working, if state care and benefits are not available. This will obviously differ from country to country.
However, taking things easy might be contagious. A husband or wife’s retirement could become an incentive for their partner to retire, too. A paper by Patrick Hesselius suggests that average sickness absence from work increases for women when their spouse retires.
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Adapting to change
Technology is transforming the way we work. Innovation, automation and AI developments create new jobs and make existing roles obsolete. The workforce of tomorrow will need to be flexible enough to pick up new skills quickly or transfer the ones they already have.
Adapting to a future with less job security may prove challenging for older workers, who are more likely to face the consequences of automation than their better-educated and better-trained younger colleagues.
The top spots on the Golden Age Index are occupied by countries that have put policy measures in place and reformed their labour markets to hire older workers.
The report recommends raising the retirement age to keep people in the workforce longer. However, to maximize the benefits of this policy governments need to support workers with lifetime learning and retraining programmes, to facilitate the skills needed for longer careers.
Making work options and pensions more flexible also supports the changing needs of older workers, by increasing opportunities for part-time or temporary jobs, as well as offering partial retirement options.
The physical needs of older employees is another important consideration. As well as adapting roles, employers can redesign factories and offices buildings to attract older workers.
The Golden Age Index figure of a $3.5 trillion boost to the OECD economy may still be some way off, but if more countries adapt the structure of their labour market and adopt a more flexible approach to older employees, the world will be working towards it.