Active ageing is a risky labour market policy

An emphasis on longer working lives should be a policy aspiration, rather than an ideological straitjacket. Image from

Welcome to Shades of Grey, a series from The Conversation that examines the challenges posed by Australia’s ageing workforce. Today, Monash University’s Philip Taylor looks at the costs and benefits of lifting the workforce participation rate of older workers.

In the past, older workers have borne the brunt of industrialised nations’ efforts to grapple with the effects of economic downturns, with policymakers encouraging their withdrawal from the labour market. They have been over-represented in declining industries, under-represented in those experiencing growth and affected by reduced demand for unskilled workers.

Earlier this year, the Australian Human Rights Commission released “Working Past Our 60s”, a discussion paper on reforming workplace laws and policies for older workers. The report highlighted a number of institutional barriers to their employment, the removal of which would undoubtedly assist in lifting older workers’ employment participation rates to levels closer to those of other industrialised nations.

Organisational delayering, downsizing of operations and process re-engineering has fragmented traditional employment relationships and undermined the ability of older workers to sustain positions in the labour market. The restructuring of the global economy will continue to shape the employment landscape in ways that may not be conducive to their job prospects.

But current thinking is that early retirement is not tenable if industrialised economies are to remain competitive and to respond well to their ageing populations. The European Commission, for instance, has estimated that an increase of one year in the effective retirement age would reduce the expected increase in expenditure on public pensions by between 0.6 and 1 percentage points of GDP. The economic gains alone resulting from “active ageing” could thus be enormous.

But is this achievable without the risk of hardship for some older workers?

At first glance, working later like an attractive prospect for older workers when one considers benefits such as income and social participation. To achieve longer working lives, major reforms are needed and, in this regard, the present federal government has introduced a raft of generally useful initiatives. This latest official report identifies other, remediable factors that discourage the labour force participation of older workers.

But in the rush to promote the benefits of working later, the reality of older workers’ experiences should not be neglected. It is easy to point to gaps in arguments concerning the value of blocking off early exit pathways and instead exposing older workers to the labour market via promoting re-entry and retention. Unfortunately, past policy changes have often been driven more by concern for the economic consequences of population ageing than for the wellbeing of all older people.

While older workers may nowadays be somewhat closer to the labour market than they once were, their employability is often poor. Some unemployed workers will be, in effect, retired but lack the financial wherewithal to withdraw from the labour market. “Activation” (in terms of offering the “right” of older people to work) when there is no work to be had (due to age discrimination, a lack of skills currency, or failing health) may simply be condemning many to labour force participation, but with little or no prospect of meaningful opportunities.

Although policymakers may point to the individual benefits of working, if this is not quality work then this may reduce the prospect of a healthy and secure old age. Here the Australian Human Rights Commission report makes a contentious statement, arguing that “working is a protective factor against physical ill-health and poor mental health”. This is true to a point, but this surely depends on the kinds of work available for older people.

Flexible working has long been promoted in Australia and elsewhere as an approach that has appeal to older workers as they transition to retirement. But the problem lies in how flexibility is defined. It is not always possible for older people to exercise much choice and control over their labour market status. Many, for instance, find themselves trapped in involuntary part-time work for long periods, particularly women.

Unfortunately, the jobs to which older workers often gravitate do not fall into the “quality work” category. Despite the shift to a knowledge-based economy, many older workers are still found in physically demanding jobs, in work environments that carry occupational health and safety risks, or in roles that make it difficult to maintain skills currency. As a consequence, these older workers do not lend themselves to prolonged working lives, and instead face the serious prospect of social exclusion and poverty.

The European Commission has acknowledged these potential risks, noting that “transition rates into both unemployment and inactivity are considerably higher for older workers in jobs of low quality”. Evidence of continuing inequality in terms of types of employment opportunity would seriously undermine the case of those pointing to a simple measure of employment activity as indicative of changing labour market prospects for older people.

The new policy rhetoric of working until the age of 70 or beyond must also surely ring hollow to job-seekers aged in their 50s or those whose life expectancy, due to a combination of social and health risk factors, is likely to fall short of this or exceed it by very little.

A plausible scenario is one of increasing labour market insecurity and personal hardship as workers can no longer fall back on early retirement. One might say that there is even a “lost generation”, for whom the notion of working longer has come too late. Unfortunately, no program of activation could now make very many of them work-ready.

Much work could still be done to adjust official provision for the older jobless and those seeking a career change, to protect people from discrimination on grounds of age, to promote the benefits of employing older workers among business and, more generally, to recast work for an ageing society. However, a pragmatic balance is required between, on the one hand, maximising job chances, and on the other, an escape from diminishing prospects.

Labour markets may not adjust easily or willingly to the ageing of industrialised societies. The ongoing reconfiguration of national economies on the back of global shifts brings turbulent times ahead for at-risk groups such as older workers. Recognising this, an emphasis on longer working lives should be a policy aspiration, but not an ideological straitjacket. Certainly, any policy armoury that did not contain adequate protection for its older citizens would not be properly equipping them to meet the challenges of the modern labour market.