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March 1999


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Adapt or Die



If older people are to stay in the workplace, employers will have to change their attitudes and practices.

For the past 30 or so years, something peculiar has been happening. Decade by decade, life expectancy for older people has risen at unprecedented rates.

Not before time, there has been a rude awakening. The message is coming from pension providers: if you want to have a comfortable retirement then you will have to work longer. Earlier this month, the Institute for Public Policy Research, the UK government's favorite think-tank, advocated raising the standard retirement age to 67.

Sheer common sense, you might think. But in practice there are three hurdles. Are older workers (often defined as over 50) up to the job? Do employers really want to hire and retain them? Do older people want to work anyway?

Physical strength clearly declines with age. So, too, do some cognitive abilities. Older workers perform worse than younger ones in tests of working memory and the ability to process complex new information rapidly, says Peter Warr of the Institute of Work Psychology at Sheffield University. However, declines in such capabilities are not crucial for most jobs, especially as physically strenuous ones become the exception in a service-based economy. What matters in today's work place is the mix of skills, experience and character that individuals bring to bear. "Older workers are generally as good as younger workers," says Mr. Warr. And older employees show less absenteeism, lower turnover, fewer accidents, higher job satisfaction and more positive work values than younger workers, adds Amanda Griffiths, an occupational psychologist at Nottingham University.

The main link between age and work may operate through physical and mental health. Rises in life expectancy surely signal better health.

That raises the second question: do employers want older workers, whatever their abilities? In the past 20 years they have often acted to the contrary. Whenever, redundancies have been necessary, older workers have been the most vulnerable group. There is a widespread suspicion that employers do discriminate against people by age. The National Adult Learning Survey found in 1997 that almost four-fifths of people in their 50s and 60s agreed that "even if an older person studies to get qualifications, employers will usually choose a younger person". According to Employers' Forum on Age, two-thirds of information technology workers fear that they will be unable to get a job in IT once they pass 45.

In Britain, there are signs that employers' attitudes are changing. Several now recognise that they were too hasty in winnowing out the ranks of older workers who were the repository for much corporate memory and wisdom. Nationwide Building Society, which has been pursuing a strategy of age diversity, has found that this policy pays by reducing turnover rates of staff. The saving in lower recruitment and training costs is $10m a year, calculates Denise Walker, head of corporate personnel.

One reason why older industrial workers were vulnerable to layoffs in the 1980s and 1990s is that the skills they had learnt for their trades lost value as the economy shifted away from industry to services. Because they had had less opportunity for formal education, many lacked the foundations in numeracy and literacy that would have allowed them to respond to the new requirements of the jobs market. By contrast, post-war generations which have benefited from more formal education should prove more adaptable.

But will older people want to carry on working even if employers now want them to? After all, it is quite rational for people to retire early, if they can afford to do so. High returns in the financial markets led to a rapid build-up in private pension wealth in the 1980s and 1990s. More and more people in their 50s found that it made sense to draw down this wealth earlier rather than later, argues Mr. Blundell.

However, the high returns on equities in the past two decades were "exceptional and future returns are bound to be much lower," says Tim Bond of Barclays Capital. After two terrible years, the pension-fund surpluses that financed redundancies of older workers have eroded.

For these reasons, we believe that retirement age should be increased. Even so, there is a lot to be done to make work more attractive for older people (which should in turn help all workers). Top of the list are demands for less stress, more flexibility in working arrangements including part-time and temporary work, and greater autonomy. These are more likely to be found in companies with flat, non-hierarchical structures. Just as workers need to adapt to the idea of later retirement, so too, do employers.

Adapted from The Economist - March 2002

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