Living longer, working longer?
I wasn’t very impressed with Vince Cable’s recent Mail on Sunday piece on public sector pensions. Yesterday’s article on the challenges of an ageing workforce is much more interesting – and anyone who can introduce the lump of labour fallacy to Mail on Sunday readers deserves high praise. His thesis that we need to change attitudes to people working longer and end compulsory retirement ages is winning support, not leaast from unions. The TUC welcomed the government’s review of the default retirement age, just as business organisations opposed it.
But I can’t help thinking that this is actually a rather more complicated issue than some debate suggests. Too often people glibly say that we can solve the pensions crisis if only people will work longer. There are a number of problems with this.
First not everyone wants to work longer. Vince Cable says:
Our ideas about retirement were formed in an age when most employment was in ‘3D jobs’ – dirty, dangerous and demanding. That is no longer the case.
But lots of jobs still deserve at least one D. And if we add in ‘boring’, ‘stressful’, ‘bullied’ and ‘lacking in autonomy’ as possible adjectives, then lots of people still understandably look forward to retirement. It’s rather easy for people doing fulfilling ‘knowledge’ jobs to think that they wouldn’t mind carrying on working, at least part-time. And they are the people with access to the media.
On the other hand, those with the least pension, who most need to work longer to avoid poverty in old age, tend to have the heavier and less interesting jobs. While they may still want to work – for the same reasons that younger people don’t want to be unemployed – they may much prefer to take it a bit easier.
Secondly it is not clear that there is much employer demand for older workers. The CBI want to keep a default retirement age of 65. Many employers of course do let staff retire when they want as long as they can do their job competently, but that does not mean that there is work available for all older workers who want a job.
Now I certainly don’t buy the ‘lump of labour’ argument that says that anyone who works past retirement age stops a young person getting a job. And as Chris Dillow finds, the evidence suggests that older workers can be usefully productive. But I am worried that we will expect people to work longer before they get a pension, but without any thought about what kind of job older workers will do or who will employ them. Employers show little inclination to create transition to retirement part-time jobs that can tap the experience and skills of their older workers. Nor are new part-time jobs being created that are designed to attract older workers in any numbers.
Perhaps this will change. In the same way that employers have seen the advantages of creating jobs suitable for those with caring responsibilities (mainly women of course) and in more recent years have created jobs for students, they maydo so for older workers. But there is still a huge risk that society says everyone should work longer for their pension, but all that happens is that a big proportion of the older workforce can’t find a job. Instead of extra productive employment they have to wait for their pension on benefits with the added pleasure of a regular rendezvous with Job Centre Plus.
Nor does making people work longer solve the pensions crisis. For sure, the state can pay more somewhat more generous pensions for the same cost if they don’t start until later in life – although this of course redistributes money from the poor with shorter life expectancy to the healthier rich. But people still want and need pensions that are better than this. The real pensions problem is more profound. There are two basic ways of providing decent pensions. Either it is done by the state – and that doesn’t happen here, though common in the rest of Europe (highlighted by Age Concern/Help the Aged today). Or there is compulsory saving (though the UK does make a reasonable start at something like that in 2012).
Of course people should have much more say about when they finish working and how they move from work to retirement. But that is the start of a series of highly complicated debates, not a glib answer to anything.