We’re Only Gettin’ Older, Baby

UK plc’s Problem with Ageing and Ageism

“We're only gettin' older, baby

And I've been thinkin' about it lately

Does it ever drive you crazy

Just how fast the night changes?”

One Direction - Night Changes

In case it’s passed you by, One Direction are no longer a boy band. This year, they’ll all be in their 30s. S Club 7 are in their 40s. Those New Kids on the Block? They’re in their 50s. The clock’s ticking for all of us.?

Getting older is inevitable and yet the UK has a problem with ageing and ageism at both national and company level. This article looks at the UK productivity paradox, why companies often choose not to employ older workers and why they’re potentially missing out at a strategic level.

The Productivity Paradox

The United Kingdom’s economy has been plagued by low labour productivity growth since the 2008-09 global financial crisis. Between 1974 and 2008, the UK’s productivity grew at an average rate of 2.3% a year, a much higher rate than the growth rate between 2008 and 2020 at around 0.5%.?

Productivity at a national level can be measured by the output (GDP) divided by the work hours required to produce it. We can think about it as a measure of how smart we work instead of how hard we work.?

Productivity matters. The UK’s real wages improved with productivity before 2008 and stagnated in the post-2008 period. While slower productivity growth since 2008 is not UK-specific, it is worse in the UK than other comparable economies.?

Undoubtedly one of the causes is investment in capital. If we invest in better facilities and machinery, then that creates more output per hour worked. However for many less capital intensive industries, it is the output of workers themselves that determines productivity.??

Britain’s Ageing Problem?

The UK government has recognised for some time that the UK’s ageing population was going to be a problem for our economy. The Census 2021 results showed 18.6% of the total population – were aged 65 years or older, compared with 16.4% in 2011.?

The 2017 Equality Act was introduced making it unlawful to discriminate because of age. The government, several Prime Ministers ago, also set up a number of initiatives, such as the Workplace Challenge and the Positive Ageing Strategy (I’ve bet you’ve never heard of them).?

Brexit, by its very nature, implied a reduction in the ready supply of younger labour coming into the UK from the EU under Freedom of Movement. However, the pandemic exacerbated problems making many EU workers reconsider their long term future and leave the UK. By September 2022, around 330K EU-origin workers had left, about 1% of the total labour force.?

Any slack should have (in theory) been taken up by the indigenous workforce, but there has been a huge increase in economic inactivity. The UK has seen 1m people leave work since 2020. Retirement is the most popular reason given.?

Furthermore, nearly 2.5 million people are not looking for jobs because of long-term sickness, an increase of about 0.5m pre pandemic. The UK has a waiting list of nearly 7m for consultant appointments.?

The net result is that the UK has an imbalanced labour supply with shortages in both unskilled and skilled workers with ageism adding a further dimension to the productivity puzzle.?

Britain’s Ageism Problem

A study by the University of Manchester found that almost half of workers aged over 50 have experienced age discrimination, which can lead to low morale, reduced motivation, and feelings of isolation and imposter syndrome. All of these factors can lead to reduced productivity and experienced and capable workers leaving the workforce prematurely, taking their skills and knowledge with them.?

However, despite legislation, The Centre for Better Ageing ‘Becoming an age-friendly employer; Evidence report’ from 2018 commented that it was ‘hard to reconcile the fairly high proportions of employers with formal equal opportunities policies relating to age and recruitment with the widespread incidence and experience of discrimination’.

For those people looking for work, the job market for people over 50s is difficult. Most in this bracket will recognise a pattern amongst recruiters similar to Figure 1.?

Evidence from the Fuller Working Lives Business Strategy Group (DWP, 2017), for example, finds that recruiters are more likely to take on someone closer to their own age, resulting in the skills and experience of older workers being overlooked.

Recruiters love a steady pattern of career progression, once a candidate has some career experience (an issue for another time). However, there is a point at which either candidates peak in their career, have career breaks, get made redundant, have life changing events and therefore become less attractive, at least to many recruiters, who are yet to experience these. In some companies with younger founders, this ‘ideal range’ of about 25-40 can get contracted even further. Essentially they don’t want to employ their parents!

Add on some of the other underrepresented groups such as ethnicity, gender, parents etc and you can start to see why the UK has a major productivity problem. It is simply not using all of its available talent to its best advantage. That may not be an immediate problem to an individual company, as long as they get the employee they want, but it is a national problem.

Economic Gains

We are all living longer as a result of advances in treating the major areas of disease and some successes in preventing the causes of those diseases e.g. smoking cessation. Someone entering the workforce at 20 can expect to live on average until 88. For governments, this represents an unhappy dilemma.?

State pensions are paid out of current tax revenues,Thus these advancements, public sector finances, and a falling birth rate means that governments either force the current workforce to pick up the bill or keep raising the pension age with the Centre for Social Justice, led by Iain Duncan Smith calling for an eventual increase to 75 (Figure 2). Someone working in their later years is also likely to be contributing more to the economy both in terms of tax on earnings..?

However, while there are compelling arguments from a societal point of view for older workers, there are logical reasons for companies not to employ older workers out of choice.?

Company Pains?

As I’m sure some of you are itching to point out, it’s not the role of companies to provide social care. Companies employing older workers can be?left ‘on the hook’ for employees in poor health or unable to perform duties with the speed and precision of their younger selves.?

Despite quite large rises in life expectancy, there has not been an equivalent rise in healthy life expectancy i.e. the age at which we acquire one or more serious long term illnesses (Figure 2). This is around 63 for males and 64 for females. Increasing the pension age ensures that many will be struggling to work in their later working lives although, for those that are able, there are some social and health benefits.?

There are also other logical reasons for companies not wanting to employ older workers. Younger workers may feel that they are being held back by older employees who are “stuck in their ways” and resistant to change. This can create tension and conflict in the workplace, which can be distracting and counterproductive.

Training is also an issue. Having knowledge of the latest software package is a good way of eliminating large numbers of applicants but it works particularly against older workers. The majority of training effort and money is poured into younger people with universities and colleges being used increasingly to train the workforce. Over 50s are in danger of their skills becoming outdated but are not in a position to take significant time off to retrain.?

Therefore, while it’s societally good for workers to enjoy a longer working life (if able), there is a potentially higher cost for companies to maintain an older workforce and for individuals who are being forced to work in poor health.?

Business Gains

On the flip side, there are business gains to be made by thinking about older workers and a wider society. According to research from Saga, 27.9 million people will be over the age of 50 by 2030 in the UK, and 63p of every ￡1 will be spent by people over 65 in 2040. Yet age is often marginalised in cultural content.?

It’s easy to see examples of companies that are missing out on a huge source of potential revenue by not understanding the needs and nuances of an older audience and are, in effect, putting a shelf life on their own relevance by not considering how their existing client base will change over time.?

Unlike the ads, many people in later life want more than a funeral plan, a stairlift and a Viking River Cruise! Older employees help provide a window into the older market and, when employed in customer facing positions, can give companies a potential differentiator in servicing this market.?

However, one of the most important things that companies are missing out on are soft skills e.g. EQ (emotional quotient or intelligence), which are developed over a longer period. In a world where hard skills are being constantly disrupted by new technology, soft skills are beginning to look more and more valuable in terms of competitive advantage.?

Policies to Address This

Governments will need more than legislation to create a sea change in attitudes towards older workers. There needs to be some carrot as well as a stick.??

A key requirement to improve productivity in the UK is to encourage a culture of lifelong learning and development. This can be done by providing incentives for companies to invest in training and development programmes for employees of all ages, potentially in partnership with online learning and also for individuals affected by redundancy or re-entering the workforce.?

A second is to create the incentive for flexible working arrangements that allow employees to balance work and offset health issues that may affect full time productivity e.g. offering job sharing or phased retirement options, working from home or more flexible hours and making adjustments to the workplace such as ergonomic furniture or assistive technology.?

Governments need to better support part time and freelance work amongst older workers such that companies may be encouraged to take on more experienced people as and when required on a portfolio basis.

All these policies require a fundamental review of both how we think about retirement as a concept and the current tax arrangements, which are geared to permanent continuous full time employment.??

Final Thoughts

There is no simple solution to the UK productivity problem but Brexit, COVID 19 and the current cost of living crisis are making ageism something that has to be addressed, not only for the current generation of oldies but all those coming up, who will be in less of a position to plan retirement with a degree of certainty, as new technologies disrupt markets at an increasing pace.?

?The fights for gender and minority equalities would suggest that companies are less eager to take genuine action than their PR departments might suggest, even without any specific downsides to consider.?

For governments, this is a ‘wicked’ problem and one that has been parked for many years. However, there are compelling strategic reasons for companies to be bothered.

Finally, if that doesn’t get you motivated, there’s the obvious appeal to self interest. Three quarters of people in Europe live to be 65, and, if you’re reading this article, you’re more than likely to be one of them! The clock’s ticking for all of us.?

Until Next Time

Pete