Economic crisis adds pressure to challenges of ageing workforce

The economic crisis is of major concern to Social Security institutions worldwide, and its implications have far reaching effects on all areas of Social Security coverage. The information below is taken from the International Social Security Association (ISSA) website. It is essential to the future sustainability of Social Security that meetings are held to discuss the way forward especially during the current financial crisis impacting our global village.

Keeping growing numbers of older workers in employment for longer, or finding them new jobs after they have been made redundant, are challenging objectives for policy-makers and social security schemes alike, which are made more acute by the current economic crisis.

The impact of long-term demographic changes, combined with the effects of the economic crisis on older workers, and the various policy measures introduced to counter their unemployment, were the focus of a seminar organized by the International Social Security Association (ISSA) on the Retention and reintegration of older workers into employment, hosted by the Department of Social and Family Affairs in Malahide (Dublin), Ireland, from 18 to 19 June 2009.

Bernadette Lacey, Secretary General of the Department of Social and Family Affairs and Vice-Chair of the ISSA Technical Commission on Employment Policies and Unemployment Insurance, welcomed the participants. On behalf of the ISSA, Yannick D’Haene, Director of the Social Security Observatory, underlined the strategic importance for social security of targeted policy approaches to address the demographic ageing of the workforce.

Evidence shared by social security and employment experts at the meeting confirmed that a number of social security institutions, including unemployment protection schemes, have adopted policy measures to address the needs of older workers. Recent statistics presented at the event indicate that older workers are not being disproportionately affected by the crisis, but that this situation might evolve.

Targeted policies to face the demographic challenge
Results of studies by the European Foundation of Working Conditions presented at the seminar confirm that falling birthrates and increased longevity are already impacting the labour market, with major consequences for pension systems. In the European Union alone, older workers aged between 55 and 64 will increase by 24 million between 2005 and 2030.

In discussion, experts identified three areas that require concerted policy actions to tackle the consequences of these demographic trends: Reward work; reduce incentives for earlier retirement; and improve people’s employability.

Many social security schemes have chosen proactive and often innovative approaches to face this challenge, and examples of measures and good practices were given from France, Belgium, Portugal, Netherlands, Canada and Germany.

With a view to changing employers’ perceptions of older workers, the German Federal Pension Insurance carried out a regional pilot project that promotes the development of skilled consultancy services for local firms with a focus on the demographic challenge, and the intensification of regional networking among economic actors dealing with older workers.

In Canada, targeted policy initiatives in favour of older workers have created incentives to stay in work longer, improving flexibility for older workers to combine work and pensions. In response to the current crisis, short-term stimulus plans assist unemployed seniors affected by downsizing or closures through income support and other measures.

In the Netherlands the “first come, last out” policy has been more generally applied over the past years so as to discourage selective dismissal of older workers.

Another example originates from Belgium, where the “active management of restructuring” programme was introduced in 2006, in order to facilitate the redeployment of workers, particularly older workers, who are victims of collective redundancy. One important objective of this measure is to change the attitudes of employers and workers by encouraging re-employment rather than early retirement for older workers.

A comprehensive strategy to invest in employability
Job losses are inevitable as a result of the recession, but the long-term challenge of population ageing requires a comprehensive strategy to invest in the employability of workers of all ages, according to keynote speaker Mark Keese, a Senior Economist at the Organisation for Economic Co-operation and Development (OECD).

The OECD representative emphasized that long-term demographic trends inevitably mean that people will have to work longer. Neither productivity nor migration alone can solve the challenges resulting from the demographic changes, Mr. Keese told participants.

The economic crisis is adding new pressure to the labour market in all countries. Despite the significant rise in unemployment in most industrialized countries over the last year, the OECD estimates that employment losses are likely to be more severe for younger persons. Older workers face a lower risk of job loss than younger workers, but once out of work face much greater difficulties in finding a job, he stated.

Mr. Keese warned against repeating past policy mistakes. “Employers, trade unions and governments should avoid resorting to early retirement schemes, disability benefits or targeting lay-offs solely on the basis of age,” he warned, as this leads to higher social costs and does not necessarily lead to recruitment of younger workers.

Effective policy interventions
The financial crisis makes the underlying challenges of an ageing population more apparent, according to Brendan Whelan, Research Professor at the Economic and Social Research Institute, Ireland. The crisis is likely to lead to a more plentiful supply of younger workers and less incentive to hire older workers, he warned.

But governments and social security schemes could develop effective interventions, for example re-training and incentives to work longer, while avoiding the risks associated with encouraging early retirement experienced during previous recessions, he noted.

“Without policy interventions, demographic changes will lead to reduced economic growth and a rising burden of dependency, and pose serious problems for public finances through pressure for expenditure on pensions, health and social services,” Mr. Whelan concluded.