Predicting increases in life expectancy is difficult but very important. Even today the demographers at the Office for National Statistics are at pains to point out just how much uncertainty there is forecasting life expectancy - “We don’t know what life expectancy will look like in the future.” The problem is that the projections are used by actuaries to calculate pension liabilities, and the government to plan for the provision of social welfare. The welcome gains caught us off guard and swelling pension deficits and questions around how to fund pensions and social care keep actuaries and policy-makers awake at night.

Extraordinarily, the age of exit from the labour market is lower today than it was in 1950. The extra 13 years that the average person has to play with is certainly not spent at work. The irony of the ageing workforce, therefore, is that it is not old enough!

Figure 1: Not old enough - Average age of exit from the labour market 1950 to 2018 by gender

^{Source: DWP – Employment statistics for workers over 50 since 1984}

Talking ‘bout my generation

The idea of an approaching cliff edge as a glut of baby boomers ease into retirement is simplistic. The baby boomers left an echo when they themselves had children. Peaks and troughs in the birth rate as well as the net effect of migration mean that the population age profile of the UK undulates. All this has consequences for the public policy and the labour market.

Industry breakdown

When we look at the age profile of each industry it is clear that an ageing population will affect some industries more than others. 

Hospitality stands out as an employer of young workers. This industry reports some of the highest skills shortages according to the latest Employer Skills Survey. This has been attributed to a dip in the birth rate around the turn of the century meaning there are fewer young people to fill vacancies.

Figure 2: Peaks and troughs - 2019 Population of UK by gender and 5-year age bands

^{Source: ONS 2016 population projections}

Primary industries have a large proportion of men working past the default retirement age and many of these work in agriculture. Although already in decline, when these men entered the labour market in the 1970s the industry accounted for a larger proportion of the economy and employment, so it is unsurprising that they are not being followed by a large younger cohort. From an economic perspective this is an expected and manageable decline.

^{Source: CIPD analysis of Annual Population Survey - July 2017 - June 2018 – q) In which industry is your main job?}

What next?

It is clear from Figure 1 that the age of exit from the labour market is creeping back up. Economic necessity will help. Default retirement ages are rising, and generous defined benefit pensions are closing to new members. The Government’s Fuller Working Lives report made the case that there a million older people who would like to be in work but are not. Policies to support older workers and stem the early exit, such as flexible working, will be increasingly important.

In an upcoming megatrends report the CIPD will look closer at the ageing workforce. We will look at how the labour market has changed and what are the reasons for early exit and how this might be reduced.