CIPD Voice: Issue 19
Good problems to have
There are good problems to have and an ageing population is arguably one of them. Throughout the 20th century, life expectancy – a key, if not the key metric of human progress - increased at a steady pace. The causes are various; in the early years of the 20th century infant mortality was reduced, and infectious diseases tamed, whilst the latter half the 20th century saw increases at older ages. Deindustrialisation and a move away from dangerous industries as well as lower rates of smoking has made large contributions. Every decade since 1950 saw life expectancy increase by two years. We now have an extra 13 years to spend but how should we spend it?
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!
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.
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.
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.
In other industries the age profile is more problematic. Overhangs appear in health and social work as well as education which suggests that industries already experiencing skills shortages will have to make up further as the baby boomer generation eases into retirement. In June the NHS looked towards Mumsnet to entice back nurses who had left the profession.
Figure 3: Age profile of UK industries
Source: CIPD analysis of Annual Population Survey - July 2017 - June 2018 – q) In which industry is your main job?
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.
Jon Boys, Labour Market Economist
Jon joined the CIPD in January 2019 as an Economist. He is an experienced labour market analyst with expertise in pay and conditions, education and skills, and productivity.
Jon primarily uses quantitative techniques to uncover insights in labour market data, both publicly available and generated through in house surveying. Jon regularly contributes commentary and analysis of economic issues on the world of work to online, print and TV media. Recent work includes the creation of an international ranking of work quality, analysis of firm level gender pay gap reporting data, and an ongoing programme of work looking at the changing age profile of the UK workforce.
Prior to this he worked for Be the Business – a government backed start up aimed at increasing firm level productivity in the UK, the Careers & Enterprise Company – another government backed start up aimed at transforming careers provision in school. He has also held prominent research roles at an Employers Association and Trade Union researching pay, conditions, and workforce composition.