Growth through an ageing workforce

Extending the working life will benefit individuals, companies and countries

John Greenwood

The abolition of the default retirement age is an important milestone for British industry. Now it is on the statute book it seems inconceivable that people who need to work because, for example, they do not have a decent pension or their children have not left home, should be deprived of their livelihood through age discrimination.

The insurance exemption secured by the efforts of Grid, providers and other group risk professionals is also obviously welcome.

The real concern is economies will face serious imbalances that will threaten stability unless there are more older workers staying in the workforce for longer

The next step, now this cloud of uncertainty has been removed, is for the industry to push out its chest and deliver confident messages of the benefits that protection insurance can bring to the wider economy.

The arguments in favour of products that help extend working lives and improve productivity have never been stronger. The issue of ageing societies and the benefits health and wellbeing programmes can bring to economies even made it onto the agenda at this year’s World Economic Forum in Davos.

The reasons the world’s most influential business leaders are suddenly interested in health and wellbeing and the ability to include more older workers into the workforce are not entirely selfless. The real concern they have is economies will face serious imbalances that will threaten stability unless there are more older workers staying in the workforce for longer.

The European Union is a case in point. It currently has around 25 over 65s for every 100 people of working age. That figure is predicted to more than double by 2060 unless changes are made.

Another facet of the same problem is the effect of a shrinking working population. The EU’s workforce is due to get smaller from next year.

Economists say each percentage point contraction in the workforce equates to a percentage point contraction in GDP. They point to Japan, which has seen its workforce contract since 1990, creating a long-term drag on growth. Productivity gains can only do so much to take up the slack. We may think there are not enough jobs to go around, but at a macro level, the more workers there are, the bigger the economy and the lower the old age dependency ratio.

Extending working lives is imperative to the health of the economy. Longer, fitter working lives also mean lower healthcare costs, both to the state and to companies. We know that, but sometimes it feels that the government, with its layers of taxation on companies that do the right thing, do not.

If the bigwigs in Davos think health and wellbeing is an economic necessity, rather than a nice to have, surely now is the time for our industry to bang the drum for incentives, or at least lower penalties, for those employers that do the right thing.

John Greenwood, Editor