Madeleine Jephcott, Managing Practice Development Lawyer in Lewis Silkin LLP’s employment team, considers the drivers behind an ageing workforce, current and expected government policy in this area and how employers can take steps now to adapt to this ongoing trend.
INTRODUCTION
Our world is changing continuously and at an unprecedented pace. Advances in technology, evolving social values, migration and globalisation are significantly affecting the future world of work. Alongside such rapid and often uncertain developments, there is the long-term, predictable trend of ageing populations and ageing workforces across the globe. This convergence of increasing longevity with rapid technological innovation has the potential to radically reshape the future of work, bringing complex challenges for government, businesses and individuals alike.
In this article, we consider the drivers behind an ageing workforce, current and expected government policy in this area, and how employers can take steps now to adapt to this ongoing trend.
Drivers of an ageing workforce
Increasing longevity: we are living longer
One of the underlying drivers of an ageing workforce in the UK is that we are all living longer. In 1800, older workers were rare: one-third of British children died before their firth birthday – today the figure is less than 1%. According to the Resolution Foundation’s 2019 report “Ageing, fast and slow”, men born today can expect to live 8.4 years longer, and women 6.1 years longer, than those born in the early 1980s.
If progress at reducing mortality rates continues at the current rates, then many children born since 2000 will live to celebrate their 100th birthday. In fact, the number of centenarians living in the UK has increased dramatically in the past 15 years, forcing the government to hire additional staff for the office that ensures they all get a birthday card from the Queen on their 100th birthday.
It is worth noting, however, that medical breakthroughs can be rapid, with the potential to radically change current projections. In recent years, scientists have been pursuing ways to achieve longer lifespans, with some suggesting the world’s first 200-year-old person has already been born, and others speculating that the first person that will live to 1000 is already alive today.
Baby boomers, Generation Z and the ageing workforce
Cohort size has a significant effect on the age demographics of the workforce and is affected by different birth rates at different times, alongside changes in migration levels. “Baby boomers”, born in the period after World War II (1946-1964), benefitted from the full effects of antibiotics and vaccinations but before the mass introduction of birth control led to declining birth rates.
The entry of baby boomers into the workforce coincided with women entering the workforce in larger numbers and the opening up of other countries to the global economy. This surge in workforce growth is coming to an end, however, in part because many in the baby-boomer generation are deciding to move from work into retirement.
At the same time, the rising cost of homeownership and education over recent years means that the current Generation Z cohort of late teens and early 20s are tending to study longer and enter the workforce later, a trend that is expected to continue for the next two decades. The combined effect of these trends – a large cohort of older workers together with a generally ageing workforce – has considerable implications for employers.
While attitudes and values can vary across cohort groups, there are certain drivers that unite younger and older workers. Research by the Institute for Employment Studies and the Centre for Ageing Better in 2017 showed that older workers (over 50) are in many essential ways just like their younger colleagues, desiring meaningful and intellectually stimulating work, job security and opportunities for learning, mentoring and career progression.
There are, however, certain factors that are even more important - such as flexibility, especially for those older workers who may wish to reduce their working hours to phase their retirement or accommodate heath or caring needs. Older workers are also likely to value being part of an organisation with values they identify with and work that gives them autonomy and an ability to pass on knowledge to others.
Extended working lives
As the population ages, so too does the UK’s workforce. There are now 185% more over-65s in the workforce than there were in 1992, and over the past 20 years, the number of people working past the traditional retirement age has increased substantially. This change was driven in part by the abolition of the default retirement age in the UK in 2011, which had allowed employers to force staff to retire on reaching 65 years of age. Its removal has meant that reaching a particular age no longer signals a sign for older workers to stop.
Furthermore, as the health of the population has continued to improve over the last century, ill-health is a smaller factor in restricting older workers’ ability to work, particularly in light of the shift from physical to higher-skilled work. There is also an increasing appreciation of the cognitive and social benefits of staying in work and, while retiring later is a financial necessity for some older workers, others are taking advantage of greater opportunities to agree flexible working arrangements.
What is government policy on an ageing workforce?
The importance of older workers for the health of the economy is apparent in the shift of government focus in recent years away from policies promoting early retirement, towards an emphasis on extended working lives.
Industrial strategy for an ageing workforce
In 2014, the government published a report on Fuller Working Lives, setting out its strategy to reduce the number of older workers leaving the labour market early. This was followed in September 2019 with the publication of the government’s Industrial Strategy, which recognised the increasing reliance of the UK economy on older workers. The strategy identifies meeting the needs of an ageing society as one of the four ”Grand Challenges” , and commits the government to supporting industry to adapt to an ageing workforce.
Reskilling of older workers
Many employers currently reporting difficulties in replacing lost skills will find that the “skills gap” will become even more challenging. By 2027 there will be an estimated 13.5 million jobs and only seven million younger workers to fill them. According to the 2018 report by the Centre for Ageing Better, “Becoming an age-friendly employer”, by 2025 there will be 300,000 fewer UK-born under-30s, with the number of over-50s either working or available to work growing by around one million in the same timeframe. Employers who recruit from this increasing pool of older workers as part of their workforce planning are likely to be better able to manage the skills gap.
As working lives get longer, individuals will have to adapt to the increasing pace of change. For example, 50-year careers will become the norm rather than the exception, and employees may choose to make radical career choices or change direction and seek fresh challenges in their later lives. Automation and AI will have a growing impact on jobs and job roles - while some jobs may be displaced, new jobs and skills will also emerge for which people need to be reskilled and retrained.
All the UK’s main political parties recognise the challenge of ensuring individuals obtain the skills they need to progress in work, redirect their careers and secure the jobs of the future, and the current government has already set in motion a national retraining scheme.
Transparency and enforcement: publication of ageing workforce data
A 2018 Women and Equality Commission report, “Older people and employment”, recommended the introduction of mandatory obligations requiring all public-sector employers, and private and voluntary sector employers with 250 staff, to publish the age profile of workforces. This resulted from frustration with the limited voluntary take-up from employers in response to a call for action by Business in the Community to commit to meeting a target of 1 million more people aged 50-69 in work by 2022.
Transparency has been used with some success to challenge discrimination and inequality in other areas to achieve cultural change. The gender pay gap reporting obligations are a good example, and we may see this approach being applied to age in the future.
Management of an ageing workforce
Despite the existence of legislation prohibiting discrimination on grounds of age since 2006, ageism remains a significant problem in the workforce. Different generations have grown up with different influences in their lives, and a combination of up to five generations working together can generate the potential for conflict in the workplace.
Common stereotypes of older workers may create employee relations issues, leading to discriminatory decisions. Making generalised, age-related assumptions needs to be addressed during the whole of the employment life-cycle, not just at the point of recruitment when age bias can be most apparent for older workers.
An unintended consequence of age discrimination laws and the removal of the default retirement age is that some employers are reluctant to hold conversations with older workers about retirement planning and flexible working. Employers should be readier to tackle difficult conversations about an older worker’s future plans, and it is crucial to make this a regular feature of line-management discussions with all employees.
Performance generally deteriorates at some point, and it is no longer possible for employers to rely on compulsory retirement as a more “dignified” exit from the workplace in these situations. With the removal of the default retirement age, the underperformance of older workers must be dealt with in the same way as anyone else.
With Acas reporting that only 2% of its workload had an element of age discrimination and only 4.3% of those progressed to an Employment Tribunal, there are mounting calls for better investigation, intervention and enforcement by the Equalities and Human Rights Commission, with a particular focus on recruitment.
Tackling the health challenges of an ageing workforce
While longer life expectancy has enabled many older workers to extend their working lives, healthy life expectancy is not rising at the same rate. Physical health declines with age - around 25% of 25-29 year-olds have a long-term health condition, compared with 44% of those aged 50-64. The government is actively taking steps to optimise the economy for working longer, enable people to manage work and caring responsibilities, and keep people with disabilities in work.
In summer 2019, the government launched a new consultation, “Health is everyone’s business”, setting out proposals to reduce ill health-related job loss against the background of an ageing population. The consultation asks whether employers should have a role to support employees with health conditions not covered by disability legislation. It seeks views on a proposal to introduce a new right to request work modifications on health grounds, which would apply to employees not meeting the legal definition of disability.
An ageing population means caring rights are needed
An ageing population means that a greater proportion of the working population is likely to be providing informal care in future years. In 2011, one in nine employees were carers. Carers UK estimates that there will be a 40% increase in the number of carers needed by 2037, to a total of nine million. In recognition of this, the Women and Equalities Committee has urged the government to take steps to better support those with caring responsibilities by introducing a statutory right to four weeks’ unpaid carer’s leave per year and an additional five days’ paid carer’s leave, available to all working carers regardless of employment type.
Flexibility for older workers
Since 2014, all employees who have worked for the same employer for at least 26 weeks have had the legal right to request flexible working. With increasing lifespans and rising numbers of older workers, more employees will have caring needs to fit in around their working commitments. To meet this growing need, the Women and Equalities Committee has recommended legislation to ensure that all new jobs are advertised as flexible from day one unless the employer can demonstrate an immediate and continuing business case against doing so. The government has indicated it will consult on “making flexible working the default”, but no further details have been published so far.
Reintroducing retirement ages for an ageing workforce
When the default retirement age was abolished, many employers chose to have no retirement age at all. An Acas report on Managing Older Workers noted how employers’ responses had tended to be reactive and piecemeal rather than embedded into strategic goals.
If employers decide they need additional tools to manage their ageing workforces in the future, we may see a shift in approach and potentially the return of retirement ages. These are likely to be objectively justified ages within particular workplaces rather than the reintroduction of a default retirement age - given such a policy would potentially be politically damaging in light of the negative impact on older workers, who tend to be the most enfranchised.
How employers can respond to the ageing workforce
Despite a significant increase in the number of older workers in recent decades, many employers admit they are unprepared to meet the challenges and harness the opportunities of this demographic shift. According to the Centre for Ageing Better, only one in five employers are discussing ageing workforce strategically and nearly a quarter admit they are unprepared for the growing number of older workers.
Yet older workforces are already a reality - almost one in three workers are over 50 and the average employee in the UK is in their 40s. Organisations need to act to adjust to this demographic transition in order to improve the way they recruit, support and retain older workers. How employers can best approach this was the focus of our recent event on Changing demographics and an ageing workforce, in collaboration with Renegade Generation, who specialise in providing ageing workforce solutions to businesses.
Understanding organisational data
Conducting an age assessment audit can help organisations understand the age demographics of their workforce, assess any age bias or barriers affecting older workers, and then take steps to prepare their workplace and people for the future world of work. Data can be reviewed alongside existing policies, initiatives and benefits to identify particular ageing workforce challenges and develop specific plans to address them.
Good practice age management
Good practice age management entails adopting a collection of practices and procedures that combat age barriers and promote age diversity. A mixed-age workforce can enable employers to build organisational resilience by harnessing the full range of available skills. Sharing the knowledge, perspectives and experience of older workers are all additional benefits identified in the CIPD’s report on Managing an age-diverse workforce.
Managing Older Workers, a report produced for Acas in 2016 by the University of Leicester, looked at how employers can design measures to meet the needs of older workers while also supporting organisational effectiveness and profitability. The seven suggested “levers of productivity” are:
Well-designed work, to increase efficiency and make the most of people’s skills. Evidence indicates that designing jobs to meet the capabilities and aspirations of older workers tends to decrease turnover and sickness absence while increasing commitment and productivity.
Skilled managers, who have the confidence and training to manage and lead older workers effectively.
Managing conflict effectively, with systems to reduce the likelihood of problems when generations conflict and tackle problems when they do.
Clarity about rights and responsibilities, so everyone understands their rights.
Fairness, so younger and older workers feel valued and treated fairly
Strong employee voice, so employees can contribute and are listened to.
High trust, with relationships built on trust and information being shared at the earliest opportunity.
Creation of an age-positive culture, developing language that promotes a pro-age attitude and adopting inclusive policies and practices - for example, age-neutral application processes, flexible working, career-progression/mid-life MOTs, and intergenerational mentoring.
CONCLUSION
Despite the predictable nature of age demographic shifts, they have the potential to radically disrupt the future of work. Being able to adapt to an increasingly ageing workforce will not only bring opportunities for the workforce but also enable employers to flourish in an increasingly competitive and global market. But while the business case for an age-diverse workforce is mounting, employers need to navigate a host of new and increasingly complex challenges in planning how to manage and support older workers successfully.
We will be considering challenges for employers across the globe in attracting and retaining the “baby-boomer” generation at our market-leading conference Managing an International Workforce: 2020 and beyond in London on 7 February 2020.
In light of society’s and employees’ changing expectations of work, organisations are being held accountable in new ways to their employees, their wider communities and external stakeholders. Organisations need to work even harder to meet the increasing focus on trustworthiness, people’s individual needs and “good work”. We will be considering these developing attitudes, the evolving employer relationship and what organisational capabilities will be required to meet these challenges at our next Future of Work Hub event on 18 March 2020, Technology, trust and the evolving employment “deal”.
If you would like to find out more about the impact of megatrends such as globalisation, technology and changing demographics on the world of work and key implications for business, you can read our report written for the Future of Work Hub: The changing world of work: future-proofing businesses.
Madeleine Jephcott is a Managing Professional Development Lawyer in the employment team at Lewis Silkin LLP, as well as spearheading our Future of Work Hub initiative.