Opinion of the Economic and Social Committee on "Older workers"

(2001/C 14/12)

On 2 March 2000 the Economic and Social Committee decided, under Rule 23(3) of its Rules of Procedure, to draw up an opinion on "Older workers".

The Section for Employment, Social Affairs and Citizenship, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 3 October 2000. The rapporteur was Mr Dantin.

At its 376th plenary session of 19 October 2000 the Economic and Social Committee adopted the following opinion by 97 votes in favour, one against and two abstentions.

1. Introduction

1.1. The Lisbon European Council set the EU an ambitious objective with regard to the employment rate, which was to be raised "as close as possible to 70 % by 2010" and 60 % for women. This objective is justified for both social and economic reasons. Indeed, employment provides the best protection against social exclusion. It is also fundamental for financing social protection. Failure to respond to this objective would put a brake on economic growth.

1.2. The gradual achievement of this objective will inevitably present the majority of countries with the particular challenge of raising the employment rate among older workers, which is falling in all the Member States among the 50-64 age group. Reversing this trend will require Member States to adapt their current policies, and in particular to introduce structural reforms.

1.3. In this connection, point 4 of the Annex of the Guidelines for Member States' Employment Policies 2000 confirms the need to introduce a policy aimed at extending active working life through appropriate measures "so that older workers are also able to remain and participate actively in working life".

1.4. This document will also examine the issue of early retirement schemes and other arrangements for early departure from the labour market, which the Committee has already touched upon in some of its previous opinions. Indeed this phenomenon has a critical influence on the employment rate of this age group.

1.5. The Committee feels that the issue of older workers is of such importance that it warrants an own-initiative opinion addressing the different aspects of the problem. With this opinion the Committee has also sought to stress the need for a positive approach to older workers, insofar as the way they are currently treated not only reflects a discriminatory conception of society lacking in solidarity, but in many cases results in the loss of highly qualified staff and a consequent fall in the overall level of competitiveness. Furthermore, the Committee is of the view that if scientific progress now allows more time to enjoy life, by the same token, our society should seek to organise itself so that we get more out of life for longer.

The opinion begins by mentioning a series of key facts and figures, it then examines the reasons for the fall in the employment rate among older workers, and concludes with a discussion of possible solutions with a view to proposing a Community approach drawing on the practices and experience of various EU countries.

2. The facts

2.1. Over the last twenty years the distribution of work over the course of a lifetime has undergone major upheavals.

2.1.1. Young people enter the labour market later because of longer periods spent in full-time education, training and difficulties in finding suitable work(1).

2.1.2. The employment rate among the total over 55 age group has fallen considerably in Europe and to a lesser extent across the Atlantic: in 1999 it was 37 % among the 55-64 age group in the European Union and 55 % in the USA(2).

Since the 1970s the employment rate has fallen continuously(3) and on a large scale, particularly between 1980 and 1985(4). Indeed, between 1971 and 1999 the figure for the male population fell by 47,4 % in France, 45,8 % in the Netherlands, 39 % in Spain, 38,7 % in Germany, 30 % in Ireland and more than 29 % in Portugal and the United Kingdom. It would probably be fair to speak of an individualisation of career paths. This does not however reflect greater choice for the individual as early departure from the labour market is in general more often imposed rather than chosen. The new flexibility at the end of a career is instead a reflection of labour market pressures and the human resource strategies of companies and public authorities in response to them(5).

2.2. The trend is therefore for working life to become shorter at both ends of the age spectrum and will henceforth be dominated by age groups situated at the middle of this spectrum.

2.3. The 50-64 age group is of particular importance for employment policy. According to Eurostat forecasts, at EU level it will increase as a proportion of the total population from 25 % in 1995 to 34,4 % in 2025. This increase will occur much more quickly in the Scandinavian countries over the next decade(6). It should be pointed out that this figure is only an average and that more extreme situations may also exist at the regional level or in certain employment areas.

2.4. This development is particularly worrying in the context of the acute demographic ageing which Member States will experience from the beginning of the third millennium onwards(7).

2.5. In addition to the financial implications which this has for pension schemes, it raises the question of whether the workforce will be sufficient to ensure countries' productive output. Demographic ageing can be expected to result in a relentless ageing of the workforce at the same time as labour becomes a scarce resource, without taking into account potential immigration. From a macro-economic perspective, this situation will lead to pressure on wages, which is inflationary.

2.5.1. In some Member States the average age of the active population is 40 and sometimes slightly higher because of the fall in the number of young people entering the labour market(8).

2.6. The question for the future is whether the European Union, Member States and the social partners will be able to cope with such a reduced labour force or whether companies will have to either adapt the way they produce goods and provide services to an older workforce which will have undergone continuous training and be in need of motivation, or rely on immigrant labour, or relocate certain operations to third countries. In any case, immigration and relocations would only partially resolve the problem - but not the root cause - of the lack of highly qualified labour. However this discussion should include the need to improve the ability of society to integrate an increasing number of young people, women and the unemployed (particularly the long-term unemployed) into working life. A genuine social dialogue should take place on these different strategies.

3. Causes

3.1. The early departure of older workers from the labour market is largely the result of a combination of three essential factors: companies, employees and legal and agreement-based provisions.

3.2. Companies

3.2.1. In the context of continual and rapid changes to the production system and manufacturing processes, and in a continually evolving economy and market, companies must adapt, evolve and restructure if they are to succeed in a global environment at the same time as striking a balance between social and economic concerns, as this is the only way of ensuring company dynamism and growth. It follows that companies need room for manoeuvre and breathing space.

3.2.2. This room for manoeuvre resides in the quantity and quality of jobs, in particular those of older workers. This is particularly the case with regard to the "social plans" introduced after restructuring operations.

3.2.3. Irrespective of these "social plans", the introduction of early retirement enables companies to replace older workers, who they view as relatively unproductive and as having obsolete skills, with younger and fewer workers. They view this as helping to improve their competitiveness as well as lightening their pay roll and rebalancing their age structure. However, this situation reflects shortcomings in human resource management and above all an absence of forward-looking management of employment and qualifications. One consequence is that companies sometimes deprive themselves of know-how, making it more difficult to integrate young people as a result of a reduced capacity to impart knowledge and provide tutoring.

However the following aspects cannot be ignored:

- the difficulties experienced by certain employees in adapting to, and training for new technologically advanced work processes. Special attention must be paid to this problem as it can ultimately result in exclusion;

- the lack of enthusiasm in some quarters, often among employees with very few or no skills, either because they do not feel qualified on account of their lack of educational achievement, or because they do not feel any need as retirement is imminent.

3.2.4. There is already a category of middle-aged employees in companies who are considered to have no future and who employers are hesitant to promote or train. It is paradoxical that the 40-60 age group, which makes up the baby-boomer generation, will account for the majority of the active population from 2001 onwards.

3.2.5. At the same time, the large increase in people leaving the labour market early has contributed to the devaluing of ageing workers on the labour market. The lowering of age thresholds with a view to facilitating early departure from the labour market has had a major impact on these workers as it has changed, in the mind of employers, the age at which workers may be considered to be "too old". Indeed, there is increasing evidence of discrimination against older workers at the recruitment stage in all European countries. The most general indication at European Union level has been provided by Eurobarometer studies carried out during the European Year of the Elderly and of Solidarity between Generations: a survey of the general public which asked whether ageing workers were discriminated against in recruitment procedures revealed that four out of five people claimed that discrimination did actually take place(9).

3.3. Employees

3.3.1. Much has been made of the pressure placed on employees to leave their jobs before the legal retirement age, even though they would have liked to continue working. This type of case exists but it would not be accurate to depict it as either the only type, or even the most common.

3.3.2. Only four out of ten employees would like to have continued working(10). Indeed, the widespread desire to share in a new and attractive distribution of the benefits of growth must not be underestimated, as well as the weariness that comes from doing an unrewarding, often repetitive and extremely demanding job, sometimes for more than forty years, causing people to aspire to a different lifestyle. It is often with the feeling of having already "contributed a lot" that voluntary retirement is taken up. From this perspective it would be useful to know what new conditions would be needed to reverse this way of thinking. The Commission could carry out a study on this.

Under the present conditions it can be said that a convergence of interests often exists between the employee and his company, in other words an objective alliance which is generally carried over into the collective agreements reached by the social partners at different negotiating levels, including that of companies and public institutions.

3.3.3. Furthermore, from a psychological perspective, steeped in corporate behaviour, the older or ageing worker implicitly feels that he is no longer viewed in a privileged way as someone approaching the age at which you have the legitimate right to retire and relax. Instead he has become someone defined as "incapable" of working or as "unemployable". When nearly half of those drawing their pension have left work before retirement age on the grounds of "invalidity", as in certain European Union countries, the subsequent time spent in inactivity tends to be viewed not as time during which you are entitled to take things easy, but as the inability to work. This perception of age and its labelling effects cannot help but have an behavioural impact in that it promotes the development - in the mind of the employee and in practice - of a feeling of marginalisation within the company, the labour market and society itself.

3.3.4. To this should be added the so-called generational "shock" or "clash" of cultures, distanced by time and age.

As a result of the economic crisis of the 1980s and 1990s many companies and public services introduced a partial or often total freeze on recruitment and staff turnover, leading to a shift in the middle section of their age pyramid.

When, as a result of economic recovery, recruitment has taken off again, it tends to be targeted primarily at younger people who represent the future in the eyes of the company. This leads to older workers feeling devalued and under-appreciated within the company. In addition, they may come into conflict with younger generations over their relationship to work, their working methods, and their view of work organisation, as they feel these different attitudes call into question the way they have worked for decades. This can only fuel and increase their desire to leave the labour market early.

3.3.5 On the other hand, four out of ten employees would have liked to continue working. In most cases, but not all, their profile reflects one or several of the following characteristics:

- they have a high-level skill which makes their work interesting, if not fascinating and rewarding, sometimes making it into more of a hobby. Their job is their pastime as well as their bread and butter (researchers, engineers, other highly qualified staff, etc.). For them stopping work comes as an unwelcome blow;

- they hold a senior position within the company to which they feel their social status is linked, and which is something they wish to hold on to;

- they have not prepared themselves for "inactivity" and the termination of their working life makes them feel worthless and confronts them with a seemingly unfillable void of inactivity;

- they still have family dependants (children or older people in their care, unpaid loans, divorce-related costs, etc.) and cannot afford even a minimal fall in their income;

- they are not yet entitled to draw a full pension.

- ...

3.4. Legal and agreement-based provisions

3.4.1. Most research on reducing working life has generally prioritised two factors.

3.4.1.1. Some have insisted on the role of social protection and in particular public and private pension schemes, as well as mechanisms guaranteeing replacement income in the event of unemployment or an early end to working life. They have demonstrated that these schemes contained incentives or disincentives to working beyond a certain age and that individual cases of early retirement needed to be understood against this background(11).

3.4.1.2. Other work has focused on the decisive role of the labour market and of corporate behaviour to interpret the trend towards early departure from the labour market(12).

3.4.2. If these two approaches are important to the analysis it is not appropriate to set them in diametrical opposition to each other or to say that one precludes the other. On the contrary they are intimately linked.

Social protection or its alternatives, whether legally prescribed or agreement based in nature, are only means at the disposal of the labour market for alleviating the social costs in terms of long-term unemployment and exclusion. In other words, early retirement has been used as an instrument of "employment policy" or more precisely as an instrument to fight unemployment. In many Member States it is clear that these instruments have often become, and are considered by companies, as a human resource management tool and by employees as a social benefit and entitlement.

4. Possible solutions

4.1. Part of the solution to readjusting the balance between active and inactive workers and maintaining an optimally sized workforce with regard to the demographic forecasts for the European Union consists in raising the number of employees over the age of 55 in work. Of course this must strike a desirable balance between work and retirement, and leisure time and work, as valued under the European social model.

4.2. Such a step must be planned on a medium-term basis by introducing a policy of maintaining life-long employability and retraining employees - women as well as men - over the age of 40. Indeed, it is difficult to imagine a spontaneously harmonious scenario, in which the reversal of labour market trends would be sufficient to convince companies to retain their older workers and to decide to "teach an old dog new tricks".

4.2.1. In addition to the practical measures which need to be taken, it is essential for perceptions to change and for everything possible to be done to bring about a change in attitudes and to raise awareness among both companies and employees. Working beyond the age of 55 must be viewed as rewarding by employees, while companies and public services must be aware of the benefits which older workers can bring (experience, know-how, knowledge, etc.).

4.2.2. The Committee therefore urges the Commission to promote, in cooperation with the Member States, an extensive information and enlightenment campaign to help generate a positive attitude to the role played by older workers in companies and the public services.

An examination of their participation in voluntary work, NGOs and local life after they have taken up early retirement, provides a direct demonstration of their dynamism, initiative and effectiveness.

4.3. It is particularly instructive and useful to be able to draw lessons from the practices and experience of the Member States. Thus, raising the employment rate among older workers has been the aim of a series of initiatives by governments and/or the social partners, in particular in Austria, Belgium, Finland, the Netherlands, Sweden and Ireland.

Furthermore, a study by the European Foundation for the Improvement of Living and Working Conditions has identified a whole range of interesting examples among German, Belgian, British, French, Greek, Italian and Dutch companies(13).

The Committee has drawn the following lessons from these different analyses:

4.3.1. A change in thinking and attitudes is necessary. It is not enough to prohibit age limits in job adverts if recruitment policies do not follow suit. If this change in attitudes is to extend to society as a whole, it must not occur just among a single group, but among all public authorities, employers and employees.

4.3.2. The adoption of a policy for age-groups over 45-50 does not go far enough. As stated by the Belgian "Conseil supérieur de l'emploi" (higher employment council), a policy which seeks to address the problem of older workers comes too late if it is only applied to this category of workers. Instead what is needed is a human resource policy which takes age into account as soon as employees enter the labour market. Rigorous forward-looking management of jobs and qualifications and, more generally, effective human resource management are therefore essential.

4.3.3. As demonstrated by the Dublin-based Foundation's study, a policy for age-groups must take the five following factors into account:

- recruitment and retirement;

- vocational training, further training and promotion;

- the flexible organisation of work;

- ergonomics and the definition of tasks;

- a change of attitudes within companies.

4.3.4. The following initiatives made the greatest impression on the Committee:

- the Belgian cross-sectoral agreement which encourages additional vocational training by targeting groups with poor employment prospects;

- public authority encouragement of training measures aimed at certain target groups through the provision of additional fiscal incentives, such as the tax reductions for training measures in the Netherlands and those proposed by the social partners in Austria;

- giving older workers responsibility for training their younger colleagues and/or apprentices;

- part-time work opportunities, more flexible career breaks or gradual early retirement (Germany, Finland, Belgium, France);

- trade-offs between working time reductions and pay increases (as in some Swedish sectoral agreements);

- a reduction in employer contributions for older workers or for the recruitment of older job applicants;

- the possibility for employees to open a "skills account" which qualifies for a tax reduction relative to the amount deposited. These savings, to which the employer contributes an equal amount, allow the employee to take a long period of study leave in order to undergo additional training without loss of income (Sweden).

4.3.5. The Committee examined whether salary levels and profiles, which are often predetermined, made the jobs of older workers more precarious (see 3.2.3). A recurring feature is that an older worker is paid more than a younger counterpart with the same qualifications (seniority bonuses, age-related promotion, etc.). In many Member States this factor appears to affect both their chances of being recruited and of keeping their jobs. Without being certain of anything, or having any definitive positions or guidelines on this issue and without having thought further ahead, the Committee nevertheless feels that this issue must not be ignored or avoided, no matter how difficult and sensitive it may be to address. On the basis of its investigations, it recommends drawing up a list of the advantages and disadvantages of ultimately reversing pay scales, so that salaries would increase at a faster rate at the beginning of a career, with more gradual increases later on. Of course, even though this list is mainly geared towards the case of older workers, it would not be possible to accept the negative consequences that might ensue with regard to all or some of the components of an equitable wage policy and career progression.

4.3.6. With particular regard to women, it is worth stressing that a shortage of support services - particularly care services for family members and child care for young children - leads many between the ages of 50 and 60 to give up work.

4.4. In the majority of countries the question of how early retirement schemes will evolve is proving to be a particularly difficult issue.

However numerous studies emphasise the need to raise the age of early retirement. It is evident that a debate on this subject is becoming inevitable. As soon as it can no longer be put off, the Committee feels that the issue must be situated within a broader context. As stressed by the Committee in its opinion on A Concerted Strategy for Modernising Social Protection, "for both social and economic reasons, flexible pension policies should be developed as an alternative to early retirement and lifelong learning programmes should be established in order to encourage workers to retrain in good time and find new areas of employment(14)".

The Committee is of the view that two sets of examples of early retirement are, however, worth consideration, and merit attention and caution:

- early retirement in cases of large restructuring operations, since it is true that a "young" pensioner is preferable to a long-term unemployed person with no prospect of finding a job again;

- total or partial early retirement offset by the recruitment of a corresponding number of job-seekers, since it is also true that it is better to have one person retired than to keep another unemployed with no prospects of integration into working life.

Indeed, if action must be taken to address the problem of demographic change and the predicted reduction in the size of the workforce, it must be ensured that the chosen remedy does not actually make matters worse, increasing exclusion and thereby reducing social cohesion.

4.5. Finally, with a view to obtaining results over the medium-term, the instrument which would help to ensure effective policy in this area needs to be identified.

4.5.1. As the circumstances of companies in all Member States are highly diverse, it is clear that any effective solution needs to be built on an in-depth knowledge of the real situation as well as implementation as close as possible to the grass-roots level.

4.5.1.1. From this perspective, and irrespective of the approach or instrument chosen by the EU, it is essential to consult the social partners and to take their views into account. This is the only way of ensuring that the choices made are implemented effectively.

4.5.2. The Committee feels that there are four different types of instrument - with varying degrees of effectiveness - which can help to get the ball rolling at the EU level:

- the dialogue between the European social partners;

- a targeted and thought-provoking "employment guideline" specifically for this problem;

- a voluntary code of conduct;

- a directive.

4.5.2.1. The European social partners could themselves, or at the request of the Commission, initiate a social dialogue on this subject leading to an exchange of views, an opinion, recommendations or any other form of conclusions which they might consider to be useful. The results of this dialogue could, for example, be fleshed out if necessary and used to produce a "voluntary code of good practice". Above all they could contribute to the drawing up of precise and thought-provoking employment guidelines, which the Committee feels are the most appropriate instrument for tackling this problem. The advantage of this approach is that it would result in guidelines and measures which would be the synthesis or consensus of the positions of the main actors responsible for implementation on the ground at company level. Furthermore, these players are in the best position to assess the feasibility of the approaches taken.

4.5.2.2. A targeted and thought-provoking employment guideline could have the advantage of allowing more diverse forms of implementation, giving operational responsibility to the Member States, but within a commonly defined framework. However, in order to be effective, such an approach should give a large share of the initiative to the social partners. In any case, and on a more general level, they should be involved in drawing up and implementing the national action plans on employment and older workers.

4.5.2.3. A voluntary code of conduct based on good practice and adopted by the European Union would enable companies to adopt a flexible approach suited to their circumstances.

4.5.2.4. The Committee does not feel that priority should be given to a directive initiated by and under the sole responsibility of the Commission. Indeed this could be perceived as being an over-generalized response to a diverse situation, even if it only defined a framework; above all it could be perceived as being too far-removed from the operators responsible for its implementation.

4.6. Whichever instrument is chosen, the Committee would like the Commission to examine to what extent the ESF could contribute financially to the measures which will have to be taken(15).

5. Conclusions

5.1. The Committee approves the decision by the Lisbon European Council to raise employment "as close as possible to 70 % by 2010".

5.2. Having regard to the:

- demographic problems with which the European Union will eventually be faced;

- the current employment rate among the 55-64 age group, which is in continual decline everywhere;

- the constant growth of this age group, both in terms of total numbers and in relation to other age groups;

- current company and employee practice, as well as Member States' legal and agreement-based provisions,

the Committee considers that the Council's objective can only be reached if measures are taken by the European Union, the Member States and the social partners with a view to raising the employment rate among older workers.

Failure to do so would be a source of concern, as the workforce will diminish, putting a brake on growth, with implications for employment, and the purchasing power of both current and future pensioners.

5.3. The first step must be to bring about a change in attitudes and to raise awareness among companies and employees. Working beyond the age of 55 must be viewed as rewarding for the employee and valuable for companies. Without such a collective awareness, any practical measures which are adopted will not have an optimal impact.

The Committee therefore urges the Commission to promote, in cooperation with the Member States, an awareness-raising, information and enlightenment campaign targeted at the main stakeholders as well as society in general, in order to help bring about a positive perception of the role which older workers can play in companies and the public services.

5.4. In point 4 of this opinion the Committee makes a series of practical suggestions based either on Member States' best practice, either legislative or agreement-based in nature, or on its own reflections and investigations, and also refers to the Dublin Foundation's proposals which it feels are the most important.

The aim of these suggestions is to make a positive contribution to the debate and to play a role in the directions and decisions which the social partners, the Council and Member States will have to take.

5.5. With regard to the appropriate instrument at the European Union level, the Committee does not feel that a directive would be the most suitable choice.

It recommends that the social partners - either at their own-initiative or at the request of the Commission - initiate a social dialogue on this subject leading to an exchange of views, an opinion, recommendations or any other form of conclusions which they might consider to be useful. The results of this dialogue could be fleshed out if necessary and used to draw up a "voluntary code of good practice". Above all they could contribute to the drawing up of precise and thought-provoking employment guidelines, which the Committee feels are the most appropriate instrument for tackling this issue.

Brussels, 19 October 2000.

The President

of the Economic and Social Committee

Göke Frerichs

(1) Opinion of the Economic and Social Committee on "Youth unemployment", OJ C 18, 22.1.1996.

(2) Contribution by the European Commission to the Lisbon Social Affairs Council. Source Eurostat.

(3) See tables 1 and 2, 2a and 2b.

(4) See table 3.

(5) Guillemard 1986; Casey et Laczko 1989.

(6) See table 4.

(7) "The demographic situation in the EU and future prospects".

(8) Anne-Marie Guillemard, "Salariés vieillissants et marché du travail", in rapport de l'Observatoire européen des politiques de vieillesse et de retraite, DG V, Bruxelles, January 1993; by the same author, "vers un nouveau contrat entre générations pour les retraites". Anne-Marie Guillemard is a sociologist and lecturer at the university of Paris V - Sorbonne - and is a member of the French university institute.

(9) European Foundation for the Improvement of Living and Working Conditions (1997), "Combating age barriers in employment", p. 23.

(10) "Age and Attitudes - Main Results from a Eurobarometer Survey", Commission of the EC, 1993.

(11) Quinn et al. 1990; Quinn et Burkhauser 1990.

(12) Standing, 1986; Sorensen, 1989.

(13) European Foundation for the Improvement of Living and Working Conditions (1997), "Combating age barriers in employment".

(14) OJ C 177, 26.4.2000.

(15) European Foundation for the Improvement of Living and Working Conditions (1997), "Combating age barriers in employment".

APPENDIX

to the Opinion of the Economic and Social Committee

Table 1 - Employment rates among the male population (55-64 age group) in 1986(1) and 1997

>PIC FILE= "C_2001014EN.005702.EPS">

Table 2 - Employment activity rates for men 55-64 years old (a) in 12 countries: 1971-1997

>TABLE>

Notes:

a) Cross-sectional data are hard to interpret for women. They generally suggest stable or slightly rising rates throughout the period. But this global result covers two contradictory trends that have affected women: the trend of women massively entering the labour market, which started at different dates depending on the country; and the early exit trend. When cohort analyses could be made, they were able to disentangle these trends. They proved that women, like men, have had to retire early even though this trend has been hidden by their massive entry in the labour market

b) Reunified Germany as of 1991.

Source:

OECD data plus our own calculations.

Table 2a - Employment rates by age group among men over 55 in 12 Member States of the EU

>TABLE>

Source:

Guillemard 1993, Table 3.2, Eurostat study of the labour force 1992 (1994), Table 6: Eurostat study of the labour force, unpublished.

Table 2b - Employment rates by age group among women over 50 in 12 Member States of the EU

>TABLE>

Source:

Guillemard 1993, Table 3.2, Eurostat study of the labour force 1992 (1994), Table 6: Eurostat study of the labour force, unpublished.

Table 3 - A comparison of employment rates for men aged 55-64

(1970-1990)

>PIC FILE= "C_2001014EN.006101.EPS">

Source:

OECD, Labour force survey (1992).

Table 4 - The 50-64 age group as a proportion of the population

1995-2025

>PIC FILE= "C_2001014EN.006201.EPS">

Source:

Eurostat, Demographic estimates 1997 (basic scenario).

(1) Source:

Eurostat study of the working population, excluding Austria, Sweden and Finland.

The figures for the first reference year for these three Member states are based on national studies for 1985.