Employing older workers: the business case

The proportion of men aged 55 to 64 no longer working doubled between 1979 and 1997, rising from 20% to 40%.¹ Over the same period, the number of women aged 55 to 60 who were in work fell only slightly (0.5%), although the decline runs contrary to the overall rise in the level of female participation in the workforce. One study suggests the annual cost of ageism to the UK economy is £26 billion - the equivalent of one fifth of the country's GDP over five years.² This figure is based on an estimate of the value of the goods and services the 3.4 million people aged 50 to 64 not working in 1998 would have produced had they remained economically active. Official government figures put the cost slightly lower at somewhere between £19 and £21 billion a year: £16 billion in lost GDP and £3 to 5 billion in additional benefit costs and lost taxes.³

While assessments of the overall cost to the nation of large numbers of economically inactive older workers are staggering, employers also lose out in several ways by failing to consider people aged 50 to 64 a valuable resource. As Winning the generation game, a report from the Performance and Innovation Unit at the Cabinet Office, puts it: "One of the key causes of declining economic activity among older people is age discrimination by employers, which affects both retention and re-entry of older workers."³

The degree of discrimination in employment on the basis of age is difficult to quantify. Nonetheless, ageism as an explanation for the high levels of economic inactivity found within older sections of the population is supported by the findings of a study of 85 public and private sector organisations. The study, conducted by Philip Taylor and Alan Walker, concluded: "Most large UK organisations were inclined towards the exclusion of older employees and potential employees" and employers generally adopt this position because they hold "prejudiced, stereotypical attitudes".⁴ Financial reasons tend to underpin employers' attitudes to the retention and recruitment of older workers. Employers' need to minimise unit labour costs makes workers less attractive to employ as they get older: long-serving individuals tend to be at the higher end of the pay scale and salary-related occupational pension schemes impose higher costs on continuing to employ workers close to retirement age.

Employers' negative attitude towards older workers include the assumptions that those aged 50 to 64 have inappropriate skills and lack the ability to learn new ones, that they are less productive and flexible and that they are more often absent than younger people. Employers' views about older workers tend still to reflect the "early exit culture" of the 1980s, in which older workers were considered expendable, so that few firms are prepared to recruit from older age groups or to invest in training for staff from around the age of 40.⁵ There is an assumption that older workers tend to be set in their ways, less adaptable in today's rapidly changing environment. Research among employers has found a perceived lack of flexibility and problems using new technology are two main disadvantages of older people.⁶ Studies in Japan, endorsed by US research, have shown that many employers believe that technological advances nowadays are so rapid as to render older workers obsolete.⁷

BENEFITS APLENTY

The ageing workforce means that employing older workers is no longer a choice but a business necessity. The demographic time bomb, which is producing an ageing workforce, is described in detail in figure 2.1 . The changing age profile of the population will force employers to alter their perceptions of older workers. These are generally unfounded. Research shows that older workers tend to be more reliable, loyal and more committed than younger employees, as well as being just as able to learn new skills. As Jenny Kodz, co-author of an Institute for Employment Studies (IES) report on the employment of workers over the age of 50, has commented:

"Quite aside from their experience, older workers are more committed and reliable, have better customer-facing skills, understand business better, and take less short-term sickness absence."⁸

Aside from the impact of demographic change, many employers are currently developing policies, procedures and guidance on age diversity as a result of various factors, including:

Several leading UK organisations are convinced of the benefits of retaining and recruiting older workers and are actively developing an age-diverse workforce, believing a balance of staff from different age groups will provide a winning combination in terms of skills and experience (see comments in figure 2.3 ). The list of organisations providing older workers with better opportunities in the workplace includes: the BBC, Boots, B&Q (see case study 1, Chapter 4 ), Dixons, H&M Customs & Excise (see case study 3, Chapter 4 ), Nationwide Building Society (see figure 2.4 ), Sainsbury's and WH Smith. Food retailer Sainsbury's, which is pursuing a policy of recruiting older people, says that they are extremely reliable and flexible.⁹ Nationwide Building Society, which is "committed to an inclusive employment environment that attracts and retains employees across the age spectrum" and has won awards for its stance on age diversity, says the business benefits of such an approach include:

Echoing some of the positive aspects of employing older workers expressed by Sainsbury's and the Nationwide, the Government has also spelled out the benefits to business of eliminating unfair age discrimination. According to the DfEE document accompanying the Age diversity in employment code of practice, organisations can expect to enjoy the following benefits:

The following section examines the potential benefits that older workers can bring to the workplace in more detail, while the experiences of Nationwide Building Society are summarised in figure 2.4 .

Reliability and commitment

By and large, older workers are much less likely to leave their employment than younger people. Labour Force Survey data shows that in the 12 months to spring 2000, employees aged between 16 and 34 were far more likely to have switched jobs than older employees (see figure 2.5 ). A study of turnover among civil servants illustrates this point. It found that 23.8% of men and 20.3% of women aged under 20 left the service in 1999. Among the over-40s, just 1.2% of men and 1.6% of women left.¹² The figures compare with an average turnover rate across the whole civil service of just 2.6%, with only 3.2% of those aged over 30 opting to leave. Lower turnover among older workers suggests a higher level of commitment to job and the company.

Figure 2.5: Percentage of employees^a by age who were working for a different employer compared with 12 months ago; United Kingdom; spring 2000, not seasonally adjusted

a Employees in both spring 1999 and spring 2000

Source: Labour Force Survey

B&Q, which first began its policy of employing older workers in 1989 by opening a store staffed entirely by people in their 50s in Macclesfield, reported that labour turnover at the store was a sixth of the average for other outlets.¹³ This outcome, and turnover figures from other stores, led a B&Q spokesperson to comment:

"You have to remember that labour turnover is an important issue in retailing. It costs thousands of pounds for us to recruit a member of staff and figures show that the turnover of staff over 40 is around half that of those aged 20, so there are big cost savings to be made."

The fact that annual turnover among retail staff is more than four times that of older employees is one reason retailers such as Dixons, Sainsbury's and WH Smith are taking the same approach as B&Q and, in many cases, looking to older workers to fill vacancies.¹³ Given that the Chartered Institute of Personnel and Development (CIPD) calculates the individual costs of labour turnover among sales staff to be £3,717 in 1999, there is a significant financial advantage in employing older workers.¹⁴ Indeed, following research into the cost of replacing a sales assistant at WH Smith, a company its size (29,000 sales staff at the time) would save around £725,000 a year.¹³

Another company finding that a commitment to age diversity reduces labour turnover is employee relocation service HCR. Staff turnover fell by more than 20% between February 1998 and January 1999 as a result of adopting entirely non-discriminatory application forms and basing selection decisions purely on ability and potential.¹¹

Research backs up these corporate examples. An early IES study, based on the responses of senior personnel staff in 20 organisations, concluded that "older workers were more stable, ie they were less likely to leave the company once they joined it, and that once in employment they tended to be 'more reliable and display greater commitment to work'. Younger workers, on the other hand, particularly those between 20 and 30, were seen to be 'job hoppers' and 'less reliable', and were often regarded as not having comparable interpersonal skills or loyalty to the job and company."¹⁵ All respondents reported that turnover declined substantially with age.

A further IES survey reported that the majority of employers using older workers to tackle labour shortages considered them to be more reliable.¹⁶ IES's findings are consistent with other studies. The Carnegie Inquiry, for example, found that labour turnover is lower among older workers than among their younger counterparts - one company reported that, on average, people in their 40s and 50s were four times more likely to remain than staff in their 20s.¹⁷

Part of the explanation as to why older workers are more likely to remain loyal is that they tend to have lower expectations of, and are more satisfied with, work. This was Professor Cary Cooper's conclusion after analysing survey results showing that older workers are more contented at work than younger employees. He commented: "As we get older and more experienced we tend to have a more balanced perspective … [whereas] people in their 20s are more miserable at work because jobs do not live up to their expectations."¹⁸ The survey, of 200 international workers, reported that 90% of those in the 54 to 64 age bracket were happy at work compared with only 20% of those aged 18 to 24. This supports much older research indicating that job satisfaction rises with age. Arvey and colleagues found that job satisfaction among men rises until middle age, levels off, and increases again from the mid-50s, while women do not appear to suffer a levelling off, so that satisfaction continues on an upward curve.¹⁹

Absence and injury

The CIPD says that it is "misleading to equate physical and mental health with age", and that "differences in absenteeism between age groups is slight".²⁰ According to figures from the Office of Population Censuses and Surveys (OPCS, now the Office for National Statistics), absenteeism is highest in the youngest and oldest workers, although length of absence differs markedly with age. "Young age bands have a very high percentage of short-term absence relative to long-term absence, whereas in the older age bands the trend is toward more long-term absence. This indicates that the aetiology [cause] of sickness absence varies across age strata. Possibly chronic health conditions, more prevalent with age, are the reason behind this trend in the older age bands. Among the young age bands sickness absence may be dependent on a number of other factors not directly related to health, such as fewer commitments and responsibilities both personal and occupational, lower social status and perhaps a higher incidence of minor accidents," the OPCS reported.²¹

Companies employing older workers mostly report no difference in short-term absence between age groups. Sainsbury's says that absenteeism was no higher among older workers than for other employees.¹³ Some organisations say that older workers actually take less short-term absence. A 1991 comparative exercise between the Macclesfield store and five other B&Q outlets by the Institute of Employment Research at Warwick University found that short-term absence was almost 40% lower at the former.¹³ Granada Road Services (now part of Granada:Compass), which retains older workers by enabling them to continue working beyond the firm's normal retirement age of 60, also reports reduced levels of absence.¹¹

Despite perceptions to the contrary, the rate of injury decreases with age. Research from Finland reported that the accident rate among 15 to 24-year-olds was 36.5 per 1,000 workers compared with 22.8 per 1,000 workers aged 55 to 64.²² Greater familiarity with tasks might explain this outcome.

Productivity

Ageing involves many small physical and mental changes, and variation between individuals of the same age is enormous. Some of the difference is genetically determined, but a fair amount depends on lifestyle, so that active people tend to retain higher physical and mental capacities than those who adopt a more sedentary way of life.²² Physical strength declines with age from a peak at 20 to 30 years old. Physical capabilities may be limited by musculoskeletal changes, and joint mobility and body posture gradually change between ages 20 and 60. However, few jobs demand maximum physical strength; mental capacity may be more important in many contemporary jobs. Ageing also affects mental abilities. Cognitive processes such as information processing appear to decline with age, while cognitive products including verbal abilities and "crystallised knowledge" remain stable. Research suggests that older workers perform less well than their younger colleagues at problem-solving and dual-task activities, and that short- and long-term memory, as well as visual and auditory processing, decline with age.²²

Despite an apparent decline in mental and physical abilities, employers using older workers claim that people over the age of 50 are just as productive as their younger counterparts. Nationwide reported in 1999 that in the most recent annual performance appraisal, 96% of employees aged over 50 achieved a rating of "good" or above, with 32% achieving a rating of "excellent" or "exceptional".¹⁰ Among Nationwide's financial consultants aged 50 or more, all received a performance rating of excellent or above in 1998.

A participant in the IES study examining employers' attitudes to older workers observed:

"The older people may appear to be slower but they always get the job right first time, whereas the younger person is rushing about looking efficient but making lots of mistakes which take time to put right."¹⁵

The research comparing the performance of B&Q's Macclesfield store with five other outlets (above) found that the profitability of the store exceeded target over its start-up period and was 18% above the average of the other shops, indicating a high level of productivity among the staff.¹³

Employing older workers can also improve productivity across the business as the knowledge and experience they bring to the workplace can help younger workers maximise their contribution. "Sitting-by-Nellie" - whereby inexperienced employees are paired with experienced staff to learn the ropes - is often considered one of the best forms of learning, with older workers playing the role of mentor. B&Q found that the knowledge older workers pass to younger employees is a positive feature of employing mature staff.23 HCR reported that increased productivity resulted from developing a mixed-age workforce.¹¹

Research supports these employers' views that older workers can be just as productive as younger staff and help boost productivity generally. Timothy Salthouse, for example, compared the productivity of older and younger workers in factories and offices and reported no differences between age groups.²⁴ Robinson and colleagues also concluded that older workers are likely to be as productive as their younger colleagues.²⁵ The IES study examining the attitudes of employers in 20 companies to the employment of older workers also found there was little variance in productivity between age groups. Of the 16 employers who expressed a view on the productivity of older workers: three said it improved with age; three reported a decline; and 10 said it remained the same.¹⁵

Flexibility

Employers often think that older workers, especially in today's rapidly changing environment, will be unable to stand the pace of work, adapt to change and will have to be carried by other employees. A 1995 DfEE study into age discrimination, including an assessment of employers' attitudes towards older workers, found this was an issue. Asked about their perceptions of the weaknesses of older workers, the largest proportion - 27% of employers - said resistance to change/"being set in their ways" was their main concern.²⁶

Although we might be more reluctant to accept, and adapt to, change as we age, most people, regardless of how old they are, tend to feel anxious when faced with unfamiliar situations. Older workers might be more reticent because they are often the most vulnerable group, in terms of job losses, when workplace changes are implemented. Older workers are often just as receptive to change, when it is not perceived as threatening, as younger members of staff. Nationwide, which, as was noted earlier, is actively recruiting from older age groups, reported in 1999 that 61% of employees over 50 were happy with the amount of organisational change occurring within the company.¹⁰ The company's findings are supported by a report from the Industrial Society.²⁷ It found that people 50 and over were more inclined than younger workers with family and financial commitments to take on new challenges and adapt to new ways of working.

There are other aspects of flexibility in which older workers excel. Flexible hours, such as part-time working, that ensure staff presence when it is most needed, can be attractive to older workers. Management Review  9 - Flexible resourcing - reported that of all the most commonly used flexible working arrangements, part-time work is most likely to be a response to employee demand, including from older or retired workers who no longer want, or need, to work full-time.²⁸ The use of part-time staff can reduce costs because labour supply matches the peaks and troughs of business activity. This is an issue in the retail sector, as the following quote from a supermarket manager illustrates:

"Part-timers are more flexible than full-timers. The main reason is to cover trading patterns. Computerised monitoring of sales shows how many hours labour is required at what times. The peaks in business are in the evenings and at weekends. Part-timers make it easy to cover these."²⁹

Data shows that both men and women aged 50 or over are more likely to work part-time than other age groups, although for men below the state retirement age there is only a small difference.³⁰ While the proportion of women working part-time gradually increases with age, the move to part-time employment among men is rapid at retirement, after which there is little variance between genders. In summer 1998, 55% of all employed women aged 50 or over were in part-time work compared with 41% of younger women.³¹ Among men aged 50 or more, 14% worked part-time. This is double the proportion in part-time employment under 50. Significantly, 88% of part-timers aged over 50 said they did so because they did not want a full-time job. The equivalent figure for part-time workers under the age of 50 was 66%.

Sainsbury's is one organisation that has found mature workers to be flexible, happy to match their working hours to the needs of the organisation. The company has introduced a retirement plan and pension protection mechanism that enables staff aged 50 or more who reduce their hours to top up their salaries (see figure 3.4, chapter three).³² The move is seen as a way of retaining older staff. B&Q also says that older workers are often more willing to accept flexible work patterns - for example, weekend and evening shifts, which can be less suitable for younger staff with greater family responsibilities.²³

The broad skills and experience many older workers bring to a job means they can often be more flexible than less-experienced staff in the range of tasks they perform. B&Q's Macclesfield store illustrates this. The company initially planned to extend the usual pre-opening training period to ensure the older workers were familiar with the different aspects of running the store, including the use of information technology.²³ In the event, the additional time was unnecessary because of the wide range of skills and experience of the staff. B&Q experienced a similar outcome when the Macclesfield project was repeated at Exmouth.

Overall, the strengths and weaknesses of a mixed-aged workforce can complement each other, enabling the organisation to respond better to situations and changing circumstances.

Knowledge and experience

A growing number of employers fear that the cull of older workers during the corporate restructurings of the 1980s and 1990s has resulted in the loss of valuable experience and crucial company knowledge. This loss of corporate memory means that many firms are no longer able to learn from past experience and earlier projects because the people involved are no longer around. The following comment highlights the negative impact on companies of reducing headcount by discarding older workers:

"Having reduced their workforce in the name of change, they recall very little of their own corporate memories and experiences, with the result that few have any facility to benefit from their own hindsight. Without continuity, companies have scant ability to learn from their own special experiences. They run the risk of misapplying their prior successes, of repeating past mistakes and re-inventing the wheel."³³

There is little sense in discarding staff who can still make a valuable contribution and the loss of whose skills and experience might take years to replace. Midland Bank, now HSBC Bank, has revised its early retirement practice after becoming concerned that too many experienced staff were leaving the business once they reached the age of 50. Each case is now reviewed by senior management.³⁴ Ford hit on a novel way of retaining the skills of its older workers, taking a minority stake in a company set up by two former directors called XR Associates.¹³ The idea behind the initiative was the increasing need for "leaner" companies - that is, firms that have compressed their hierarchies by shedding several management tiers - to use outside firms to supply specialist services, particularly for short-term projects. Around 250 ex-Ford managers joined XR Associates when the company was established in 1992 and were then offered work with their former employer through the new business. By 1996, XR had 545 professional staff on its books. A US study by the Society of Human Resource Management found that 62% of respondents were adopting an approach similar to that of Ford in that they were hiring retired employees as consultants or temporary workers.³⁵

The knowledge and experience that many older workers possess make them a much-sought-after commodity among newly established businesses, especially dotcom and other new economy firms, according to a report by the Industrial Society.²⁷ It identified skills new companies need from older workers and placed them into the following four categories:

The report's author, Charlotte Thorne, commented:

"The current requirement is for knowledge. Businesses need people who can employ their experience and understanding, their networks and their strategic vision to add value to organisations. What businesses are really after is wisdom and that puts older workers in pole position."

Growth in the use of interim management also suggests that many employers appreciate the benefits of experience. According to Bill Penney, managing director of consultants Ashton Penney, which produced a business guide on interim management with the CBI, interim managers are an asset: "Their experience, the ability to absorb large quantities of information quickly and the gravitas and credibility that they bring to the party make them a formidable force".³⁶ Knowledge and experience tend to give older workers superior business acumen over their younger counterparts. This is illustrated by the greater success of new businesses established by older people. One study claims that companies set up by entrepreneurs in their early-50s are twice as likely to succeed as those started by people in their early-20s.²⁷

A number of companies recognise the wider benefits of knowledge and experience that older workers can bring to the workplace. B&Q, for example, has found that employing ex-tradespeople, such as plumbers and electricians, makes good business sense as they provide customers with reliable expert advice.¹³ Insurance company Commercial Union also believes that the experience of older people is valuable.¹³ CU says that experience of life helps assessors and underwriters to do their jobs more effectively. Also, employing experienced older workers can reduce fraudulent claims because most have seen every trick in the book.

Recruiting someone with experience can also reduce the training costs associated with a new employee, as some of the skills and knowledge they already possess may be applicable or adaptable.

Customer service

Enterprises have become more customer-oriented over the past decade. Customer service differentiates products and services. The general view is that satisfied customers are less likely to take their custom elsewhere: no small consideration when research estimates that, on average, it costs six times more to secure a new customer than to keep an old one. Companies also recognise that customers are not homogeneous: individual consumers may all want good quality at a fair price, but beyond that they have different needs and preferences.

Organisations employing older workers in customer-facing positions all report a positive response from customers. Older workers tend to have a different perspective on what constitutes good customer service, and are often more responsive to customer enquiries. This point was made by a B&Q spokesperson of the company's Macclesfield store: "We had a very positive reaction from the local community. I think that older workers are probably better at customer service aspects of the job than some of our younger staff - they tend to have more patience and, what they lack in energy, they certainly make up for in experience, which is very important in the retail DIY trade."¹³ Staffing stores with a high proportion of older workers also fits aspects of the company's marketing strategy. It includes a discount for over-60s shopping on Wednesdays and older customers often appreciate being served by someone their own age. WH Smith feels that staff who have had considerable knowledge of life are more able to deal with a wide range of customers. Generally, they have had wide experience of being a consumer and have greater product knowledge and so are more likely to empathise with the needs of the customer.¹³

Sainsbury's has expressed the view that a mixed-age workforce better reflects the make-up of its customers and thereby helps to improve consumers' views on service.¹¹ US evidence shows similar experiences among American companies. American Airlines, for example, has trained 300 workers aged between 40 and 65 to become flight attendants as a way of raising its appeal to older customers, while 500 of Texas Refinery Corporation's 3,000-strong sales force are aged between 60 and 80 in order to relate better to older property owners.³⁷

Good customer-facing skills include patience, friendliness and a willingness to help. These kinds of interpersonal skills were considered by employers to be typical characteristics of older workers, according to research by IES.¹⁵

A LARGER POOL OF LABOUR

Aside from better work attendance, greater loyalty, the benefits of experience and knowledge, and superior customer-facing skills, increasing the pool of potential recruits from which to fill vacancies is a further compelling business reason for employers to focus on older workers. This is no small consideration given that the CIPD's annual recruitment survey in 2000 reported that almost 60% of participants had experienced difficulties in filling vacancies over the previous 12 months.³⁸

The pool of older workers from which to recruit is large. One in three people (2.8 million) between 50 and state retirement age do not work.³ Few choose to be out of work, with almost half relying on benefits for the majority of their income. In addition, the post-retirement population - 65 and over for men, and 60 plus for women - numbers 10.7 million. Only 461,000 of those were in employment in winter 1999/2000.³⁹ Although most people in the post-retirement group will not want to work, some would still like to play an economically active role given the opportunity.

Men

Since 1993, there has been a recovery in the numbers of older men working due to a tighter labour market in parts of the UK. Data from the Labour Force Survey shows that the proportion of older male workers in employment has been increasing broadly in line with that of the working-age population as a whole.⁴⁰ The three-month average employment rate for men aged 50 to 64 between August and October 2000 was 69.2%, up from 68.6% over 12 months.⁴¹ Older men, however, still account for a disproportionate share of the long-term unemployed. The number of men out of work - based on the international definition of unemployment (those actively seeking work) - in the three months to October 2000 was 5.9%, whereas the rate among men aged 50 to 64 was 4.9%.⁴² The measure of long-term male unemployment shows a marked difference between the age groups. The proportion of men aged 50 to 64 unemployed for one year or more, or two years or more in April 2000 was 47.8% and 31.9% respectively.⁴⁰ Corresponding figures for all men aged 16 to 64 were 32.6% and 19.7%. The speed at which long-term unemployment among older male workers is falling still lags behind the overall decline in the long-term unemployed. Whereas the claimant count measure of long-term unemployment fell by 22.2% in the year to April 2000, the decrease for older workers was 18.6%.

The relatively low employment rate among older men since 1979 is part of an ongoing trend. Research suggests that each generation is less likely to work in old age, despite medical and health advances that are considerably increasing longevity. According to analysis by the Centre for Economic Performance, the vast majority of men born in the 1920s were still working in their 60s.⁴³ Each successive cohort, however, has been leaving the labour market earlier, so that by 1997 the fall in employment appeared to begin at 50.

Regional analysis of the data between 1990 and 1997 indicates that the latest downward trend in the number of unemployed men aged 50 to 64 may not be sustained in less healthy economic conditions. In the south east, the region with the highest employment rate in the UK, one in three older people are not working.³ As Nigel Campbell, economic adviser at the Treasury, has explained, "economic recoveries may not be sufficient to reverse the trend" in men leaving the workforce at an earlier age.¹

Despite the recent upturn in the number of older men in work, the tide of men aged 50 to 64 who are economically inactive - that is, neither in work nor looking for work - is still stubbornly high and is unlikely to be halted without action to combat ageism by employers and incentives to encourage them back into work. Labour Force Survey data shows that in the 12 months to April 2000 the inactivity measure among older men rose by 0.3% to 27.8%.⁴ This compares with an overall inactivity rate for men of working age of 15.2%. Economic inactivity has been steadily growing among unemployed men after the age of 50, with few moving back into work (see figure 2.6).³

Figure 2.6: Economic activity rate of older workers by sex (%); UK, February to April 2000 (seasonally adjusted)

Women

Older women (aged 55 to 60) have not shared in the general rise in female employment over the past few decades. Data shows that an additional 1.5 million women were working in 1997 compared with 1979.¹ The figure would be 200,000 higher if older women had experienced the same increase in employment as other age groups. In 1998, women aged 30 were almost 50% more likely to be employed than in 1978. By contrast, women aged 50 have only experienced a modest growth in employment.

The proportion of women aged 50 to 59 who were working in the three months to October 2000 was 64.2%.⁴¹ This is a 1% increase over 12 months. Post-retirement women are more likely to be in employment than men who are aged 65 and over. The average proportion of women aged 60 plus working between August and October 2000 was 8.3%. The equivalent figure for men was 7.5%. In a reverse of the position of men, later generations of women are more likely to be economically active than earlier generations. However, economic inactivity among older women is higher than for older men. Just over 34% of women aged 50 to 59 were classed as economically inactive in April 2000, compared with nearly 28% of men aged 50 to 64.³⁹

Although older women are less likely than men of a similar age to be unemployed for 12 months or more, the proportion unemployed for between one and two years and for two years or more is still much higher than the equivalent measure among all women aged 16 and over - 26.9% and 17% respectively, compared with 17.6% and 8.5%.⁴⁰

CHARACTERISTICS OF OLDER WORKERS

Some employers are put off employing older workers because they believe them to be deficient in the skills required in today's workplace. A study by the Open University Business School found that one reason why older workers were being displaced in the financial services industry was because most jobs required some familiarity with information technology and older workers often only have limited experience of this.⁴⁴ However, the workless older population is as diverse as other age groups in society, so the skills and experience they possess are equally wide ranging.

It is no longer the case (as it was in the early-1980s) that economically inactive older workers were previously employed in manual occupations and declining industries, such as mining and steel making. Most of these are now beyond state retirement age. Government data shows that there is now little difference between the previous occupations of workless people over or under the age of 50.³ And the distribution of those over 50 in employment tends to mirror the sectors in which younger people work. Labour Force Survey data from summer 1998 shows that the type of work performed by those over the age of 50 is not dissimilar to that undertaken by younger workers with one or two exceptions.

For example, older workers are more likely to work in the public sector, while organisations in the distribution, hotels and restaurants, and banking/finance industries tended to employ younger workers (see figure 2.7). In terms of type of work, both age groups were equally likely to be in professional occupations. Older workers, however, were slightly more inclined to be in intermediate, skilled manual and unskilled occupations than workers under the age of 50 (see figure 2.7).

Figure 2.7: Industry sector of employed people by age in the UK; summer 1998 (%)

Source: Labour Force Survey

The proliferation of early retirement and voluntary severance programmes has produced a disparate workless population, many of whom are familiar with, for example, information technology. The B&Q example illustrates that older workers are quite capable of using new technology and require no more training than the average employee. Research by Age Concern corroborates B&Q's findings, reporting that 81% of older people surveyed found computers easy to manage.⁴⁵ This is illustrated by studies indicating that many older people are attracted by the potential of new technology and are using the internet in greater numbers. Silver surfers, as they are known, make up one of the fastest growing segments of the online population. MMXI Europe calculates that there were 1.1 million people in the UK aged over 55 online in 2000, a 33% increase on the 1999 figure.⁴⁶ A study conducted by the Yorkshire branch of the Engineering Employers' Federation reported that the over-50 workforce was signing on to the internet at double the rate of those under 30.⁴⁷

A further characteristic of older people, and one that should appeal to employers, is that they are more likely than those in younger age groups to be involved in voluntary community activity, such as serving on committees and visiting people.⁴⁸ This suggests that many will be adept at problem solving and leadership, and have good interpersonal skills.

Source: Labour Market Trends, September 2000

Figure 2.1: The ageing workforce

Throughout the industrialised world, baby boomers - the name given to the population born in the upsurge of births during the 20 years after the Second World War - will reach retirement age between 2010 and 2030. This development, coupled with rising longevity and declining birth rates, will reduce the ratio of the number of people of working age (15 to 64) to the number of older people (over 65,).⁴⁹ Across the European Union (EU), the numbers aged 50 to 64 are expected to rise by 25% between 1995 and 2015, whereas those aged 20 to 29 will fall by as much as 20%.⁵⁰

Aside from demographic change, changing behaviour will also squeeze the overall labour supply. A larger proportion of young people is continuing in post-school education and, over the past 20 years, there has been a big rise in early retirement. As a result, people are spending a smaller proportion of their lives working. Data from OECD illustrates this change: In 1960, men had a life expectancy of 68 years, of which 50 were spent in work; in 1998, men lived to 76 on average, but spent only 38 years in employment.⁴⁹ The OECD predicts that if this trend continues, men will spend "substantially" less of their lives working by 2030.

The UK's population is ageing less quickly and the dependency ratio is rising less rapidly than in most EU countries.⁵¹ Nonetheless, projections for the UK show that between 1991 and 2011 the proportion of people in the 25 to 34 age bracket will fall from 16% of the total population to 12% - a decline of 1.6 million. By contrast, there will be a 4% (2.3 million) increase in the proportion of people aged 45 to 54 and, by 2021, the number of 55 to 64 year-olds will rise by 50% - from 5.6 million in 1991 to 8.4 million (see graph).⁵² Overall the average (mean) age of the UK population will rise from 38.4 years to 41.9 years between 1996 and 2021.⁵³

What affect will the projected demographic shift have on the UK workplace?

Chapter one noted that by 2010 almost 40% of the UK's workforce would be aged 45 or over, with only 17% under the age of 24. The numbers of people aged 16 to 24 peaked in 1986, accounting for 23% of those of working age (defined as those aged between 16 and 64).⁵² By 2026, the proportion of people in this age bracket will form the smallest age group - down to less than six million from 8.2 million. At the other end of the age scale, people aged 55 to 64 will form the largest cohort in 2026, representing 24% of the working age population. They will have increased in number by three million over 40 years, from 5.6 million in 1996 to 8.6 million. Although the 35 to 44 age group will form the biggest proportion of the working age population between 2001 and 2006, they will be outnumbered by people aged 45 to 54 by 2011, and by 2016 they will be the second smallest cohort.

Déjà vu

Some employers may feel that we have been here before. The National Economic Development Office (NEDO) predicted in 1989 that 1995 would be the year the "demographic time bomb" would explode in the UK.⁵⁴ The prevailing view at the time was that the low UK birth rates of the 1970s would result in a lack of young people entering the labour market, forcing employers to recruit from less familiar sources, such as older workers, the unemployed and people with disabilities. One estimate claimed that the NHS would have to recruit half of all female school leavers with the relevant qualifications to meet the demand for nurses.⁵⁵

However, the demographic fallout failed to have the impact NEDO predicted. Two factors prevented the shortfall in young workers entering the labour market becoming a major crisis. First, female participation rates in the labour market continued their post-war increase. In 1959, the proportion of women of working age in employment was 47.3%.⁵⁶ By 1999, this figure had jumped to 66.5%. The second, and more significant, reason why demographic change failed to have the effect predicted by NEDO, was that 1995 was preceded by more than a decade of economic uncertainty and corporate restructuring. Cost pressures forced companies to alter the nature and content of many jobs, reducing the number of less skilled jobs that are often more suitable for younger workers. Freezing recruitment - the response of many organisations to economic downturn - further limited the opportunities for young people, even well-qualified graduates. Economic uncertainty moderated the effects of demographic change, as Richard Worsley, author of Age and employment and director of the Carnegie Third Age Programme, explains: "Above all, the demographic factors have been masked by recession."⁵⁵ He goes on to offer employers a stark warning: "But if the explosion of the time bomb has been prevented by recession, employers need to remember that recessions, however long and drawn out, are temporary - whereas the demographic factors are permanent and inevitable."

Source: Office for National Statistics

Figure 2.2: Age discrimination and the law: a summary

Discrimination on grounds of age is not unlawful at present in the UK. However, this will have to change by December 2006 by when EU Member States must implement the age discrimination measures set out in Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation ("the Directive").

On 14 February 2001, employment minister Margaret Hodge officially confirmed that the Government intends to introduce legislation on age discrimination within the next six years, and announced that an Age Advisory Group had been set up to advise on the issues to be addressed in the forthcoming extensive consultation exercise.

CURRENT POSITION

This Government's token measure to combat age discrimination in the workplace has been the non-statutory Code of Practice on Age Diversity in Employment, introduced in 1999, the legal relevance of which is uncertain (see figure 3.1, chapter three). At most, the recommendations set out in the Code may be relevant in considering whether an ageist practice might be unreasonable or unjustifiable for the purposes of an unfair dismissal or sex discrimination claim.

An employee in the UK might, however, already be able to rely on other employment protection laws to challenge age discriminatory employment practices.

Breach of contract

In some cases, an employer's equal opportunities policy might be incorporated into its employees' contracts of employment. If this is the case, and the policy identifies age as one of the areas in respect of which the employer is committed to equal opportunities, an employee might bring a breach of contract claim if he or she believes that he/she has been discriminated against on the grounds of age (Secretary of State for Scotland v. Taylor [2000] IRLR 502).

Unfair dismissal

An employee dismissed solely on account of his or her age is likely to be unfairly dismissed. However, the Employment Rights Act 1996 currently states that an employee over his/her normal retirement age (or 65 where no such normal retirement age exists) is excluded from pursuing an unfair dismissal claim. This, in effect, endorses mandatory retirement, as an employer's decision to retire an employee at his/her normal retirement age cannot be challenged as unfair.

It has been argued that this exclusion from bringing an unfair dismissal complaint unlawfully discriminates against men (who are more likely than women to work beyond their normal retirement age) and, hence, breaches EC equality laws. This argument has been successfully used in at least two employment tribunal cases: Nash v. Mash/Roe Group Ltd [1998] IRLR 168 and Rutherford v. Harvest Town Circle (16.8.99, unreported). The Nash case was settled following Mr Nash's death and before it could be heard by the Employment Appeal Tribunal (EAT), but the EAT is due shortly to hear the employer's appeal in Rutherford.

The use of age as a criterion for redundancy selection purposes may well render a dismissal unfair. There are conflicting employment tribunal decisions on whether or not the use of age is inherently reasonable. However, it may well be that the introduction of the Code of Practice on Age Diversity will persuade employment tribunals that the use of age in redundancy selection will normally be unfair. The Code states that employers should ensure that age is not a criterion in selecting for redundancy.

Sex discrimination

Age limits may also indirectly discriminate against women, who are less likely than men to have acquired experience or qualifications by a certain age, on account of childcare breaks. Upper age limits for job applicants will, therefore, often have a disproportionate adverse impact on women and will potentially amount to indirect discrimination on the grounds of sex.

Employment tribunals have considered, over the years, the extent to which such age limits can be justified with varying results (see, for example, Price v Civil Service Commission (No.2) [1978] IRLR 3, Leavers v Civil Service Commission (Equal Opportunities Review no.8, 1986) and Jones v. University of Manchester [1993] IRLR 218).

Once again, the Code of Practice on Age Diversity counsels against the use of age in recruitment and may be relevant in determining that employers will not normally be able to justify age limits.

EC ANTI-DISCRIMINATION DIRECTIVE

The UK legislation implementing the Directive will in many respects mirror the long-established Sex Discrimination Act 1975 and Race Relations Act 1976. For example, it will be required to cover both direct and indirect discrimination, as well as harassment and victimisation on age grounds.

The Directive specifically envisages that domestic law may set out exceptions where age discrimination may be lawful, and the preamble to the Directive suggests that Member States will be entitled to retain laws relating to mandatory retirement. Margaret Hodge's evidence to the Select Committee considering age discrimination suggested that the Government may well not take advantage of this exclusion. This would require a fundamental shift in attitude on the part of many employers, who would have to tackle declining performance through their normal appraisal and disciplinary procedures.

Article 4 of the Directive also envisages that direct age discrimination may be justified where age represents a 'genuine and determining occupational qualification'. It is, however, difficult to envisage many circumstances in which the requirements of a job would necessitate recruitment of a person within a particular age range. One possible example might an acting role that requires casting of a young or old person, as the case may be, for reasons of authenticity.

Article 6 of the Directive entitles Member States to permit direct age discrimination where it is "objectively and reasonably justified by a legitimate aim" and "the means of achieving that aim are appropriate and necessary". The Directive goes on to set out a non-exhaustive list of the types of discrimination which may satisfy this test. The list includes:

Even if a practice came within one of these areas if would, of course, still have to satisfy the stringent justification test.

The UK will have to decide whether or not to have a general justification defence to direct age discrimination or whether to prescribe limited specific circumstances in which direct age discrimination may be justified. Either way, it is likely that the UK legislation will be accompanied by a statutory code of practice and guidance.

As with sex and race discrimination, indirect age discrimination will be capable of justification. For example, experience requirements for job applicants are likely to indirectly discriminate against younger workers and employers may find themselves seeking to justify such requirements before employment tribunals.

One interesting issue will be the approach of tribunals to "pools for comparison" in claims of indirect age discrimination. Unlike race or sex, it is not easy to separate individuals into "older" and "younger" people.

It seems inevitable that issues surrounding age discrimination in the workplace will become increasingly significant over the next few years for those dealing with employment law in the UK and throughout the European Union.

Written by James Davies, partner and joint head of Employment Department, Lewis Silkin solicitors (james.davies@lewissilkin.com)

Figure 2.3: Companies make the case for age diversity

"B&Q welcomes older job applicants. It has a positive policy on recruiting older workers and retaining those who are nearing retirement age and this has provided the company with a stock of experienced customer-friendly staff. The recruitment strategy proved to B&Q managers, the public and older people alike, that a policy of hiring older people can work and that older employees can make a significant and valuable contribution to the success of the company."

B&Q

"The recruitment policy of the Littlewoods Organisation plc maximises the potential of all employees, regardless of age. It ensures that we recruit the best person for the job because it makes good business sense."

Littlewoods

"Customer service is a high priority for us at Sainsbury's, and it is helpful to us if staff reflect the customer base we serve. For example, older workers can identify easily with the large number of retired people who shop in our stores. Their experience and natural courtesy are particularly helping in enabling us to meet our high standards of customer care."

Sainsbury's

"WH Smith has a recruitment policy which sets out to ensure the best person for the job. To improve the retention rate of their staff, those responsible for recruitment and selection are required to ensure that age is not used as a criterion. We have found that turnover rates for older workers are significantly lower. Every 1% of staff turnover costs our business around £800,000, so reducing staff turnover presents a huge opportunity for savings."

WH Smith

Source: Chartered Institute of Personnel and Development, September 1998

Figure 2.4: Nationwide Building Society - encouraging nationwide diversity

CASELET

Nationwide now claims the title of the world's largest building society. The organisation has some 8.6 million customers, with around 10.2 million savings accounts and one million mortgage accounts. There are approximately 11,500 full-time equivalent staff in Nationwide group. The company is the product of numerous mergers over the years, most notably that between the Nationwide and Anglia building societies in 1987.

A loss of corporate memory was a problem following merger, according to the Nationwide. Subsequent recruitment of younger employees and increasing staff turnover prompted it to take positive action on age diversity in order to "bring back stability brought about by mixed-age teams".

Today, the society is "committed to an inclusive employment environment that attracts and retains employees across the age spectrum". According to the organisation, its policy is linked to commitment to employee choice, it adds that it has "developed policies that recognise the changing lifestyle needs of employees". Specific initiatives include the implementation in 1991 of an equal opportunities policy (including age), subsequent targeted advertising programmes, the introduction of flexible working arrangements, and its active participation in the EFA since that body's inception in 1996.

Benefits

According to the Nationwide, the business benefits of an age diversity policy include:

Since 1993, the company has operated telephone shortlisting when recruiting for some grades - customer service advisers and branch managers - believing that this "lowers the risk of assumptions made on appearance". The interviewer is given only basic details of each applicant, including name and telephone number. This method has helped to broaden the age range of employees, says the company.

A team within Nationwide, called the "promoting equality of opportunity group", formally monitors the effectiveness of employment policies in relation to all aspects of equal opportunities.

It highlights the following figures from its monitoring data:

Source: Managing a mixed-age workforce, IRS Employment Review 694, December 1999.

¹     The decline of employment among older people in Britain, Nigel Campbell (1999), CASEpaper 19, Centre for Analysis of Social Exclusion, ISSN 1460-5023.

⁵⁷    Older workers are defined as people between the age of 50 and state pension age.