AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY MATURE AGE ENGAGEMENT ISSUES PAPER. May 2011

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1 MATURE AGE ENGAGEMENT ISSUES PAPER May 2011 The Australian Chamber of Commerce and Industry (ACCI) is the peak council of Australian business associations. ACCI s member network comprises more than 350,000 businesses, which are represented through Chambers of Commerce in each state and territory. This national network of industry associations makes ACCI the largest and most representative business association in Australia. ACCI and its member organisations are deeply committed to improving the skill base of the Australian economy through employment education and training. But the member network also seeks to find solutions to disadvantage and to give hope and opportunity to all members of the Australian community through developing opportunities for sustainable employment outcomes. ACCI and its member network work closely and cooperatively with the broader industry community, training providers, governments and the trade union movement at a national and local level. In the skills arena it is the role of industry to ensure that government focus remains on driving productivity gains, not only in key growth areas but across the breadth of the Australian economy, setting the foundations for economic strength in the future. INTRODUCTION The Australian Chamber of Commerce and Industry has sought to examine the options for engaging flexibly and productively with workers who are approaching retirement and has drawn on studies in Australia, the United Kingdom and Europe. Mature age workers form one of the fastest-growing resources available to Australian industry, and ageing is an issue that affects every Australian 1. But the impending loss of a large number of experienced older workers to retirement carries serious ramifications for the future supply of skilled labour to sustain Australia s economic growth. Increasingly, employers will experience a need to adopt more flexible strategies to retain mature age workers with their enhanced skills. This means a rethink of the policies for managing older workers, which have suffered through age discrimination, or ageism, as shown throughout this issues paper. Like most developed countries Australia s population is projected to grow and to age over the next 40 years, when the proportion of the population aged 65 and over will nearly double to 25 per cent 2. By 2050 the population is expected to reach 35.9 million and this will be reflected in Australia s workforce profile, with a growing proportion of mature age workers staying in the labour market to older ages 3. However, baby boomers - the generation born between 1946 and are now reaching retirement age and their presence dominates some industries, like education, where in National Strategy for an Ageing Australia, Employment for Mature Age Workers Issues Paper Highlights Sheet Experience Works: The Mature Age Employment Challenge, 2009, The Australian Institute for Social Research 3 Australia to 2050: future challenges, The Intergenerational Report 2010, Circulated by The Hon. Wayne Swan MP 1

2 04 almost half of all employees (47 per cent) 4 were already aged 45 to 64. While all industries will be affected by demographic change, those with an older workforce profile (e.g. education, government administration, defence and health and community services) can expect the greatest disruption 5. Emphasis on the extension of working life has grown in most industrialised countries, as reflected in numerous reports by the Organisation for Economic Cooperation and Development (OECD), the European Union, the International Labour Organization, the World Bank and other national and international agencies 6. At the other end of the spectrum, new approaches will be needed to attract young people back into the workforce, with a forecast decline in the rate of youth entering the labour market. In order to lift youth participation and productivity, the Australian Government is investing an additional $6.7 billion in vocational education training through the National Skills and Workforce Development Agreement with the states and territories 7. These cyclical pressures on the labour market will create fluctuations in the supply of labour over time, but in the longer term Australia will need to maximise the number of people in the workforce to keep pace with the economy, which is set to continue expanding into the foreseeable future. ACCI has carried out a number of studies of mature age employment; in particular, It s not about age: Pathways for engagement in employing mature age people and existing workers as apprentices, The report featured case studies and interviews that give consistent and compelling evidence of the value of mature age and existing worker apprenticeships. A second report, Worth Their Weight in Gold; Practical Strategies for Engaging and Retaining Disengaged Apprentices , noted a further motivating factor for employers was the relative ease with which they were able to assess the attitude, maturity, reliability and potential of existing older employees. ACCI has examined the implications for Australian industry from the perspective of a predicted upsurge in the rate of retirements by older workers, and concludes that industry has much to gain by adopting strategies for retaining mature age workers in the labour market for as long as practicable. EXECUTIVE SUMMARY There is a growing discrepancy between increasing life expectancy and low labour market participation by mature age workers in Australia, which has been described as the ageemployment paradox 10. Given the barriers many mature workers face, especially those arising from ageism, their ability to participate in the workforce is constrained. Yet removing these barriers is essential to building new pathways for mature age workers to remain in the workforce for longer. 4 Age can work: the case for older Australians staying in the workforce, Experience Works: The Mature Age Employment Challenge 6 Australia to 2050: future challenges 7 ibid 8 It s not about age: Pathways for engagement in employing mature age people and existing workers as apprentices, February-June 2010, ACCI 9 Worth Their Weight in Gold, Practical Strategies for Engaging and Retaining Disengaged Apprentices, ACCI 10 Combating Age Barriers in Employment: A European Portfolio of Good Practice 2

3 A combination of the declining birth rate and increasing longevity has decisive implications for the size of the future workforce. Australia had 3.9 million mature age workers 11 in 2007 (those aged over 45) forming almost a third of the national workforce, and studies show that as many as 85 per cent of workers older than 45 are already planning their retirement. The Australian Bureau of Statistics predicts that by 2012 the proportion of the population aged over 65 will reach a peak growth rate of 4 per cent per annum, which is considerably faster than total population growth 12. By 2021, nearly 22 per cent of the population will be aged over These pressures underpin a need for policies that are designed to extend working life and to improve employment opportunities for older workers before they reached pensionable age. Australia faces an average increase in the workforce of 2.1 per cent a year to keep pace with the economy, reaching 15.3 million workers by , according to the highest growth scenario by Skills Australia. This hypothesis would see a black hole of 9.3 million jobs to fill by 2025, a shortfall of 4.4 million from retirement plus 4.8 million new jobs to sustain Australia s resurgent economy 15. Such a huge demand for so many new and skilled workers calls for a radical rethink in human resource strategies and new ways of managing age in the workplace. Future competitiveness is likely to rest substantially on the performance and productivity of Australia s ageing workforce and on the effective use of its mature age workers. Business will need to appreciate the bigger picture, of which mature age workers are only a part. Some of these considerations are listed below 16 : potential for further economic growth produced by a larger cohort of mature age workers opportunities for workforce participation by mature age workers for periods beyond traditional retirement age expanded range of knowledge, skills and competencies required to produce goods and services for the global economy and the need for ongoing training opportunities for all workers perceptions of the value of mature age workers, the need to employ people with specific skills and experience, and the availability of labour with the required skills - mature age workers should be considered for positions in the context of their individual abilities and capacities challenge of promoting a cultural change in the way that the community perceives mature age workers, and encouraging initiatives that will support their longer participation in the workforce. Australia is not alone in this. Countries with low population growth face greater challenges from population ageing. For example, Japan s already high old-age dependency ratio is 11 Experience Works: The Mature Age Employment Challenge 12 Australian Social Trends, 2008, ABS Age Can Work: the case for older Australians staying in the workforce 14 Australian Workforce Futures: A National Workforce Development Strategy, Skills Australia ibid 16 Experience Works: The Mature Age Employment Challenge 3

4 projected to more than double in the next 40 years, resulting in only 1.4 people of working age for every person aged 65 years or older 17. This progressive demographic change is clearly evident in Australia, where in 1970 there were 7.5 Australians of working age to support every person aged 65 and over. In 2010 this had fallen to 5 people of working age for every person aged 65 and over and by 2050 the figure is expected to reach 2.7 people of working age to support every person aged 65 and over 18. But mature age workers are resilient and a majority indicate a willingness to stay in work as long as they can before retirement. Some 62 per cent of working Australians expect to continue holding a job once retired, highlighting the growing trend for retirement to be a phased process rather than a complete exit from the workforce 19. OECD research suggests that early retirement decisions in Australia are affected by a range of welfare benefits, especially the Disability Support Pension. A Treasury paper on Australia's demographic challenges also notes the importance of flexible work arrangements to allow people the ability to make choices about extending their working life 20. Ensuring the availability of such transitional jobs is one of the key strategies for preventing the premature workforce exit of older workers. The potential loss of skills and experience is reflected in all developed countries: for example the giant British aerospace and defence industry faces the loss of 60 per cent of its entire workforce over the next 20 years. Overall, Britain expects 11.5 million job vacancies across the nation by 2017 due to retirements alone 21. Australia s mature age participation rate was 58.9 per cent in 2008 and this was the thirteenth highest in the OECD 22. The rate was higher than the OECD average (56.3 per cent) but lower than the United States, the United Kingdom, New Zealand and Canada 23. Achieving widespread changes in community attitudes and perceptions is not something governments can do on their own. This underscores the importance of developing comprehensive strategies that encompass and involve all levels of government, employer organisations and unions a message that is emerging from experiences in other countries. There can be little doubt that rising unemployment and underemployment, rather than skill shortages, will be the principal mature age employment policy challenge facing government and the wider community over the next few years 24. Contents 1. Introduction 2. Executive Summary 3. Definition of mature age worker 4. Long-term risks to economy 17 Australia to 2050: future challenges 18 Experience Works: The Mature Age Employment Challenge 19 ibid 20 Australian Social Trends, 2007, ABS, The shape of business: The next 10 years, 2009, Confederation of British Industry 22 Australia to 2050: future challenges 23 ibid 24 Experience Works: The Mature Age Employment Challenge 4

5 5. Public policy reforms a. Main public policies related to older workers 6. Why people choose to retire 7. Mature age policy challenge 8. Europe blazing the trail 9. New flexible contracts in Britain 10. Mature workers widespread across industry 11. Workforce participation 12. Invisible men 13. Ageism and discrimination 14. Strategies for engagement 15. Case studies in age management a. ANZ Bank - Age Diversity Strategy b. Westpac - Age Balance Strategy 16. Australian Chamber of Commerce and Industry a. Grey Matters Project, Victoria b. Silver Lining Project, Canberra c. It s not about age, mature age apprentices i. Career not just a job d. Worth their weight in gold: retaining older apprentices 17. APPENDICES 1. Australian Human Rights Commission: Myths about mature age workers 2. Incentives to encourage the skill development of mature age workers 3. Five dimensions to age management in the workplace 4. It s not about age i. Survey ii. Interviews iii. Recommendations Definition of mature age worker There is no clear definition of an older worker or mature age worker and no agreement in the research literature about what age separates older workers from others 25. Some reports include people as young as 40 to 45, others take the ages of 50 to 55 as their reference point, while still others use the retirement and pre-retirement ages of 60 or 65. Generally, 45 and over is the age group used by the United Nations and World Health Organisation to encompass older workers, and the Australian Bureau of Statistics (ABS) classifies people aged 45 and over as older jobseekers 26. The Department of Health and Ageing defines the age of mature age workers as 45 years and older 27. The generational cohorts are 28 : 1901 Federation War Baby Boomers Gen X Gen Y Gen Z 25 Experience Works: The Mature Age Employment Challenge 26 ibid 27 DOHA, Men not at work, Productivity Commission

6 Long-term risks to economy Increased productivity could compensate to a degree for the projected decline in skilled labour resources, particularly due to ageing and retirement. These are among the findings from the Intergenerational Report 29, which said Australia s ageing population presented significant long-term risks to the economy and to the sustainability of government finances. Australia s population will grow, though at slightly lower rates than experienced over the previous 40 years, putting pressure on infrastructure, services and the environment. But the Intergenerational Report said enhanced productivity was the key to increased economic growth and this would assist in managing the pressures of an ageing population 30. Australia s productivity performance has slowed, however, averaging only 1.4 per cent in the past decade compared with 2.1 per cent in the 1990s 31. The Intergenerational Report assumes that the current 30-year historical average of 1.6 per cent will continue. However, just a 1 per cent rise in literacy rates could push labour productivity rates to 2.5 per cent 32. With the ageing of the population reducing workforce participation rates, productivity growth is likely to become the major contributor to real GDP per person growth in Australia over the next 40 years 33. Productivity trends of the past 30 years should continue but growth in real GDP per person is forecast to slow to 1.5 per cent per annum. If the productivity growth increased to 2 per cent per annum, then the economy would be more than 15 per cent larger by , GDP per person would be around $16,000 higher and fiscal pressures would be reduced as a result of an enhanced capacity to fund government services 34. Prime Minister Julia Gillard said in her Skills for the future presentation in February that after three decades when unemployment had been Australia s major problem it now faced shortages of labour, a problem unmatched anywhere in the industrialised world. By 2050 almost a quarter of Australia s population would be over 64, almost double the figure today. Real per capita gross domestic product (GDP) growth would slow to an average of 1.5 per cent a year compared with 1.9 per cent during the past 40 years. At the same time, Australia s productivity growth had slowed over the past decade, averaging only 1.4 per cent compared with 2.1 per cent in the 1990s. In the short term, the mining boom is placing huge strains on our labour market compounded by the demands of flood recovery, Ms Gillard said. For example, the resources sector will face a potential shortfall of 36,000 tradespersons by But the ageing of the population will create even greater pressure over the next 40 years because it will create a yawning demographic deficit. It is vital that we unlock all the potential of our labour market, both the young people who are the workers of the future and the adults of working age whose absence from the labour force is not only a social tragedy but an economic risk Australia to 2050: future challenges 30 ibid 31 Prime Minister Julia Gillard, and Australia to 2050: future challenges 32 Australian Workforce Futures: A National Workforce Development Strategy 33 Australia to 2050: future challenges 34 ibid 35 To the Committee for Economic Development (CEDA), meeting in Melbourne 6

7 People should have the option of working well beyond traditional retirement ages and to steadily withdraw from the workforce over a period of time. They should have more options for retirement than have been available to anyone in the past, including scope for the continuation of full or part-time paid and voluntary work, as well as the pursuit of hobbies and leisure activities 37. Age should not be a barrier for employees to have access to on-going training to develop the knowledge, skills and competencies to produce goods and services for the economy. Longer participation in the workforce by mature age workers would bring a range of economic and social benefits to the Australian community 38. Fertility rates in Australia are assumed to continue to be broadly consistent with current levels, at about 1.9 births per woman. Over the past forty years, the fertility rate has declined from 2.9 to 1.7 before recovering to nearly 2.0. Net overseas migration is expected to continue at a rate equivalent to 0.6 per cent of the total population per annum on average, as per the average of the past 40 years 39. Industry, therefore, can expect to face considerable skilled labour shortages increasing over time across all industries as mature age workers leave the workforce unless new strategies of engagement are introduced. Public policy reforms Continued improvement in mature age participation rates requires an ongoing policy effort to identify and remove the barriers for those who wish to remain in the workplace. These barriers (identified by the OEDC) include cultural (including employer) attitudes, workplace inflexibility, educational attainment, features of the tax and transfer system and the lack of retraining and support services (such as health and rehabilitation services, career advice and employment services). Policy responses need to reflect a sound understanding of the complex nature of mature age participation 40. A number of countries have developed new public policy approaches to encourage greater workforce participation by mature age workers and to respond to the stigma of ageing. The promotion of early retirement by Australian governments in previous years has been found by some researchers to have contributed to ageist expectations about the capacity of older workers to remain in the labour force, with a downward negative impact on how workers in their 40s are viewed by managers and supervisors 41. An authoritative body of research by Professor Sol Encel 42 in 2003 identified a culture of early retirement in Australia, quantified by surveys of retirement intentions 43. Professor Encel 44 cited a 1997 survey of retirement and retirement intentions of those aged over 45, 36 ibid 37 National Strategy for an Ageing Australia, 2002, Department of Health and Ageing 38 ibid 39 Australian Demographic Statistics, Sep 2010, ABS Combating Age Barriers in Employment: A European Portfolio of Good Practice 41 Experience Works: The Mature Age Employment Challenge 42 Age Can Work: the case for older Australians staying in the workforce 43 ibid 44 ibid 7

8 which found that the majority of men retired between the ages of Given that mature age workers form almost a third of the full-time workforce, a significant portion could be expected to retire in the next decade. Surveys indicate that over 75 per cent of males and around 95 per cent of females intend to retire from full-time work before reaching age 65. Over 50 per cent of women indicated that they intend to retire from full-time work before age Professor Encel said that against the backdrop of increasing longevity, the realism of these intentions at the level of the individual and from the perspective of the broader community, was open to significant doubt 46. This message has been reinforced by Australian research with some of the general conclusions drawn from a joint study by the State Equal Opportunity Commissions of Victoria, South Australia and Western Australia including that 47 : Older workers and employers are uncertain about the operation of antidiscrimination legislation Age discrimination is commonly covert and evasive and easily masked, and Community attitudes do not reflect the legal situation pressures exist towards induced early retirement, commonly justified by ageist stereotypes. Professor Encel said that achieving widespread changes in community attitudes and perceptions was not something that governments could do on their own. This underscored the importance of developing comprehensive strategies that encompassed and involved all levels of government, employer organisations and unions a message that was also emerging from experiences in other countries. In Australia, the Commonwealth Government was addressing concerns regarding mature-age workers and early retirement across a number of fronts including among others: changes to retirement income policies including pensions and superannuation arrangements to redress incentives to early retirement; changes to superannuation arrangements to make it easier to contribute at an older age and easier for individuals who decide to re-enter the workforce; job search and placement assistance has been enhanced for older job seekers; and improved coordination among job placement agencies. 48 While recognising the changes already undertaken in regard to superannuation arrangements, it was likely that more may need to be done to simplify current arrangements and to increase the flexibility of the system to better support ongoing participation and phased retirement Among other areas Professor Encel identified for further action are 49 : Addressing community, business and individuals attitudes to workforce participation by mature age people Ensuring that individuals keep skills and competencies relevant, so that they can better handle transitions during their working lives 45 ibid 46 ibid 47 ibid 48 Age Can Work: the case for older Australians staying in the workforce 49 ibid 8

9 Working with employers and their organisations on assessing the impact of the ageing of the workforce and developing strategies and practice guidance, designed to retain and support older employees, including action in such areas as: greater workplace flexibility through family-friendly policies, employer support for re-training and preventive steps to reduce the incidence of workers compensation claims Raising wider community awareness of the importance of financial planning and retirement planning (with a view to starting early with younger workers) Consolidating and more actively promoting information about the range of programs and services available to mature age people Providing up-to-date information for mature age people about the changing nature of employment for example, what kind of jobs can be secured, and growth industries Creating additional incentives to assist mature age people on income support, or who have been made redundant, and Improving services and support for mature age people, based on their varying needs, including enhanced employment services. Emphasis on the extension of working life has grown in most industrialised countries, as reflected in numerous reports by the OECD, the European Union, the International Labour Organization, the World Bank and other national and international agencies. This increase in concern arose partly because of high levels of unemployment among older workers (defined variously as 40 plus, 45 plus, 50 plus, and 55 plus). More specifically, contributing factors included: An ageing population and increased life expectancy Pressure on public pension systems A shift of responsibility for pension coverage from public schemes to individual saving The popularity of early retirement A general shift from passive to active labour market policies Increases in long-term unemployment among older workers A growing view that employment problems require cooperation between government, employers and unions Recognition of age discrimination in the labour market, and Concern about labour shortages. Philip Taylor, of Cambridge University s Interdisciplinary Research Centre on Ageing, prepared a comparative analysis of policies in six countries on behalf of the Joseph Rowntree Foundation, as part of its series of reports on Transitions after A useful classification of policy settings in these six countries is shown below. While providing a useful snapshot of the range of policies in play, as Taylor himself admits, the table did not indicate the extent to which policies were developed in particular countries. Main public policies related to older workers 1. Comprehensive approach to the employment and retirement of older workers 2. Removal of incentives to early retirement, plus encouragement of later retirement Australia, Finland, Japan Australia, Finland, Germany, Japan, Netherlands, USA 50 New Policies for Older Workers, Policy Press,

10 3. Abolition of compulsory retirement* Australia, USA Australia, Finland, Germany, Japan, 4. Banning of age discrimination* Netherlands, USA 5. Gradual retirement schemes Finland, Germany, Netherlands 6. Consciousness raising campaigns Australia, Finland, Germany, Netherlands 7. Guidance and training programs for older workers Australia, Finland, Germany, Japan, Netherlands, USA 8. Support for employers (advice, training, placement Australia, Finland, programs) Germany, Japan, USA 9. Support for labour market intermediaries Germany, USA 10. Employment subsidy and other employment incentive schemes Australia, Finland, Germany, Japan, Netherlands *All members of the European Union were required to introduce legislation to ban age discrimination not later than The directive issued by the European Commission in November 2000 stipulated that all forms of age discrimination in employment must be prohibited, but it is less clear whether this also entailed the abolition of compulsory retirement. Why people choose to retire Quantifying the reality of mature age employment and unemployment is neither simple nor straightforward, with the reality often disguised. For example, early retirement implies a voluntary outcome when it could actually mean involuntary workforce exit 51. Of the 1.9 million retired people in Australia in 2007 who had worked in the previous 20 years, the most commonly reported main reason for retiring was personal health or physical abilities (32 per cent) 52. The other main reasons men retire are: Being retrenched or made redundant (10 per cent), and Reaching the eligibility age for an age pension (8 per cent). The other main reasons women retire are: Caring responsibilities (15 per cent) and To spend more time with family (13 per cent). Of the 3.9 million employed people aged 45 and over, 85 per cent intend to retire eventually from the labour force the remainder do not intend to retire. Of the 748,000 people who intend to continue with full-time work right up until retirement, 69 per cent plan to remain with 51 Experience Works: The Mature Age Employment Challenge 52 ibid 10

11 their current employer with no further plans to phase in retirement. These people plan to retire at an average age of Age at retirement from full-time work 54 Age group Men% Women% Under There were 1.1 million people who intended to leave full-time work and work part-time before retiring. The average age of this transition was estimated at 60 years. Of all employed people who intend to retire 55 : 24 per cent intended to retire aged 70 or over; 40 per cent intended to retire aged 65 to 69; 24 per cent intended to retire aged 60-64; 9 per cent intended to retire aged 55-59; 1 per cent intended to retire aged 45-54; 2 per cent were unable to provide an intended age of retirement. Mature age policy challenge Skills shortages are expected to arise from Australia s ageing workforce and this lays the foundation for a re-design of employment policy and programs that will respond to rising unemployment. Ensuring that mature age people are engaged in meaningful employment and training and with access to a decent incomes will help ensure that the workforce is ready for the major demographic challenges that will confront Australia with great intensity in five years time 56. Changed labour market conditions have encouraged mature age employees to seek early retirement in times of under-supply of jobs. But in recent years, there has been pressure to delay retirement in the face of skill shortages and an exodus from the workforce of baby boomers, now reaching retirement age. A review of available research identifies a number of factors that affect retirement decisionmaking 57 : Age (affecting access to the Age Pension and superannuation) Pension and superannuation scheme availability and attributes (which either push people into a longer working life or pull them into retirement) 53 ibid 54 Retirement and Retirement Intentions Survey, 1997, ABS 55 Experience Works: The Mature Age Employment Challenge 56 ibid 57 ibid 11

12 Pension wealth and implicit tax on Age Pension or superannuation (high pension wealth and/or high implicit tax contributing to early retirement) De facto schemes, such as, disability pensions that facilitate an early path to retirement Positive workplace factors including flexible working arrangement, availability of parttime work, positive approaches to managing older workers (contributing to delayed retirement) Job satisfaction Health status (self or spouse) Employment and labour force status (self-employed men tend to retire later, selfemployed women earlier than employees; those with access to part time work are more likely to work longer) Educational status (tertiary educated tend to work longer) Housing status (those with own home or mortgage tend to retire later than those who rent) Level of debt (higher debt equating to later retirement) Most OECD countries (including Australia) have documented higher rates of unemployment and age-based discrimination that are related to negative vocational training experiences by mature age workers 58. This certainly reduced their expectations of their continued participation, and reflects attitudes by employers, trade unions and workers not just government policy makers. The 2004 Economic Implications of an Ageing Australia report 59 reinforced the importance of prolonging workforce participation in employment, and ensuring that older workers (and all workers) had the necessary skills to do so. The Productivity Commission argued that immigration alone could not resolve the loss of labour force and that increasing taxes was not sustainable. Instead, the commission pointed to addressing the source of the challenge sustaining and supporting workforce participation (for example, through flexible working arrangements). Skills Australia Chairman, Philip Bullock, said policy reform was needed, not just in the areas of workforce development, skills and education but also in taxation reform, more flexible working arrangements, more affordable child care as well as other whole-of-government and industry measures 60. The aim was to sustain economic growth, avoid future skills shortages and raise productivity by increasing and deepening the skills of Australia s workforce. Lifting the participation rate would significantly mitigate the impacts of an ageing population. The workforce participation rate would fall from its present level of 65.1 per cent to 63.9 per cent in 2025, largely due to retirement. Skills Australia called on governments to commit to a participation target of 69 per cent by 2025 to provide the required workforce and to improve social inclusion 61. The target of 69 per cent participation would require a bold new approach to encourage and support more people to enter, re-enter and remain in the workforce. 58 New Policies for Older Workers, 2002 (adapted), Philip Taylor, 59 Economic Implications of an Ageing, Submission to the Productivity Commission, Volunteering Australia 60 Australian Workforce Futures, A National Workforce Development Strategy 2010, Skills Australia 61 ibid 12

13 We recognise that a 69 per cent target is very ambitious and will not be easy to reach, but international evidence shows that countries comparable to Australia achieve higher rates of participation, so it can be done. Philip Bullock 62. A significant amount of research has been devoted to the combined impact of population ageing and skills shortages on workforces in Australia and other OECD countries. Understanding the implications of these dynamics is crucial for the design of policy and program responses 63. Europe blazing the trail An age employment paradox confronts most European Union countries, where the increase in the average age of the economically active population conflicts with a continuous lowering of labour force exit thresholds, with people aged over 40 regarded increasingly as nearing the end of their working lives 64. This was recognised as a major policy challenge throughout the OECD as countries sought to address concerns about the emergence of chronic skill shortages. While the concerns had abated in the short term, with the global economic recession, the pressures arising from workforce ageing were set to re-emerge with even greater intensity when the world economy recovered and economic growth accelerated. Good practice in the employment of older workers consists of combating age barriers, either directly or indirectly, and providing an environment in which each individual is able to achieve his or her potential without being disadvantaged by their age. 65 A positive case emerged across the European Union in 2009 for combating age barriers in job recruitment and training on the grounds of pragmatism, commercialism, good human resource management practice and in the interests of justice and fairness 66. Several European governments began the process of reversing the public policy support they had previously given to early exit from the labour force and were seeking ways to reduce the costs of early retirement. Some employers had reassessed their attitudes to older workers; some were even constructing a positive business case for employing this group 67. Trade unions were also reconsidering their (previous) support for early exit strategies. Our conclusion, therefore, consists of both negative and positive elements. The bad news is that age discrimination is still widespread in the labour markets of EU countries and that there are far too few examples of organisations, especially SMEs, taking action to combat age barriers. The results are that the employment prospects of many hundreds of thousands of older workers in the EU are being blighted; employers are wasting human resources and creating unnecessary skill shortages and national social security budgets are being inflated. The good news, however, is that a minority of employers, in the public and private sectors, and community-based 62 ibid 63 Experience Works: The Mature Age Employment Challenge 64 ibid 65 ibid 66 ibid 67 Combating Age Barriers in Employment: A European Portfolio of Good Practice 13

14 NGOs are demonstrating that it is possible to take practical action to combat age barriers. They are blazing a trail that others could follow easily if they are so minded 68. New flexible contracts in Britain The Confederation of British Industry (CBI) argues that retirement is accentuating existing shortages of critical skills but plugging the gaps will have to be the responsibility of business rather than government, whose spending would be constrained 69. CBI said the challenge for businesses across the UK was to capture the knowledge and experience of individuals effectively before they retired, in particular those in technical and senior management positions, and to retrain other employees and/or seek new skills from elsewhere. Britain expects 11.5 million job vacancies by 2017 due to retirements alone. Mature age retirement is expected to cripple some industries and only a radical new approach would retain mature age workers. For example, over the next 20 years the UK aerospace and defence industry is set to retire close to 60 per cent of its workforce at an average rate of 3 per cent a year. This equals a massive loss in experience and a need to increase recruitment by 74 per cent over the same period 70. CBI said new flexible working contracts would become the norm in the UK and by offering flexibility businesses would seek to differentiate themselves in the market for the best and most talented employees. It would also allow them to tap into the widest pool of resources, including pensioners, the disabled, and people with childcare/elderly care or other significant responsibilities outside of work. As a result of the drive towards flexibility, a significant number of businesses were moving to a new employment model, where the core of permanent staff is smaller and use a greater number of freelancers, consultants and temporary workers. These would be skilled professionals who would undertake activities core to operations when needed 71. Continued participation in the workforce and/or re-entry into the workforce at an older age was facilitated by a number of factors: Flexible IR arrangements to suit the mutual needs of employers and employees A holistic approach that includes strategies to address health and skills issues and their contribution to ongoing workplace effectiveness, with an emphasis on a preventive approach Access to ongoing skills programs that have been aligned with industry needs Incentive regimes that support individuals and employers to participate in mature aged labour market programs Appropriate work placement matching between the employer and employee supported by quality career support, and 68 ibid 69 The shape of business: The next 10 years, 2009, Confederation of British Industry 70 ibid 71 ibid 14

15 The availability of quality information for employers and employees about practical approaches to participation in mature aged employment including retention of existing workers and transition assistance Over the next ten years and beyond a number of significant social and demographic changes are expected to affect businesses in the UK and elsewhere. Most, such as the ageing population, are underlying trends not caused by the recession, but their impact on business is expected to be greater as companies faced them while also having to deal with new economic conditions. Even with people working longer the vast majority of labour market movement in the years to 2017 was expected to be accounted for by the replacement of those leaving jobs for retirement. The challenge for businesses will be to capture the knowledge and experience of individuals effectively before they retire in particular those in technical and senior management positions and to retrain other employees, and/or seek new skills from elsewhere. 72 Mature workers widespread across industry Mature age workers are located throughout the Australian workforce with similar concentrations of older and younger workers in four key industries: manufacturing, retail, property and business services, and health and community services 73. Mature age workers have increased their share of employment in nearly all industries over the previous decade, although participation rates for women were still significantly below those for men in age categories above 45 years 74. The ageing of Australia s population poses significant challenges for the Australian economy and society as a whole, but more importantly even greater opportunities 75. A significant decline in the growth of the workforce is projected to emerge as baby boomers move through to retirement. Mature age workers have the potential to make a significant impact on Australia s future economic growth and prosperity with improved health expectations, greater longevity for the Australian population and increased workforce participation by women. In there were 3.2 million mature age workers in the Australian labour force making up a third of all employed people. Around 44 per cent were women, the same proportion as all employed people, and just over a quarter (26 per cent) were employed part-time, compared with 23 per cent of employed year olds 76. Mature age employment by industry 77 % of employees aged 45+ Industry Retail trade Health and community services ibid 73 Age can work: the case for older Australians staying in the workforce, National Strategy for an Ageing Australia, Experience Works: The Mature Age Employment Challenge 76 Mature age workers ABS Year Book Australia Department of Employment and Workplace Relations 15

16 Education Property and business services Manufacturing Agriculture, forestry and mining The education industry employs the highest proportion of mature age workers, where 47 per cent of all employees were aged years in The health and community services industry employed the next highest proportion of mature aged workers (42 per cent), followed by electricity, gas and water supply, government administration and defence, and agriculture, forestry and fishing industries, with 41 per cent of workers in each of these industries aged years. The high proportion of mature age workers in the agriculture, forestry and fishing industry was consistent with the trend for fewer young people entering farming as a vocation and with farmers often working beyond the age of 65 years 78. Many occupations with relatively high levels of mature age workers require higher skill levels. In the broad occupation of group managers and administrators, 47 per cent (332,800 people) were aged years (in ) followed by 38 per cent (144,300 people) in advanced clerical and service workers, and 37 per cent (666,400 people) in the professionals group. Of the mature age workers employed in the broad occupation group of professionals, 12 per cent were registered nurses, 10 per cent primary school teachers and 9 per cent secondary school teachers. Some occupations with lesser skill requirements also contained large numbers of mature age workers: 483,200 mature age workers were intermediate clerical, sales and service workers, 291,000 intermediate production and transport workers, and 277,500 labourers and related workers were aged years 79. The unemployment rate for mature age people tends to be lower than most other age groups. The unemployment rate for year olds was 3.6 per cent in , representing 119,100 people. In comparison, the unemployment rate for year olds was 4.9 per cent. Over four-fifths (82 per cent) of mature age jobseekers were seeking full-time work, a similar proportion to that for year olds (81 per cent). Workforce participation Mature age workers are more likely than people in younger age groups to become discouraged and drop out of the labour force altogether, consistent with the difficulties people aged years face finding work over a long period of time. In September 2003 more than half (52 per cent) of all discouraged job seekers were aged years 80. In recent years, the retention of mature age workers (defined as employed people aged years) in the labour force has been highlighted as a possible solution to the potential shortage of labour 81, and has been the focus of certain public policy goals Mature age workers, ABS Year Book Australia ibid 80 ibid 81 Australia's Demographic Challenges, 2004, Department of the Treasury 82 National Strategy for an Ageing Australia, 2002, Department of Health and Ageing 16

17 These policies include gradually increasing the age at which women can access the age pension, ongoing increases to the minimum age for accessing superannuation benefits, and the introduction of incentives for workers who stay on in employment beyond the Age Pension age (e.g. the Pension Bonus Scheme). People aged years made up almost a third (32 per cent) of the labour force in compared with 24 per cent in This increase reflects larger numbers of people entering this age group as baby boomers age and due to changes in labour force participation over the period 83. People aged years are more likely than in the past to be labour force participants. Participation rates for this group increased from 57 per cent to 68 per cent between and This increase in workforce participation has been driven largely by the increased participation of women, reflecting a range of social changes, including greater acceptance and opportunities for women in the workforce. In the participation rate for women aged years was 60 per cent, well above the proportion participating in the labour force in (36 per cent) 85. By comparison, participation for men decreased slightly over the previous two decades in almost all age groups, although the participation rate for men aged years remains stable (77 per cent in and ) 86. Invisible men They have been called the invisible men. Of the 8 million Australian males in the adult male civilian population in , at any one time more than 2.2 million, or nearly 30 per cent, were outside the labour force (economically inactive) neither working nor looking for work 87. These were described as people whose engagement with the labour market had ceased, in many cases for the rest of their lives. In contrast, the unemployed were still counted as economically active because they were looking for a job and their search activities had effects on the labour market as a whole. Population ageing was part of the reason for climbing aggregate male inactivity rates. The pattern of inactivity by age followed a predictable lifecycle pattern, with considerably more inactivity at ages under 25 years (as males attend educational institutions) and then relatively low inactivity rates until age 55 years, after which exit from the labour force begins to drive up inactivity rates steeply 88. By age 70 or more only about 1 in 20 men have any engagement with the labour force. The ageing of the male population had pushed more men into ages in which inactivity rates are high. But other factors still explain about three quarters of the long-run increase in the aggregate inactivity rate. Ageism and discrimination 83 Mature age workers, ABS Year Book Australia ibid 85 ibid 86 ibid 87 Men not at work, Productivity Commission ibid 17

18 Despite the acknowledged valuable contributions of mature age workers, they face many barriers to staying in the workforce arising from terms like ageism. Such ageist discrimination is commonplace in all European countries where targeting older workers for redundancy is still favoured. The ageing of the population and the declining labour market participation of mature age workers has been described in the UK as the age-employment paradox 89. The key to maximising mature age labour force participation in Australia is an understanding of the multiple barriers that mature age people face in securing and retaining employment 90. A number of consistent themes emerge from the research regarding the barriers to workforce participation of mature age people, and these could be grouped into five main categories 91. Discrimination on the basis of age Lack of appropriate skills and training as skills requirements change, and limited opportunities to upgrade skills in a way that does not bring financial difficulty Personal circumstances related to health and disability issues associated with the ageing process and caregiving responsibilities, and Government income support policies that work against achievement of credentials that will lead to sustainable employment, and against the combining of part time paid employment with income support including the Age Pension. In addition, policies developed in one portfolio, income support for example, can work against policies developed in other domains, for example, education and training, creating competing incentives and disincentives. There is a need for coordinated, cross-government policy to support mature age employment. The term ageism (or age discrimination) refers to negative perceptions held about people because of their age. It affects both young and older people and fails to distinguish individual differences within a group 92. Ageism assumes a lack of capacity either through lack of maturity and experience (as is the case for young people) or because of the changes brought by growing older. As a barrier to workforce participation, ageism categorised young people as lacking the maturity and experience to be effective employees but ironically disregards the maturity and experience of older workers. According to the Australian Human Rights Commission, negative stereotypes and assumptions of a use by date are significant barriers that older Australians already face when they look for meaningful work. With Australia s workforce ageing at a rapid rate and some industries facing labour supply shortages, buying into these stereotypes will increasingly come at a heavy cost to employers. That s why it s so important to separate the myths from the facts 93. Older workers are commonly perceived as 94 : 89 Combating Age Barriers in Employment: A European Portfolio of Good Practice 90 Experience Works: The Mature Age Employment Challenge 91 ibid 92 ibid 93 Age Discrimination, Mature Workers, Australian Human Rights Commission, 94 ibid 18