Older people on the labour market in Iceland Public policy and measures within continuing education Gissur Pétursson Directorate of Labour 1. Conditions on the labour market Employment participation among middle and older age groups is very high in Iceland compared to other western societies. Thus 44% men 65 years and older were on the labour market compared with 5% in Denmark and in Finland in 2002. Figure 1 shows that employment participation of the 50-69 age group was over 80% in Iceland compared with 40-60% for most of the OECD countries in 2002. The age division of the Icelandic population is different from most Western European countries. The average age is lower, i.e. more people are in the working age and school age brackets. It is expected that the employment participation will undergo the same changes in Iceland as happened in Western Europe 10-30 years ago, the same way as with other social and demografic factors. Figure 2 shows porportion of population that is over 65 in some OECD countries in 2004 and expected proportion in 2050. The proportion is currently rather low in Iceland but is expected to be rather high in 2050 compared to many other nations It is obvious that labour market participation in Iceland, which is not restricted to older age groups but also to students and women, is a feature which is particular to Iceland and is in some way connected to the tradition and culture of the country. Surveys have shown that the so-called workethic is stronger in Iceland than in most Nordic countries as well as in other neighbouring countries and the self-identity of the Icelandic people is strongly connected to work. Morale is high among employed persons and the employed are prepared to work a long working day and are also willing to delay retirement. There are some signs that these views are changing with new generations. Surveys show that there are differences in the opinion of young people vs. older peoples towards work we must be aware of changes in opinion with higher age. The public authorities in Iceland act differently from the governments in many OECD countries. Lowering the retirement age in order to counteract unemployment has not been the method generally used in Iceland. The main reason is that unemployment has historically not been high except during the 1929 world economic crises and the big reduction in fishcatches in 1967-69 as well a period during the middle of the nineties. That increase in unemployment during that period did not last or become permanent compared to what happened in Europe. Thus the unemployment ratio in 1995 was 5%, but decreased fast thereafter and has been fluctuating around 2% during the past several years. The older age groups are relatively few due to the age distribution. 1
Australia Austria B elgium Canada Czech Republic Denmark Europe European Union 15 Finland France Germany Greece Hungary Iceland Ireland Italy Japan Korea Mexico Netherlands New Zealand Norway OECD Poland Portugal Slovak Republic Spain Switzerland Turkey United Kingdo m United States 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Figure 1. Participation rate in some OECD countries in 2004 2
Ireland Slovak Republic Iceland 2050 2004 Cyprus Poland Malta Netherlands Czech Republic Luxemburg Denmark Slovenia Lithuania EU 25 Austria Hungary Finland United Kingdom Latvia Estonia France Portugal Spain Belgium Sw eden Greece Germany Italy 0% 5% 10% 15% 20% 25% 30% 35% 40% Figure 2. People over 65 years old as proportion of total population, in EEA countries 2004 and estimation for 2050 3
1.1 The retirement age and the social security system The opportunities for retirement have increased because of alternative pension schemes as well as because of the improved welfare of more employees. Employees retire at different times, thus those officials who retired according to the socalled 95 years rule (natural age and number of working age=95 years) can retire from the age of 60. Public officials in government, employment and the employees of municipalities can retire when they reach 65 years and become entitled to base pension and income related benefits from the State Social Security. The employees of financial institutions as well as seamen can retire when they reach 60 if they are entitled to do so. The general retirement age is however 67 years when the State Social Security Institute begins paying old age pension. The ratio of old age pension is low in Iceland compared to 85% in Germany, 65% in UK and 45% in USA. This reflects the age division of the nation and a great importance of public pension funds in Iceland s pension system. The general attitude towards work and retirement age seems to be changing and be more in tune with new legislation in neighbouring countries where there are now ongoing preparations towards flexible retirement. The new policy is for offering more alternatives than just retiring when you become 70 years of age. Until now many people can not retire before they reach 70. This is because of the lack of strength of the pension funds, delayed access of employees to the pension funds as well as low payments from the State Social Security Institute and reduction of benefits due to income and pension benefits. In this comparison it is necessary to describe the pension system in Iceland. Iceland is a special case in this sense. The pension system is based on equal entitlement until 70 years of age and a fixed ratio of wages (4-6%) is paid to a pension fund. The employer pays an extra amount (2-4%) of the employees wages. The Icelandic pension funds are so-called collecting funds. The Icelandic pension system is mainly based on three pillars- social pensions, public pension funds and alternative pension savings. The alternative pension saving is a new addition which is based on a fixed ratio of wages paid into a private pension fund and when the employee reaches 60 years of age and through his/her 66th year the employee can opt to receive pension payments before he/she becomes 67 years, or proportionally between the ages 60-67 years. Iceland s pension system has been positively evalued by the OECD. The participants to the labour market collective agreements in 1969 decided to establish pension funds based on a compulsory membership and with a complete fund saving. Due to the growth of the funds in recent decades and the improved legal foundation all prerequisites are for these Icelandic funds to become the principal pillar of the Icelandic pension system in the future. 1.2 Other items influencing the decisions of retirement A public commission set up by the Prime Minister s office on flexible retirement made a survey in 2002 on the situation of the 55-75 age group. One of the results was that 40% of the replies of the 4
age category 55-64 years were prepared to reduce their job-ratio when traditional retirement is obtained instead of going on retirement. The survey results that those retired before 67 years explained that: 30% were retired due to health problems. 20% wanted to enjoy life while age and health would allow 15% said that they retired because of good economy Those who continued to work after 67 years of age gave the following explanations: 39% said the reason was to improve their economy 30% were happy in their job 31% described other reasons, i.e. they didn t know what to do, they wanted to be active, or continue to work because of the employer s requirements. During recent years an increase in age related prejudice has been noticeable in the Icelandic labour market. Partly this is connected with increased stress in modern society and the constant need for increased qualifications in order to keep the position in the labour market. This is also due to changes within the industry sectors but traditional production- and service industries are stationary or have less and less need for more labour. New industries such as IT and the growing financial sector as well as tourism require employees with new knowledge and experience-good language capabilities and people with IT capabilities have many opportunities as well as those who enter the labour market with business education from the 4 universities in Iceland in addition to those who receive an education abroad. Generally older people are not more likely to loose their jobs than those who are younger, even less. Typical for the group is that if those older than 50 years loose their job it might be more difficult to get a job again compared to the younger age groups and long term unemployment is higher among oldest age group as can be seen in figure 3. 5
500 400 300 200 100 0 júl.02 okt.02 jan.03 16-24 years 25-34 years 35-44 years 45-54 years 55 years + apr.03 júl.03 okt.03 jan.04 apr.04 júl.04 okt.04 jan.05 apr.05 júl.05 okt.05 jan.06 apr.06 júl.06 okt.06 jan.07 apr.07 júl.07 Figure 3. Long term unemployment (6 months+) among agegroups If people close to 60 years of age haven t got a new job within some months they are likely to become permanently unemployed until they retire. Lifelong learning for older people is necessary in this connection but it is necessary to strengthen this factor because continuing education is less among the older age groups. 2. Continuing education among older people on the labour market government policy and measures in historic perspective The labour market needs more and more know-how and technical development requires an increased emphasis on lifelong learning. Continuing education is an important factor in maintaining people s qualifications for the labour market. Surveys show that participation in continuing education diminishes after people reach 50 and they participate in inexpensive lower studies and even more so after they reach 60. The groups are however different especially in relation to education. Those with the most education are those who are most active in continuing projects. However this is not valid in all instances i.e. there are some differences according to educational background within the age groups. Those with less education participate least in continuing education and that group is more sensitive in relation to unemployment. This indicates that the group s position on the labour market shows that it is not a homogenous group and different methods must be used in order to strengthen the position within the group. Below is a description of some factors regarding continuing education and their status in Iceland. okt.07 6
2.1 The development of continuing education in Iceland During the seventies and eighties more emphasis was placed on continuing education. This development however was rather slow in the beginning but accelerated later. During the eighties and nineties so-called educational centres were common and in 2000 under three party negotiations between the actors on the labour market and the government, so-called vocational funds were established for the general labour market. These funds are aimed at education in order to provide the labour union members with vocational education as in Iceland about 90% of the employees are unionised. Until present the public authorities have paid into these funds but the employers will take over that role, beginning in 2008. In the public labour market the government has decided to pay a fixed income ratio from the salary of the employees into the vocational funds. This development is characterized by an increased access of the parties on the labour market to education. Cooperation between the educational institutions and the parties in the labour market has increased. The supply of studies especially on the labour market for people with limited education has increased. According to information from the vocational funds people 50 years and older reduce their participation in vocational studies and enter even cheaper studies after 60 years of age. Generalization can not in this context be done while the groups are different especially in relation to the educational background. People with the most educational background are also most active in continuing education. 2.2 The public policy of older people on the labour market In 2003 the Althingi Parliament passed a resolution about dissmissal from work or discrimination due to age. This resolution was an answer to the discussion concerning the idealysation of young people in the society and the fact that older people were dismissed in order to hire young people. The resolution was as follows: The parliament Althingi resolves to perform an investigation into how discrimation and dismissal from work within the labour market because of age can be counteracted against with legal provision. A commission shall be appointed where representatives of the employees and political parties will participate and the commission shall submit a report within one year. The Minister of Social Affairs appointed a commission on the middle-aged and older people s position on the labour market. The commission was entrusted to counteract by enacting a law against age discrimination in the form of dismissal from work as well as discrimination due to age. The main conclusion of the commission which investigated the position of the middleaged and older people on the labour market. 7
On the initiative of the commission, a survey was completed which investigated the position of middle-aged and older people on the labour market which IMG Gallup performed. The conclusions of the survey were not valid in all instances. No age-discrimination was observed on the Icelandic labour market, when people older than 50 years were asked about their experience of loosing their job due to age. If however people were asked about others experience, 7-9% of the surveyed answered that they were familiar with such discrimination. The Federation of Icelandic Employers made a survey among their members on attitudes towards middle aged and older people on the labour market. In that survey older people on the labour market did not receive an evaluation of being less qualified than younger people they had fewer days from work due to illness and were more motivated towards their job than the younger people. Similar to other countries it is more difficult for Icelandic employees over 50 years of age to be reemployed again after loosing their job. The main key to re-enter on the labour market is continuing education. The Commission agreed about the necessity of measures and proposed that the government set up a 5 year project to strengthen the position of middle-aged and older-aged on the labour market. The Project Board of 50 years and older, role and emphasis In 2005 the Minister of Social Affairs appointed a project board which was entrusted to administer a 5 year project with the main target to strengthen the position of the middle-aged and older-aged on the labour market. The Project is also intended to create a positive discussion in Iceland about middle-aged and older-aged in the labour market, improve their image and counteract the opinion in the society in favour of the group. The project board focus primarily on three topics, i.e. education, research and opinion towards the age-group. The project-board has set up a project-plan in favour of the needs of the middle and older-aged on the labour market. The project board divided the target group into two categories: People over 50 years of age intending to stay on the labour market and not thinking about their retirement. This group has problems regarding re-entering the labour market according to experts. The emphasis are on measures in order to strengthen the position of the group with provision of education. The oldest age-group which is approaching retirement, emphasis on entitlement to pension, flexibility regarding job-ratio as well as on retirement. Research and education is aimed at the group 50 age and over. The project board co-operates with the universities where post graduate students are encouraged to focus on this topic. The project board wants to cooperate with a research unit on provision of a age-barometer based on a Norwegian model which has been used for some years on older peoples position on the 8
labour market. The aim is to evaluate what factors influence the older-peoples position on the labour market. The representatives of the board of project-administration have introduced the work of the committee abroad as well as the position of middle-aged and older-peoples on the labour market in Iceland. The project-board has introduced the work both among general public, researchers, policy-makers as well as among companies through media both in 2006 and 2007. The projectboard has set a project-plan in the beginning of the year and in 2008 the focus will be on companies. 2.5 The Continuation The labour force of the future will not be similar to the present composition. The so-called baby boomer generation, i.e. those borned after world war two until 1964 are approaching their retirement age. The fertility rate in the Western states has diminished with higher life-probability. In Iceland this development has not been as fast as in other western societies and the fertility has increased during the last years. There are signs of diminished labour market participation in Iceland in the near future, if not counteracted. The age composition of Icelanders, more welfare, more extra pension saving is a reality and the pension system is better prepared for larger old-age groups. Scarcity of labour can be a reality in the future and companies must be prepared to scarcity of labour. It is important to encourage older people to continued labour market participation. Higher average ages and more support to older people is presently not a problem in Iceland similar to most countries which finance pension payments through canals as taxation on companies and employees income. The problem is lack of labour supply. It is necessary that all obstacles for older people s participation on the labour market must be moved and that the work place meet the adjustment of the older people. This includes the coordination of private life and work, shorter working time, part-time work, mobility from more responsible job to less responsible job. 9