trends appears twice a year in eng- it can be ordered free

2 No. 33 · Winter 1999

Trends

Currency conversion rates

One Euro is equivalent to the following amounts of national currencies (31 December 1999):

Belgium BEF 40.3399

Denmark DKK 7.4380

Germany DEM 1.95583

Greece GRD 330.146

Spain ESP 166.386

France FRF 6.55957

Ireland IEP 0.787564

Italy ITL 1,936.27

Luxembourg LFR 40.3399

Netherlands NLG 2.20371

Austria ATS 13.7603

Portugal PTE 200.482

Finland FIM 5.94573

Sweden SEK 8.5600

United Kingdom GBP 0.6209

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No. 33 · Winter 1999 3

TrendsContents

The Journal of the EuropeanSystem of Documentation, Evaluation

and Monitoring on Employment Policies(SYSDEM)

No. 33, Winter 1999

Trends provides a comparative and in-depth overview ofselected policies and developments in the labour marketsof the Member States on the basis of articles provided bythe SYSDEM correspondents. It appears twice a year andis published in English, French and German.SYSDEM is one of the networks of the European Em-ployment Observatory (EEO) and is administered on be-half of the European Commission (DG V) by I.A.S., Insti-tute for Applied Socio-Economics.

SYSDEM correspondents:Belgium: Jan Denys, Higher Institute of Labour Studies,LeuvenDenmark: Per Kongshøj Madsen, Institute of PoliticalScience, University of Copenhagen, CopenhagenGermany: Kurt Vogler-Ludwig, Institut für Wirtschafts-forschung (Ifo), MunichGreece: Athena Petraki Kottis, Research Centre, AthensUniversity of Economics and Business, AthensSpain: Luis Toharia, Departamento Fundamentos deEconomía e Historia Económica, Universidad de Alcaláde Henares, MadridFrance: Sandrine Gineste, BIPE Conseil, Boulogne-BillancourtIreland: Jerry Sexton, Economic and Social Research In-stitute, DublinItaly: Manuela Samek, Istituto per la Ricerca Sociale(IRS), MilanLuxembourg: Uwe Warner, CEPS/INSTEAD, Differ-dangeNetherlands: Marjolein Peters, EIM International, Zoe-termeerAustria: Ferdinand Lechner, L & R Sozialforschung,ViennaPortugal: Helena Lopes, DINÂMIA, Centro Associadodo Instituto Superior de Ciências do Trabalho e da Em-presa, LisbonFinland: Reija Lilja, Labour Institute for Economic Re-search, HelsinkiSweden: Anna Thoursie, Swedish Institute for Social Re-search, Stockholm University, StockholmUnited Kingdom: Nigel Meager, Institute for Employ-ment Studies (IES), University of Sussex, Brighton

European Commission:Markus Penttinen (DG Employment and Social Affairs,EMPL/A/2)

Secretariat of the European EmploymentObservatory:I.A.S., Institute for Applied Socio-Economics, BerlinAdministrative director/publication manager: AngelikaZierer-KuhnleScientific programme manager: Frank StilleTranslation: Max Guggenheim (French), Klaus Rup-precht (German), Andrew Watt (English)

Layout: pinkuin satz, BerlinPrinting: Druckerei Conrad, Berlin

EMPLOYMENTOBSERVATORY

Trends Older Workers on the Labour Market:an Introduction ............................................................. 4

Older Workers on the Labour Market

Belgium ........................................................ 9

Denmark....................................................... 15

Germany....................................................... 21

Greece .......................................................... 27

Spain............................................................. 31

France ........................................................... 36

Ireland .......................................................... 43

Italy .............................................................. 50

Luxembourg ................................................. 58

Netherlands .................................................. 61

Austria .......................................................... 66

Portugal ........................................................ 73

Finland.......................................................... 77

Sweden ......................................................... 83

United Kingdom ........................................... 89

The articles in Trends reflect the opinions and analyses ofthe SYSDEM correspondents and do not necessarily repre-sent the opinions or views of the European Commission.The signed articles are the sole responsibility of theauthor(s).

4 No. 33 · Winter 1999

Trends

Rising life expectancy in the indus-trialised countries is leading to an“ageing” of the population. Becausein many countries this trend is beingaccompanied by a major decline inthe birth rates, there is often simulta-neously the problem that within thepopulation of working age the rela-tive size of the younger cohorts is de-clining, while that of older workers isincreasing substantially; that is, theworking population, too, is ageing.

Such trends have complex eco-nomic and social implications for thesituation facing pensioners, for thefinancial viability of the pension,health and care system, and for thesituation facing older workers on thelabour market. Unemployment isparticularly important in this con-text: it tends to hit older workers –and especially the lower skilledamong them – hardest.

In order to save older workersfrom unemployment, most Europeancountries have established variousforms of early exit from working life,in most cases designed and also fi-nanced by the government. This wasalso in the interest of employers, assuch instruments offered them a wayto reduce or restructure their work-force at low cost. Such restructuringproves all the easier when those af-fected do not face financial lossesand, via their interest-representationorgans, feel able to accept such exitpaths.

For some time now, the economicimplications of the ageing of societieshave been the subject of intense de-bate; the contributions to this issueform part of a larger whole, consist-ing of numerous international andEuropean publications on this theme.Prominent examples include the1998 report by the OECD, Maintain-ing Prosperity in an Ageing Society,which placed particular emphasis onthe need to enhance the skills of old-er workers in order to strengthentheir employability. The research un-

Older Workers on the Labour Market:an Introduction*

dertaken within the NBER Pro-gramme “Economics of Aging”(www.nber.org/programs) is an indi-cation of the intensity with whichthese issues are being discussed in theUSA.

At the European level, the topic ofolder workers received greater em-phasis in 1999. Older workers are re-ferred to explicitly in the 1999 Em-ployment Policy Guidelines for thefirst time. The new Guideline 4draws attention to the necessity todevelop measures, within the con-text of a policy of “active ageing”, inorder to maintain the work capacityof older workers and to grant themaccess to lifelong learning and, thus,active participation in working life.At the same time, vigorous stepsmust be taken to counter age dis-crimination. The position adopted bythe EU Commission is clearly set outin its contribution to the Internation-al Year of Older Persons, declared bythe United Nations for 1999, underthe title Towards a Europe of AllAges (COM [1999] 221 final, 21.5.1999).

The choice of topic for this issue isalso linked to the Finnish presidencyin the second half of 1999. Prelimi-nary – and rather longer – versions ofthe contributions to this volumeserved the Commission as prepara-tory documents prior to discussionsand negotiations on this theme. Inparticular, it is also to be noted that aspecial section of “Employment inEurope 1999” (http://europa.eu.int/comm/dg05) has been dedicated tothe labour market implications ofageing. There, one can find informa-tion on, and comparisons of, thecharacteristics of older workers –such as participation, unemploymentand re-employment chances, occupa-tional and sectoral structure, income,and so on – for all the Member Statesof the EU.

This issue of TRENDS focuses pri-marily on those aspects with which

older workers find themselves con-fronted on the labour market. Thereports from the Member Statesclearly reveal both numerous simi-larities and differences between thecountries in terms of:– the current situation and the prob-

lems expected;– the provisions concerning statuto-

ry age limits and early retirementfrom the labour market and activelabour market policy measures;

– the efforts made by firms, the so-cial partners and governments toensure that older workers remainin working life longer;

– policy conclusions.This introduction aims to make thenational reports more readily com-prehensible by presenting some sup-plementary information and consid-erations, particularly concerning theinterrelationship between early re-tirement from working life and un-employment.

The statutory retirement age, thatis, the age at which older persons areentitled to claim the standard old-agestate pension, varies between theMember States (MS). In many casesthis age is set at 65, for both men andwomen (E, IRL, L, NL, S); in Den-mark the pension age is now 65, hav-ing been lowered at the start of 1999from 67 years. In Belgium the stand-ard statutory retirement age lay be-tween 60 and 65 years prior to 1997;between then and the year 2000, theage limit is steadily being increasedto 65 years.

In a number of MS, the retirementage of 65 applies only to men,whereas the age for women is – orwas until recently – slightly (63 in P)or considerably (60: D, GR, UK) low-er. In some of these countries, the ab-olition of these gender-specific dif-ferences is already under way (D) or

* By Frank Stille, Scientific Programme Man-ager of the European Employment Observa-tory (EEO).

No. 33 · Winter 1999 5

Trends

is planned (P, UK). Some other coun-tries have exceptional rules for cer-tain occupational groups (FIN) orworking conditions or branches(GR). In many countries it is possibleto draw an old-age pension – subjectto corresponding cuts in the pensionlevel – prior to this statutory retire-ment age. This is to be distinguishedfrom the additional possibility insome MS of more or less flexible ex-ceptional provisions, which enable apension to be drawn at an earlier agewithout deductions.

Alongside the group of countrieswhere the retirement age, at least formen, is in principle 65, there is an-other group in which the statutoryretirement age is considerably lower.In France the age limit is 60; in Italythe retirement age was raised in1995 from 60 to 63 for men and from55 to 60 for women; and in Austriamen are still able to enter retirementat 60, whereas women can enter at55. These differences alone in somecases go a considerable way in ex-plaining the significantly lower par-ticipation rates of men and women inthe age groups in question.

In addition, the existing opportu-nities to leave the labour market pre-maturely, and the financial condi-tions attached to them, need to beconsidered. Such options include ear-ly retirement, entitlement to unem-ployment benefit without an obliga-tion to be available for work, andprovisions for occupational disabilityand work incapacity pensions. Withfew exceptions, measures are avail-able from all three areas in all MS.On the other hand, there are hugedifferences between the MS in termsof financial provisions and conditionsof entitlement, especially regardingminimum age requirements.

In order to evaluate the impact ofsuch regulatory instruments on theparticipation of older persons in thelabour market, the participationrates of the prime age group, thoseaged between 25 and 49, can be usedas a yardstick. Male participationrates for this age group are in excessof 90% in all MS, consistently withina narrow band of 5 percentage

points. Female participation rates areconsistently substantially lower inthis age group: by more than onethird in Greece, Spain, Ireland, Italyand Luxembourg; and by 10 percent-age points or less in Denmark, Fin-land and Sweden. Clearly, this re-flects different traditions in the MSregarding both the subjective percep-tions and the objective realities ofgender roles. As a result, the differ-ences in participation rates forprime-age women are far more pro-nounced between MS than is the casefor men. The difference between thehighest rate (S: 85.8%) and the low-est (I: 58.3%) amounts to more than27 percentage points.

Against the background of partici-pation rates in the prime-age group,it is possible to determine the influ-ence on participation among the old-er age groups of the various provi-sions in the MS on retirement agesand early exit from the labour mar-ket. Of course, other factors also play

an important part here; particularlyrelevant are the level of security of-fered by company pension schemesor private provision for old age, in-cluding home ownership, family sta-tus and household composition, theextent of self-employment and thescope for working in the unofficialsector.

Compared with prime-age, partic-ipation rates of males in the 55–59age group vary significantly be-tween countries. The difference inparticipation rates is lowest in Swe-den and is also rather insignificant inDenmark. In a number of MS, theparticipation rates of this age groupare less than one quarter (D, GR, E,IRL, P, UK), and in others (F, NL, A,FIN) they are around one third be-low that of the prime-age group. InBelgium, Luxembourg and Italy, onthe other hand, the difference isvery large (cf. Table 2). In thesecountries withdrawal from the la-bour force begins at a relatively ear-

Table 1: Participation rates by age group in the EU Member States, 1997(in %)Total EU 15 B DK D GR E F IRL

25–49 years 82.7 83.9 88.5 84.8 77.6 77.4 87.0 76.655–59 years 55.2 35.3 71.8 64.1 52.1 50.0 52.6 50.360–64 years 23.5 11.2 34.1 20.2 33.0 27.7 11.1 34.8

I L NL A P FIN S UK


Men EU 15 B DK D GR E F IRL


I L NL A P FIN S UK

25–49 years 91.7 94.9 94.4 94.3 93.6 90.8 90.6 92.655–59 years 54.9 54.7 64.3 63.4 71.3 60.4 84.4 74.660–64 years 30.6 (14.6) 21.2 13.5 52.8 21.9 57.1 51.5

Women EU 15 B DK D GR E F IRL


I L NL A P FIN S UK

25–49 years 58.3 61.1 72.5 76.7 78.0 84.7 85.8 75.655–59 years 21.5 17.6 33.2 24.7 45.6 57.5 76.4 53.060–64 years 8.3 (7.2) 7.5 8.6 31.1 17.3 51.0 26.9

Source: Eurostat: Labour Force Survey 1997.

6 No. 33 · Winter 1999

Trends

ly stage for male workers. In the 55–59 age group, the participation rateof male workers is less than 50% inBelgium, and in Italy and Luxem-bourg it is only slightly above 50%.In Denmark, Germany, Greece,Spain, Ireland, Portugal, Swedenand the United Kingdom, on the oth-er hand, more than 70% of menaged between 55 and 59 are still inthe labour force, in some cases con-siderably more. Participation ratesamong men in this age group are farmore highly differentiated betweencountries than is the case withprime-age males: the differenceamounted to as much as 35 percent-age points (Belgium: 49.3%; Swe-den: 84.4%, in 1997).

This differentiation in participa-tion rates is even more pronouncedin the case of women aged between55 and 59. The participation rate ofwomen in this age group is only onethird as high as that of the prime-agegroup in some MS (B, L, A), is lessthan half in Greece, Spain, Ireland,Italy and the Netherlands, and isaround 60% in France and Portugal.The figure is down by less than onethird in Denmark, Germany, Finlandand the United Kingdom; as was thecase with men, the difference com-pared with the prime-age group wasby far the lowest in Sweden (cf. Ta-ble 2). Accordingly, the participationrates of women in this age group arejust 20% or lower in Belgium, Italyand Luxembourg. And in Greece,Spain, Ireland, the Netherlands andAustria, less than one in three wom-en in this age group participates inthe labour market. It is only in Den-mark, Germany, Finland and theUnited Kingdom that the participa-tion rate is above 50%; in Sweden itis as high as 76%. As a result of theextremely sharp differences in theextent of early exit from the labourmarket in the MS, there has been asignificant increase in differences ofparticipation rates between the MS;the difference now amounts to al-most 60 percentage points (Belgium:17.6%; Sweden: 76.4%).

This process of differentiationcontinues on a broad front in the

next age group, the 60–64 year-olds.By 1997 it was only in a few MS thataround half of the male populationaged between 60 and 64 still partici-pated in the labour force (GR, IRL, P,S, UK), whereas in some countriesonly around a fifth or less formedpart of the labour force (B, F, L, NL,A, FIN). The gap between the MSwith the highest and lowest partici-pation rates of men in this age groupamounted to around 46 percentagepoints in 1997 (S: 57.1%; F: 10.8%).

The figures on participation ratesamong women aged between 60 and64 are such that they conceal the(cultural) differences evident fromthe prime age group. Indeed, partici-pation rates in Spain, Greece and Ire-land, for instance, are actually higherthan in Germany, France, theNetherlands or Austria. The partici-pation rate in Finland is also surpris-ingly low for this group. There is thusno longer a North-South divide inthis respect. Once again, the lowestparticipation rate is recorded by Bel-gium, where only one woman out oftwenty aged 60 to 64 is still in the la-bour force. In many countries it isonly around one in ten or less (D, F,I, L, NL, A), whereas in Denmark,Greece and Portugal more than onein five women in this age category iseconomically active, and in Swedenthe figure is above 50%.

Of particular interest is the rela-tionship between measures to reduceparticipation rates (flexible age lim-

its, early retirement, removing olderunemployed from the register, disa-bility pensions) and unemploymentrates. A reduction in participationrates will have a positive impact onunemployment rates in the corre-sponding group, to the extent that itis unemployed persons who makeuse of the measures offered. Yet, giv-en that many of these measures canalso be claimed by those in work,they also serve to reduce the eco-nomically active population. Al-though the main aim of the measuresis to prevent a rise in the unemploy-ment rate, or to reduce the currentunemployment rate, it cannot be pre-cluded that at the same time the par-ticipation and the employment rate,too, will be reduced.

In spite of all the associated prob-lems (on this, see also TRENDS No.30), a look at Table 3 seems to sug-gest that there is indeed the supposedcorrelation – albeit not a particularlyclose one – between participationrates and unemployment rates of thehigher age groups. In some MemberStates (DK, D, A, P, FIN, UK), unem-ployment rates among 55–59 year-old men are higher – and in somecases, significantly so – than the rateamong prime-age men; several ofthese countries belong to the group(Table 2) in which the difference inparticipation rates between the olderpersons and prime-age groups is rela-tively small (DK, D, P, UK). In thesecountries the measures permitting

Table 2: Relative difference between the participation rate of older per-sons and that of the prime-age group (25–49 years) (in %)Men EU 15 B DK D GR E F IRL

55–59 years –26.6 –47.4 –12.6 –20.3 –21.5 –19.8 –36.3 –21.760–64 years –65.0 –80.4 –54.0 –69.1 –50.1 –55.8 –88.1 –43.5

I L NL A P FIN S UK

55–59 years –40.1 –42.4 –31.9 –32.8 –23.8 –33.5 –6.8 –19.460–64 years –66.6 – –77.5 –85.7 –43.6 –75.9 –37.0 –44.4


55–59 years –41.5 –70.6 –27.0 –29.5 –49.5 –56.5 –43.1 –54.660–64 years –79.0 –93.8 –69.9 –84.5 –66.6 –74.7 –86.3 –71.5

I L NL A P FIN S UK

55–59 years –63.1 –71.2 –54.2 –67.8 –41.5 –32.1 –11.0 –29.960–64 years –85.8 – –89.7 –88.8 –60.1 –79.6 –40.6 –64.4

Note: Calculated on the basis of Table 1.

No. 33 · Winter 1999 7

Trends

early exit from working life haveplayed a comparatively minor role.Conversely, some countries with rel-atively low unemployment ratesamong the 55–59 year-old men (B,GR, E, F, IRL, I, NL, S) also recordsubstantially lower participationrates compared with the prime-agecategory (B, F, I, NL). This correla-tion is even more pronounced forwomen than for men. Here, there aretwo main groups: higher unemploy-ment rates (DK, D, FIN) and compar-atively small differences in participa-tion rates between age groups (DK,D, FIN); and lower, in some cases sig-nificantly lower, unemploymentrates (B, GR, E, F, I, NL, P, S, UK)and, at the same time, relatively (insome cases, markedly) lower partici-pation rates (B, GR, E, F, I, NL, P).

As far as the 60–65 age group(men and women) is concerned, thecorrelation between comparativelylow unemployment rates and lowerparticipation rates, not least due tothe deployment of the measuresmentioned, is even more pronouncedthan for the 55–59 age group.

Attempts to raise the participation(and especially the employment)rates of older persons of working agewill encounter particular problems inthose Member States in which thegeneral level of unemployment ishigh. If the measures to facilitate ear-ly exit from the labour market arewound down and retirement ages in-creased, the short-term effect, atleast, is likely to be a rise in laboursupply and a worsening of the unem-ployment problem.

As the contributions to this issueshow, there is a way out of this di-lemma, one that has already beenadopted by some Member States andthat should, according to some of theauthors, be adopted by others: theuse of flexible forms of labour mar-ket participation by those approach-ing the end of working life. Some ofthe solutions chosen combine a re-duction in the hours worked by old-er workers with a supplementarypayment, usually publicly financedand often conditional on the earlyretiree being replaced by an unem-

ployed person or first-time worker.Examples of such schemes can befound in the reports from Belgium,Germany, France and Finland. Itcomes as no surprise that all thesecountries have high overall unem-ployment rates, and are concernedwith retaining older workers in thelabour market for longer, while atthe same time improving the em-ployment opportunities of youngerjobseekers and thus helping to re-duce unemployment.

Many Member States have adopt-ed measures to improve the chancesof older persons in regaining or re-taining employment in the form, forinstance, of reduced tax and contri-bution rates or wage-cost subsidies.The reports clearly show that the re-employment chances of the olderunemployed are poor. This is reflect-ed in both the high entry rates intounemployment and the often verylong duration of unemploymentspells.

One of the consequences of thisfact – which, it seems, the fiscal andlabour market policy measures de-ployed have great difficulty in over-coming – is that everything possiblemust be done to make continued em-ployment in advanced age a muchmore “normal” phenomenon that ithas been to date. This requires thedeployment of measures that main-tain the employability of workers un-til an advanced age.

Skills and qualifications are amongthe most important factors determin-ing employment and income; low-skilled workers are both at a higherrisk of being made unemployed andhave less chance of finding a job onceunemployed. In spite of a general re-orientation towards lifelong learning,older workers are underrepresentedin further training schemes, as manyof the reports reveal. This may re-flect cost-benefit considerations: theshorter “remaining service life” ofolder workers prevents employers

Table 3: Unemployment rates by age group in the EU Member States,1997 (in %)Total EU 15 B DK D GR E F IRL

25–49 years 9.6 8.1 4.9 8.8 8.1 19.1 11.4 9.555–59 years 10.8 4.9 5.7 17.0 3.7 14.2 9.0 7.060–64 years 5.8 . (3.6) 7.7 2.5 7.1 3.2 .

I L NL A P FIN S UK

25–49 years 10.3 2.1 4.9 4.7 6.0 12.1 9.8 6.055–59 years 4.9 . 4.0 5.6 6.2 15.0 7.5 6.860–64 years 3.2 – (3.7) . 3.7 . 13.8 5.7

Men EU 15 B DK D GR E F IRL

25–49 years 8.3 6.3 4.1 8.1 5.2 14.4 9.8 9.655–59 years 10.5 5.0 5.0 15.7 3.6 13.2 9.0 (7.3)60–64 years 6.2 . . 7.5 (2.8) 7.1 (3.7) .

I L NL A P FIN S UK

25–49 years 8.0 (1.6) 3.7 4.4 5.0 12.1 10.1 6.855–59 years 5.2 . 3.6 6.4 7.7 14.3 9.3 8.160–64 years 3.3 – . . 4.6 . 14.5 7.6


25–49 years 11.2 10.5 5.7 9.6 12.5 26.3 13.4 9.355–59 years 11.4 (4.8) 6.7 18.8 (3.9) 16.9 8.9 .60–64 years 4.9 . . 8.1 . 7.1 (2.8) .

I L NL A P FIN S UK

25–49 years 13.8 (3.0) 6.6 5.0 7.0 12.1 9.5 5.155–59 years 4.2 . 4.8 . 4.0 15.6 5.5 4.960–64 years (2.7) – . . . . 13.1 2.1

Source: Eurostat: Labour Force Survey 1997.

8 No. 33 · Winter 1999

Trends

from recouping the cost of invest-ment in higher qualifications. Thissuggests, on the one hand, that fur-ther training must commence beforeworkers enter advanced age groups,but, on the other hand, it must beemphasised that learning has impor-tant non-economic effects, especiallyfor older persons; these consist, forinstance, in supporting and main-taining independence, self-esteem,health and active participation in so-cial life. This implies, however, thatfirms cannot be expected to bearmore than a share of the costs oftraining older workers.

The aim of retaining older workersin working life for longer cannot beachieved without the support offirms and the social partners. Firmsin all Member States continue to takeadvantage of the existing provisions

facilitating early retirement. Yet of-ten employees do not opt for such so-lutions voluntarily; in some casesthey do so to avert the risk of unem-ployment or merely the pressure towhich they are exposed at the work-place (be it from management orfrom colleagues). Yet firms are grad-ually recognising that the early exitof older workers can lead to a seriousloss of enterprise know-how. In thelight of this, there are certain trends,reported on in the contributions tothis issue, towards company-leveland collectively bargained agree-ments that take account of human re-source development considerations,especially for older age groups, andthat envisage steps to maintain olderworkers within the enterprise.

Thus, the reports show that a re-orientation process has begun in cer-

tain Member States, one that ap-pears to be influenced not least bythe extent to which labour marketparticipation by older persons has al-ready been eroded. The fact thatsuch a shift is being undertaken inspite of the risk that this may con-tribute to an increase in unemploy-ment, at least in the short run, re-flects primarily the recognition thata highly unequal distribution of em-ployment opportunities across thevarious age groups poses a threat tosocial cohesion in the longer run, inboth intragenerational and intergen-erational terms. As some of the con-tributions show, age discrimination –irrespective of the overall labourmarket situation – is and remains aphenomenon that requires counter-measures.

No. 33 · Winter 1999 9

Trends

Belgium

IntroductionDemographic projections clearly in-dicate that the Belgian populationand labour force are ageing. Detailsare presented in Table 1.

On the basis of Table 1, it can beestimated that the share of the groupaged 50 to 75 will increase from 17%in 1985 to 23% in 2050.

Secondly, it should be mentionedthat the activity rates of the older agegroups are very low. In Belgium,only 30% of the male populationaged 50 or over is still active on thelabour market (compared with anaverage of 39% in the European Un-ion). For females, the participationrate is even lower: only 11%, com-pared with an average of 19% forthe European Union. The Belgianparticipation rates for older workersare the lowest in the entire EU (Euro-stat, 1997).

The activity rates of the older agegroups have clearly declined overthe last two decades, as Table 2 illus-trates.

Whereas the activity rates in theyounger age groups declined by only2 to 3% between 1975 and 1995,they fell much more sharply for theolder age groups: –7% (50–54years), –28% (55–59 years) and–40% (60–64 years).

It is clear that population ageingand a decline in activity rates amongolder workers can have negativeconsequences for the social protec-tion system (i.e. a heavy burden onthe active population with regard tofinancing the pension system). This isillustrated in Table 3, which clearlyindicates an increase in the depend-ency of older persons between 1995and 2050, both from a demographicpoint of view and at the sociodemo-graphic and financial levels. This ex-plains the fact that more and moreworkers, both young and old, aresaving extra money for their old age,

Table 1: Evolution of the Belgian labour force by age group, males andfemales (in 1,000s)

15–24 years 25–49 years 50–75 years

1985 (observed) 656 2,650 6821995 (observed) 444 3,125 6192000 402 3,217 7432005 427 3,177 8832020 462 2,847 1,1122050 445 2,675 935

Source: Lindley et al. (1998).

Table 2: Evolution of the average activity rates by age group, males(in %)

25–29 30–34 35–39 40–44 45–49 50–54 55–59 60–64years years years years years years years years

1975 95.7 98.2 97.6 96.4 93.4 88.7 81.0 58.41980 95.5 97.1 96.8 95.0 91.6 87.2 72.2 35.81985 95.1 97.2 96.9 95.7 92.9 84.8 62.0 26.91990 94.4 96.2 95.0 94.6 91.9 76.5 50.5 19.31995 93.1 95.0 95.4 93.2 91.0 81.6 52.9 18.7

Source: Lindley et al. (1998).

Table 3: Dependency coefficients between 1995 and 20501995 2000 2010 2030 2050

Demographic:dependency coefficient elderly* 39 40 44 62 67

Socio-demographic:(early) retirees/labour force 51 52 54 75 82

Financial: pensions/wage sum 18 18 19 23 23

* (60 and older)/(20–59).

Source: “Sociale zekerheid op een tweesprong”, Sociaal-economische nieuwsbrief,January 1998, pp. 18–33.

either via the system of private pen-sions, on their own or through theircompanies. This is mainly the casefor the higher income groups and instrong sectors that have includedsuch arrangements in their collectiveagreements.

Furthermore, the ageing of the la-bour force and the decline in the ac-tivity rates of older workers can leadto a shortage of manpower in sectorsthat have made frequent use of earlyexit paths in order to reduce the old-er workforce, such as in textiles, con-struction and the metal industry.

Changes in the policyframework: recent trends

Policies concerning the (legal)retirement age

Between 1990 and 1997, the normallegal retirement age was fixed at be-tween 60 and 65, for both men andwomen. Now the government is pro-gressively replacing this flexible re-tirement age with a new systemwhich will take its definitive form inJanuary 2000, when the legal retire-ment age will be 65, for both men

10 No. 33 · Winter 1999

Trends

and women. It can thus be said thatthe government is in the process ofraising the normal statutory retire-ment age.

Pathways to early exit

The most important reason for thedecline in the activity rates of olderworkers over the last 20 years canbe found in the frequent use of earlyexit routes. In Belgium, there arefour essential early exit routes thatmany older workers use to leave thelabour market before retirementage.

One of the two most commonlyused early exit paths is the conven-tional bridging pension,1 which hasexisted since 1985. Although therewere plans to increase the minimumage limit for the bridging pension to60 years during the 1999 sectoralagreements in order to reduce theoutflow of older workers from the la-bour circuit, it will remain at 58 forthe next two years.

In 1993, a new measure was intro-duced which made it possible forworkers aged 55 or over to reducetheir working time by half, while atthe same time drawing a part-timeconventional bridging pension. How-ever, mainly due to the administra-tive complexity of this variant of thebridging pension, only 400 personsmade use of this measure in 1998.

The second most common earlyexit route is the unemploymentscheme for older unemployed.2 In1996, the government lowered theminimum age of eligibility for thismeasure from 55 to 50 years. As thisgroup is not included in the officialnational unemployment figures, thisoperation has not brought about aconsiderable reduction in the officialnumber of unemployed.

Another possibility for leaving thelabour market before retirement agehas been created by the introductionof the part-time career break.3 Final-ly, the fourth early exit route is thedisablement insurance act. Table 4provides data on these four early exitroutes between 1992 and 1998.

Table 4 shows that the number ofolder workers who left the labourmarket before retirement age in-creased by 16%, from 298,000 in1992 to 346,000 in 1998. Also, thenumber of persons on part-time ca-reer breaks, for which we only havedata since 1996, is clearly increasing:from 6,000 in 1996 to 8,000 in 1998.

At least four difficulties can be for-mulated with respect to this phenom-enon of mass early exit:1. The reinforcement of false stereo-

types about older workers (resist-ant to changes, lack of creativity,slow judgement, low physicalcapacity, etc.), with the result

that only 3% of all workers re-cruited in Belgium in 1998 wereaged over 45 (Denolf, Denys &Simoens, 1999). This percentagehas remained constant since 1995.In this context, we want to stressthat national scientific investiga-tions have clearly shown thatmost of these stereotypes do notmatch reality. Not only does thereseem to be no significant link be-tween age and performance atwork (Simoens & Denys, 1997),but empirical evidence has alsoshown that there is no simple cor-relation in Belgium between ageand wage costs. In 1996, a groupof human resource managers cal-culated the real actual wage costof about 17,000 workers. One oftheir conclusions was that there isno significant difference between

1 Workers aged at least 55–58 (in special cir-cumstances aged 50–55) can leave the la-bour market under attractive financial con-ditions. The employer has to take the initia-tive by dismissing the employee.

2 Unemployed aged at least 50, if they havebeen unemployed for more than a year, areno longer required to be available to the la-bour market. They are not obliged to lookactively for a job and keep their unemploy-ment benefit until pension age.

3 Workers aged 50 or over are able to reducetheir working time by half, whilst retainingpart of their salary and receiving a career-break allowance. The employer endeavoursto replace the part-time worker with an un-employed person.

Table 4: Evolution of early exit paths in the private sector between 1992 and 19981992 1993 1994 1995 1996 1997 1998 Ratio

in 1998(with1992

= 100)

Conventional bridging pension1 138,263 137,403 136,536 134,117 133,650 129,112 123,911 90

Unemployment scheme for older unemployed2 71,683 74,667 73,767 73,780 95,102 113,754 131,159 183

Part-time career break3 ? ? ? ? 5,559 6,290 7,790 ?

Disablement insurance act4 87,724 87,507 87,376 87,215 87,535 88,200 91,178 104

Total 297,670* 299,577* 297,679* 295,112* 321,846 337,356 354,038 116*

* Excluding the category of persons on part-time career breaks.

Sources:1 Ministerie van Tewerkstelling en Arbeid (1999).2 Unpublished data from the Public Service of Employment (RVA).3 Ministerie van Tewerkstelling en Arbeid (1999).4 Unpublished data from the Public Service of Medical Insurance (RIZIV).

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the wage of a young worker andthat of an older worker. In onecompany, the wage cost of aworker aged 50 or over was BEF963 (EUR 23.87), whereas aworker under 30 received BEF981 (EUR 24.31) (KoningBoudewijnstichting, 1996).

2. The trickle-down effect: thesestereotypes towards older workershave clear negative effects for theyounger age categories. This canbe illustrated by the evolution ofunemployment rates between1983 and 1997. For males, thegroup with the lowest unemploy-ment rates (or the best employ-ment opportunities) shifted from40/45 years to 30/35 years. For fe-males, it shifted from 40/45 yearsto 25/30 years, which means thatwomen aged over 30 already haveless opportunities on the labourmarket because of their age. Formore details, we refer to Table 5.

3. The high cost of the bridging pen-sion scheme: this represents0.75% of GDP, which is muchhigher than the average for allOECD countries (0.18%). In abso-lute figures, this scheme costs BEF53 billion or EUR 1.31 billion ayear.

4. The weak effect of the bridgingpension: the most important justi-fication for early retirement is thelabour redistribution effect of themeasure, because young unem-ployed would take on the jobs ofolder workers who leave the la-bour market. However, the totalpercentage of replacements in thecase of the bridging pension is ac-tually only 32%. This means thatonly one out of three early retireesis replaced by an unemployed per-son. This low degree of replace-ment can be explained by the factthat there are a lot of exemptionsfrom the obligation to recruit (forinstance, in a company experienc-ing economic problems).

Integration of older workers inthe labour market

Reduction of employer socialsecurity contributions

Although in the end the governmentdid not increase the minimum agelimit for the conventional bridgingpension from 58 to 60 years, and al-though it has lowered the minimumage for the unemployment schemefor older unemployed from 55 to 50years, this same government has si-multaneously introduced four initia-tives in order to promote the integra-tion of older workers in the labourforce. These four measures will bediscussed in the following.

Since January 1996, employerswho recruit older jobseekers (aged50 or over) who have been unem-ployed for at least six months enjoya 50% reduction of their social se-curity contribution during the firstyear following the recruitment. Thisreduction amounts to 25% after thefirst year for an unlimited period.

Because this measure is part of ageneral plan to reduce social securi-ty contributions for all kinds of riskgroups, it is hard to obtain concretedata for the group of older workers.Because only 14% of the recruit-ments with a reduction of contribu-tions concern persons aged 40 orover, one can assume that the meas-ure has had a rather limited impacton the group of older workers.

Prohibition of age discriminationThe use of maximum age limits in jobadvertisements has the consequence

that a great number of older unem-ployed are not inclined to apply forthese jobs. Furthermore, these agelimits reinforce the (false) stereotypethat over-50s are no longer able toremain active on the labour market.Precisely in order to provide greaterjob opportunities to older jobseek-ers, the recent law of 13 February1998 prohibits the use of age limits inmatters of selection and recruitment.No employers, neither in the privatenor in the public sector, may nowmake use of maximum age limitsthroughout the entire recruitmentprocess. The only exceptions arethose jobs that are legally bound tocertain age limits, such as jobs in thearmy. Although it is very hard toevaluate the impact of this recentlaw, it is hoped that it will provide astrong initial impetus for employersto ban all forms of age discriminationin the labour market.

Job opportunities for olderjobseekers in the case of va-cancies that are difficult to fill

In February 1999, the Flemish Minis-ter of Employment asked the Flemishunemployment service to actively of-fer job opportunities to jobseekersaged 50 or over, and this specifically inthe case of jobs that are difficult to fill.These older jobseekers should in thenear future receive concrete job offersfrom the unemployment service. In1997, the unemployment service reg-istered about 28,000 jobs for which itwas difficult to find a suitable candi-date. At the moment, there are 16,000older jobseekers in Flanders.

Table 5: Evolution of unemployment rates for men and women between1983 and 1997: Flanders (in %)

Men Women

1983 1990 1997 1983 1990 1997

20–25 years 20.1 7.2 9.9 30.3 11.9 15.125–30 years 11.9 4.7 6.6 28.8 11.0 12.330–35 years 9.0 4.1 6.0 27.8 14.1 13.335–40 years 9.0 4.2 6.7 25.5 16.8 14.640–45 years 8.8 5.4 7.8 21.7 20.1 18.045–50 years 10.9 7.2 9.7 24.1 26.2 24.5

Source: Public Service of Employment (RVA).

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Easy access to subsidised em-ployment for older unemployed

The federal government has recentlyintroduced several measures to cre-ate work for very long-term unem-ployed via subsidised (temporary)employment, for example via localagencies for employment (so-calledLAEs), and via the activation meas-ure of unemployment allowances incompanies (so-called Smet jobs).Within the framework of the Belgianaction plan for 1999, it has been de-cided that unemployed aged 45 orover can participate in these meas-ures after an unemployment periodof six months instead of two years. Inintroducing this measure, the gov-ernment hopes to improve the re-integration opportunities for olderunemployed.

Developments at the levelof companies and sectors

Restructuring the workforce

There are clear indications in Bel-gium that the first victims of restruc-turing are from the older workforce.This is due to the existence of theconventional bridging pension sys-tem for all workers aged 50 or overin companies that are recognised bythe Ministry of Employment as “ex-periencing economic problems”.

Unfortunately, it is impossible tomeasure the precise number of olderemployees who are forced to leavethe labour market by means of thecollective bridging pension system,because there are only data availableon the number of companies that arerecognised as experiencing economicproblems, and not on the number ofworkers. As a consequence, when anemployer dismisses more peoplethan originally planned, this can byno means be controlled by the Minis-try of Employment.

In this context, it is worth men-tioning the case of Belgacom, themost important company in the tele-communications sector in Belgium.In 1997, more than 6,000 workersaged 50 or over were asked to leavethe company via the bridging pen-

sion system. Up to the age of 60, theywould receive three-quarters of theirformer salary. About 99% acceptedthe proposal. Two years later, in1999, the company asked 170 ofthem to return to their jobs with newtemporary – and financially interest-ing – contracts. Because of the inter-nationalisation of the telecommuni-cations market, their experience wasneeded urgently by the company. Inthe end, 60 ex-employees returnedto work.

Company strategies/collectiveagreements

Despite these signs of both age dis-crimination in the event of restruc-turing and massive use of the con-ventional bridging pension by com-panies experiencing economic prob-lems, measures will be discussed be-low that try to improve the weak la-bour market position of older work-ers.

Extra bonus for workers whoremain in the labour market

In the building sector, the social part-ners agreed in 1999 that workerswho remained on the labour marketafter the age of 58 would receive anextra bonus. The building sector isthe first sector in Belgium to imple-ment such an initiative. This can beexplained by the fact that there iscurrently a severe shortage of work-ers in this sector. Many workersleave the labour market at the age of56 via the bridging pension system.

Simultaneously, the new collec-tive agreement introduces a pool foryoungsters who have not yet finishedtheir studies. They can be employedfor short periods and in interim jobsin building companies. At the sametime, they are offered the opportuni-ty to receive additional training.

Temporary employment agenciesfor older workers

In June 1999, Randstad Interlabor,the Belgian market leader in tempo-rary employment, opened the firstagency in Brussels that is specificallyoriented towards workers aged 45

and over; more such agencies are tobe established in the near future. Atthe moment, the group aged 45 andolder only represents 6.7% of the to-tal population of temporary workers.Through these specific agencies, it ishoped that the employability of old-er workers will increase in the tem-porary work sector. The agency inBrussels provides personalised coun-selling and an active introduction ofthe workers in several companies. In-formation has been sent to 13,000companies in the region in order topromote the new project.

Outplacement for older workers

Also in 1999, a project sponsored bythe Koning Boudewijnstichting waslaunched with a view to organisingoutplacement services for unem-ployed aged 45 and over. This is con-sidered necessary because most ofthe recruitment and selection activi-ties in companies are done by youngpersonnel managers who have justfinished their studies and who oftenconsider workers aged 45 and overas “being too old”. Therefore, thisgroup of workers needs extra help infinding a suitable job. An evaluationof the project after five monthsshows that 30% of participants havefound a regular job, while another14% are working independently oras a temporary worker. This is con-sidered a success, given that most ofthese older workers had been unem-ployed for longer than two years.

Access to training for olderworkers

Since the interprofessional agree-ment of 1992, employers’ and work-ers’ representatives have agreed toincorporate the group of “older un-employed” (all unemployed aged 50or more) in the target group of so-called “risk groups”. In addition, old-er “threatened” workers (workersaged 50 or over who are or could beconfronted in the near future withcollective dismissals, restructuring orthe introduction of new technolo-gies) are being treated as a riskgroup. For these risk groups, a cer-

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tain percentage (between 0.15% and0.20%) of gross wages is exclusivelyreserved for training and employ-ment measures.

However, the evaluation of theconcrete results of this agreement israther negative. Despite the fact that10% of the collective agreementshave explicitly incorporated the cat-egory of older workers/unemployedin the category of risk groups, con-crete results remain very scarce. Thetwo good practices we found are:– the “part-time bridging pension,

part-time training” measure in thebuilding sector, which entails old-er workers entering partial retire-ment via the bridging pension sys-tem and training for youngsters inthe sector during their workingtime;

– the Cevora “train the trainer”project, which entails older em-ployees training youngsters inthe employees committee’s/workscouncil’s training centre.

The under-representation of olderworkers in matters of training canalso be illustrated via the share ofolder workers in all kinds of internal/external vocational training. Table 6shows that the share of those aged 45or over is only 12%, although thisage group represents 18% of the to-tal labour population.

The situation of older unemployedis even worse than that of olderworkers: although those aged 40 andover represent 34% of the popula-tion of non-working jobseekers, theirshare in the total number of partici-pants in vocational training for un-employed organised by the publicemployment service is only 11%.

Prospects of olderworkersDespite the recent initiatives con-cerning the retention and reintegra-tion of older workers in the labourmarket, there are clear signs that thisgroup remains very weak:– Only 3% of all the workers re-

cruited in 1998 were aged over45.

– There is a clear under-representa-tion of the older age groups inmatters of training.

– Older workers are very often thefirst victims of restructuring andreorganisation.

– Unemployment rates start to in-crease at the age of 35 for men andas early as the age of 30 for wom-en (see Table 5).

A recent study (Centre for EconomicStudies, 1999) of 700 active workersin Flanders revealed that 85% be-lieve that the normal retirement ageshould be lowered. Most of themwould like to withdraw from the la-bour market at the age of 57, whichcorresponds approximately to theminimum age in the bridging pensionsystem. The lower income groups aremore in favour of a lowering of thenormal retirement age than are thehigher income groups (90% and75%, respectively). This call for ear-ly retirement is not only identifiableamong the older generation, but alsoamong youngsters. Whereas olderworkers would like to retire at theage of 57.9 years, youngsters arecalling for a definitive retirementfrom the labour market at the age of56.4 years.

Only one out of ten workers seemsto favour an increase in the minimumretirement age as a solution to theageing of the population and the fi-nancing of pensions. Thirty percentthink that pension allowances couldbe lowered. The biggest group, sixtypercent, opts for an increase in thepension contributions.

Conclusions: policyoptions

The incorporation of thedifferent facets of an age-conscious personnel policyin collective agreements

Because the working population isageing, and because many olderworkers are forced to leave the la-bour market before retirement ageand sometimes against their will,more and more people are calling forthe introduction of a so-called age-conscious personnel policy withinfirms. The rationale for such a policylies in the idea that employees shouldremain employable for as long aspossible and stay in the labour forceuntil retirement age. Scientific inves-tigations have demonstrated thatsuch a personnel policy improves thegeneral quality of labour of all em-ployees and that it reduces conflicts,absenteeism, lack of motivation,stress and premature obsolescence.The concrete elements of an age-con-scious personnel policy are, amongothers, lifelong learning, regular ca-reer consultations, horizontal mobili-ty and ergonomic measures.

A recent inquiry among Belgianpersonnel managers indicates that agreat deal of improvement is possiblewith regard to the situation of olderemployees in companies. Only 11%of personnel managers believed,however, that any measure for olderemployees will be included in thecollective wage agreement, com-pared with 58% who believe thatone or more measures should be in-cluded. Particularly with regard tothe right of older people to speciallyadapted work, and the option of ex-

Table 6: Share of participants in internal and/or external training by agegroup (in %)

Share of participants in training Share of total labour force

< 25 years 16.8 12.625–34 years 42.2 40.035–44 years 29.0 29.4+ 45 years 12.1 18.0

Total 100.0 100.0

Source: Van Assche et al. (1996).

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emption from shift work, overtimeand irregular hours, there is greatdiscrepancy between the (low levelof) actual provision and the (highlevel of) desirability (Simoens, VanHoof et al., 1996).

The need for governmentaction

It is clear that the introduction of anage-conscious personnel policy willnot find its way into companies with-out corresponding action by the gov-ernment. Therefore, it is considerednecessary for the government to takeactive steps towards an improvementof the labour market position of old-er workers.

It is obvious that the government,being an important employer, couldstart an age-conscious personnel pol-icy in the public sector. Beside givinga good example, there are other pos-sibilities that are briefly discussed inthe following. We make a distinctionhere between measures aimed at old-er workers and measures for olderunemployed.

For the group of older workers inthe private sector, the governmentcould provide subsidies to firms thatprovide work to a certain percentageof its personnel older than 50. In thiscontext, the proposition of formerPrime Minister Dehaene can be men-tioned, that is, to provide premiumsfor keeping older workers in the la-bour force; this proposition waslaunched in October 1997 and refor-mulated in May 1999. The publicauthorities could also introduce aright to collective outplacement forolder workers who are looking foranother job. It is evident in this con-text that the recent prohibition ofage criteria in recruitment and selec-tion (e.g. in advertisements) is al-ready a good measure. There are sev-eral possibilities on the pull side,such as a simplification of the exist-ing complicated system of part-timebridging pension and an elaborationof other, more flexible and individu-alised, exit routes that would partlyreplace the bridging pension, e.g. bypromoting career breaks (see below).

As regards the group of older un-employed, several measures are be-ing discussed in the literature. Allaim at helping the older unem-ployed to find a suitable job moreeasily:– agreements with the public em-

ployment service so that a greaternumber of older employees can beplaced in a new job;

– subsidies for the creation of newlabour market niches (e.g. in thefield of the social economy);

– further initiatives to make thetemporary employment agenciesmore age-friendly.

It is evident that the different strate-gies briefly outlined above cannot beconsidered completely independentof each other. For instance, it is un-imaginable that the existing systemof full-time bridging pension wouldbe abolished without at the sametime introducing measures in thecompanies to maintain older workersin the labour market.

Towards innovative solutions:the expansion of careerbreaks as a good alternativeto early exits

The implementation of a direct poli-cy of “active ageing” in the form ofan age-conscious personnel policycan only be observed in a few com-panies. Therefore, it is also crucial toinvestigate other, and maybe moreindirect, solutions, such as the expan-sion of the already existing career-break scheme. The defenders of theearly exit schemes (such as the con-ventional bridging pension) under-line in their call for the maintenanceof the measure the role that it playsin the struggle against unemploy-ment. Contrary to this philosophy oflimiting labour supply in order tocombat unemployment, we feel thatthere are better measures than earlyretirement. Taking into account thedemographic pressure of the ageingpopulation and the disadvantages ofthe bridging pension, we argue forthe possibility of a general interrup-tion of the professional career as aright for every employee, through

the extension of the existing career-break scheme.

The career-break system was in-troduced in 1985. Belgium was thefirst country in the European Unionto establish such a measure. Careerbreaks offer a possibility to the em-ployee, if desired, to temporarily sus-pend professional activities for amaximum of 60 months. There isalso a possibility to reduce profes-sional activity by 1/5, 1/4, 1/3 or 1/2.A monthly income is guaranteed dur-ing the break. The employee on a ca-reer break is replaced by an unem-ployed person. Career breaks areuniversally applicable in the publicsector. In the private sector, the rightmust be incorporated in sectoral col-lective agreements. The consent ofthe employer is required. Recently,the Belgian government has decidedto expand the right to a career breakto 3% instead of 1% of workers (forcompanies where there is no collec-tive agreement on career breaks).

We call for an increase of theallowances in the case of careerbreaks and for a general right to thesystem in the private sector, becauseit has many advantages in compari-son with the bridging pension. Con-trary to the bridging pension, the ca-reer-break system (1) involves noage discrimination, (2) is not compul-sory and (3) is approximately threetimes cheaper than the bridging pen-sion.4

Jan Denys & Peter Simoens

Selected bibliographyDenolf, L., J. Denys & P. Simoens (1999): Hoewerven bedrijven in België? Brussels/Leuven:Upedi/HIVA.Eurostat (1998): Labour Force Survey 1997.Luxembourg.Koning Boudewijnstichting (1996): Zijn ouderewerknemers duurder dan jongere werk-nemers? Brussels.Lindley, R. et al. (1998): The Impact of Ageingin the Size, Structure and Behaviour of ActiveAge Population and Policy Implications forthe Labour Market. Contract File No. SOC 97100930 05E01.

4 The bridging pension costs BFR 53 billion ayear, or BFR 410,000 per person on a full-time bridging pension. Career breaks costBFR 5 billion a year, or BFR 138,000 perperson on a full-time career break (cf. Minis-terie van Tewerkstelling en Arbeid, 1999).

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Ministerie van Tewerkstelling en Arbeid(1999): Het federaal werkgelegenheidsbeleid.Evaluation report 1998. Brussels.Simoens, P. & J. Denys (1997): Wie werkt nogna vijftig? Leuven: Davidsfonds.

Simoens, P., K. van Hoof, J. Denys & E. Omey(1996): Wordt gezocht: oudere werknemer(M/V). Leuven: HIVA.“Sociale zekerheid op een tweesprong.” In:Sociaal-economische nieuwsbrief, January1998, pp. 18–33.

Van Assche, E. et al. (1996): De eindresultatenvan het Force-onderzoek naar de voortge-zette beroepsopleidingen in de Belgische on-dernemingen. Gent.

Denmark

IntroductionAs regards ageing, the situation inDenmark is similar to most other EUcountries. While the total size of theworking-age population will remainfairly stable, the structure of both thepopulation and the workforce ischanging.

One important trend is an in-crease in the number of personsabove retirement age measured as ashare of the workforce. Thus, theshare of those aged over 67 in rela-tion to those aged 15–66 is predictedto increase from 19% in 1998 to30% in 2035. The share of the of theover-60s in relation to those in theage group 15–59 years is expectedto increase from 32% in 1998 to51% in 2035. In both cases, thesharp increase will mainly take placeafter 2005 (Finansministeriet, 1999,Table 6.1).

Another important trend is thechanging composition of the work-force, which is being skewed towardsthe older age groups, while at thesame time the number of persons inthe 15–49 age group and of new en-trants to the labour market is falling(Regeringen, 1999, Table 2.1).

The development of the work-force has not been of a purely demo-graphic nature. While the participa-tion rate of older workers is ratherhigh in Denmark compared to other

EU countries, the “unemploymentretirement allowance” for personsaged 60–67 years, which was intro-duced in 1979 (see below), has con-tributed to a fall in the average re-tirement age. Thus, the average ac-tual age of retirement had fallenfrom 63 in 1969–70 to 60 in 1995–96 (men 61 years and women 59years; cf. Danmarks Statistik, 1998,Table 9).

Furthermore, since 1993, the sup-ply of labour has been falling due toa declining participation rate causedby the expansion of various leaveschemes, while the increase in thenumber of older workers taking ear-ly retirement has continued.

Concerning unemployment, avail-able information indicates that therisk of becoming unemployed is not

significantly higher for older workersthan for others. But once older work-ers have become unemployed, theirchances of returning to work aremuch lower than for the younger agegroups (DA, 1997, p. 44). Thus,more than two out of three unem-ployed persons aged under 25 returnto employment within two years,whereas only one in four of unem-ployed persons aged over 50 findnew employment (Ingerslev andPedersen, 1997, p. 18).

Table 1 gives an impression of thechanges in the labour market attach-ment of older workers from 1980 to1994.

Whereas the labour marketattachment of the 50–59 age groupdid not change dramatically, the op-posite is the case for the oldest age

Table 1: Labour market attachment of older workers, 1980 and 1994(in %)

50–59 years 60–66 years

1980 1994 1980 1994

In the workforce 75.1 80.8 40.6 30.5 Employed 70.7 70.6 38.8 27.0 Unemployed 4.4 10.2 1.8 3.5

Outside workforce 24.9 19.1 59.3 69.4 Unemployment retirement allowance, etc. 0 2.0 14.7 34.3 Invalidity pension 9.7 12.3 23.5 26.1

Others 15.2 4.9 21.1 9.0

Total 100.0 100.0 100.0 100.0

Source: DA (1997, Table 3.2).

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Trends

group. Here, less than one third wasstill in the workforce in 1994, whilethe share of persons on unemploy-ment retirement allowance morethan doubled, from 14 percent in1980 to 34 percent in 1994.

There are several possible expla-nations for this fall in the actual re-tirement age, apart from the intro-duction of special programmes tosupport early retirement (such as un-employment retirement allowance).Thus, one should also mention thelong-lasting high level of unemploy-ment, the expansion of tax-subsi-dised private pension schemes andthe increased economic freedom ofolder house-owners who have paidoff their mortgages.

Not surprisingly, these changes(actual or forecasted) have given riseto a number of political debates andproposed changes in strategy relatedto:– the increased demands on the

Danish welfare state stemmingfrom the expected growth in theolder age-groups, whose need forcaring and health services is higherthan average (Det økonomiskeRåd, 1998; Finansministeriet,1999; Ministry of Finance, 1999);

– changes in the distribution of in-come and consumption betweenthe productive and non-produc-tive parts of the population, lead-ing to discussions about reforms inthe public and private pension sys-tems and the role of the taxationsystem in providing incentives forearly retirement;

– concerns about the consequencesof the stagnating or falling supplyof labour both in the short and thelonger run (Finansministeriet,1999). The short-run concerns forthe supply of labour have ofcourse been fuelled by the strongeconomic upswing and fall in un-employment on the Danish labourmarket since 1994.

Changes in the policyframework: recent trendsFrom 1970 to 1996, the share ofadult persons (aged 18–66 years)

supported by transfer income (unem-ployment benefit, invalidity pension,etc.) increased from 10% to 28%(Danmarks Statistik, 1998, p. 7). Notsurprisingly, this development hasled to widespread concern about theeconomic burden placed on the eco-nomically active population. Thus,the debate on ageing and early re-tirement is linked to these more gen-eral problems (Regeringen, 1997).

Policies concerning the retire-ment age and early exit

Since 1970, all persons over 67 yearsof age have been eligible for the pub-lic old-age pension, though theamount paid depends on whether therecipient has supplementary earnedincome. In many private firms, thecompulsory retirement age is 67years. In the public sector, retire-ment must take place no later thanthe age of 70.

For a number of reasons, the ac-tual average retirement age in Den-mark is significantly lower than 67(cf. above). This is due to a numberof factors, including the existence ofseveral schemes allowing for earlyretirement from work.

The most important of theseschemes is the so-called unemploy-ment retirement allowance (Efter-løn), which was introduced in 1979 asa response to the high and rising levelof unemployment in the 1970s. Thisscheme meant that members of anunemployment insurance fund aged60–66 years could choose to retireand receive a public pension definedas a share of unemployment benefit.The share was 100% of benefits forthe first 2½ years and was then grad-ually reduced. It was not a conditionfor the person to be actually unem-ployed at the time of retirement, butmembership of the unemploymentinsurance fund had to have existed for10 of the last 15 years. The schemeproved to be very popular – and cost-ly to the state budget – and it wastightened on a number of occasions inthe 1980s and 1990s. From 1995, ithas been possible to receive theallowance on a part-time basis to in-

duce a more flexible early retirementpattern. The rationale behind the un-employment retirement allowancewas to allow older unemployed work-ers to retire during a period of laboursurplus, but also to create job open-ings for younger persons when em-ployed older workers decided to takethe opportunity of the retirementbenefit instead of staying in the jobuntil the age of 67. The number of re-cipients has been steadily growing. In1998, a total of 140,900 persons re-ceived the allowance.

Against the background of thesteep increase in Danish unemploy-ment in the early 1990s, a specialscheme for long-term unemployedmembers of unemployment insur-ance funds was introduced in 1992.This so-called transitional allowance(Overgangsydelse) implied thatlong-term unemployed persons aged55–59 could retire and receive a pen-sion equal to unemployment benefit.In 1994, the age group was extendedto 50–59 years of age, and the bene-fit paid was set at 82% of unemploy-ment benefit. The scheme was ex-tremely popular and in 1996 attract-ed a maximum of 46,000 partici-pants. Entrance to the scheme wasabolished in the same year and thescheme is now being phased out.

In 1987, a part-time pension wasintroduced which was to allow bothwage-earners and self-employedaged 60–66 years to retire on a part-time basis while receiving an allow-ance calculated on the basis of thelevel of unemployment benefit. Thetotal number of recipients of a part-time pension in 1997 was 4,500 per-sons.

Persons aged under 67 years whoare permanently unable to supportthemselves due to physical or mentalhandicaps are eligible for invaliditypension. The age limit will fall to 65years with the lowering of the agelimit for old-age pensions in 1999.There are three pension levels. Thetwo highest levels are for personswith obvious and serious healthproblems, while persons with lesserproblems who have nonethelessbeen unable to support themselves

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for a longer period of time will nor-mally receive the lowest level (underwhat is sometimes termed “social in-dications”). In January of 1998,160,000 persons received one of thetwo highest levels, while 107,000persons received the lowest level ofinvalidity pension. The highest levelamounted to DKK 12,300 per month(almost equal to maximum unem-ployment benefit).

For persons who are eligible for aninvalidity pension but do not receiveit, a special wage subsidy (“flexi-jobs”) is available. The subsidy ispaid to the employer and amounts tobetween one third and two-thirds ofnormal wages. For persons who actu-ally receive invalidity pension, a sub-sidy (for “protected” jobs) can bepaid to the employer. The subsidyamounts to no more than half of thewage cost. Employment in protectedjobs is normally part time. Thenumber of these two types of jobs inthe spring of 1999 was about 10,000.

Table 2 shows the development ofthe total number of full-time workersreceiving various forms of pensionsfrom 1970 to 1996. Most impressiveis the sharp increase in the number ofrecipients of the unemployment re-tirement benefit and the transitionalallowance.

The rise in the number of olderworkers retiring from the labour mar-ket has led in recent years – in the lightof the tightened situation on the Dan-ish labour market – to a number ofpolitical actions to reverse the trendsshown in Table 2. The abolition of thetransitional allowance in 1995–96 isone example, while another ischanges regarding the unemploymentretirement allowance from 1999 on-wards. The changes imply stricter eli-gibility criteria, deductions for pri-vate pension schemes and a specialtax allowance for eligible personswho postpone their actual retirementuntil the age of 62 (see below).

Training and lifelong learningfor older workers

One barrier to hiring middle-aged orolder workers is the assumption that

Table 2: Number of full-time workers receiving various forms of pen-sions, 1970 to 1996 (in 1,000s)

1970 1980 1996

Old-age pension 568 677 705

Unemployment retire-ment benefit, etc.* 0 54 167

Invalidity pension 205 236 270

Total employment 2,039 2,289 2,598

* Includes transitional allowance and part-time pensions.

Source: Danmarks Statistik (1998, Tables 1 and 2).

they are less motivated to engage infurther training or lifelong learning.To some extent this assumption canbe based on the actual participationpatterns of older workers.

Denmark has a long tradition ofadult education. Thus, more than80% of firms offer training and edu-cation to their employees – com-pared to an EU average of about60%. Furthermore, there are no for-mal barriers to older workers partici-pating in further education and train-ing, and the firms maintain that olderworkers receive the same offers asthe rest of the staff (DA, 1997,p. 134). On the other hand, only13% of the participants in formal vo-cational education in 1994–95 wereolder than 50 years. For the groupover 50 years of age, participation inadult education diminishes with age.As a share of the workforce, 7% ofthe persons aged 50–55 participatedin adult education in 1994–95 asagainst only 1% of those aged over60. Moreover, there is a clear link forolder workers to previous education-al attainment: more workers withprevious vocational education willcontinue to participate in adult edu-cation when they get older. The pro-pensity to participate is also higheramong the employed than the unem-ployed (also see the above discussionof discrimination towards older un-employed in active labour marketprogrammes).

A major barrier to adult educationfor older workers, therefore, seemsto be their weak educational back-ground. Also, one could suspect thatfirms – in spite of the attitudes ex-pressed – give a lower priority to fur-

ther education for older workers,simply because the economic benefitwill be smaller due to the shorter re-maining duration of their activeworking life.

Labour market programmesfor older unemployed

In principle, older unemployed be-tween 50 and 60 years of age havethe same rights and obligations asother unemployed. Thus, they areentitled to unemployment benefitsfor 2½ years and to receive job train-ing and other provisions under activelabour market policy, but they arenot obliged to take part in activation.

However, as indicated by the intro-duction of the unemployment retire-ment allowance in 1979 and the tran-sitional allowance in 1992, the mainstrategy towards these groups hasbeen to ease their way into early re-tirement, accepting that in reality thechances for older unemployed to re-gain employment are significantlysmaller than for the younger agegroups. Also, a special rule made itpossible for unemployed personsaged between 50 and 54 years, whowould become eligible for unemploy-ment retirement allowance at age 60,to receive benefits for up to 10 years(instead of the normal 5 years).

The result was that significantlyfewer unemployed were taking partin active measures among the olderage groups than among the younger.In 1996, for example, only 4% of theunemployed aged 60–69 were acti-vated. For the 50–59 age group, theshare was 20%, while about 30% ofthe younger age groups were activ-

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ated during the first quarter of 1996(DA, 1997, p. 124). Age discrimina-tion is evident.

In reaction to lower general unem-ployment in recent years, the strate-gy towards older unemployed is nowundergoing a considerable change.Thus, since 1998, the unemployedaged over 50 years have been select-ed by the National Labour MarketCouncil as a special target group. TheRegional Labour Market Councils,which implement active labour mar-ket policy, are to see that more olderunemployed become re-employed.The share of the older unemployedundergoing early activation must notbe less than that for other age groups.In addition, the above-mentionedspecial rule for unemployed aged50–54 years was abolished in Jan-uary of 1999.

However, no special activation in-struments have been developed forthe older unemployed. The view isthat the instruments that apply toother age groups can be combinedand tailored to fulfil the needs of theolder unemployed (2005-udvalget,1998, pp. 55–58). One should notethat this is a general feature of Dan-ish labour market policy and similarto the situation for ethnic minorities,who also normally receive the sameoffers as other groups. This does notexclude the possibility that a specificproject can be set up by the RegionalLabour Market Council, combiningthe available instruments (training,wage subsidies, etc.) to fit the needsof a particular target group, for in-stance among the older unemployed.But this will be done on an ad hoc ba-sis, not as a permanent programme.

Given the wide range of potentialor perceived consequences of an age-ing population, ideas about “activeageing” have been developed in anumber of different policy areas.

In relation to consequences for thewelfare state, “active ageing” ofcourse implies strategies to keepolder persons healthy, self-support-ing and living in their own homes foras long as possible. With respect tothe labour market, “active ageing”has led to considerations concerning:

– the economic incentives for earlyor flexible retirement;

– increased emphasis on upgradingthe qualifications of the older seg-ments of the workforce (includingthe older unemployed);

– concerns about how to change theattitudes of employers towardsolder persons in the workforce.

Developments at the levelof companies and sectorsIn connection with the negotiationsconcerning collective agreements in1997, the question of policies in rela-tion to older workers (labelled “sen-ior employees policy”) was high onthe agenda. As a result, special chap-ters stressing the need for more ex-plicit policies towards older workersor specifying the special rights ofthese workers were included in manyagreements, most explicitly in thepublic sector. For instance, in theagreement between the municipali-ties and the trade unions, employeesover 52 years of age may work parttime while keeping full pensionrights. Favourable retirement bene-fits are also possible, but there is amarked change from seeing senioremployees policy as a form of retire-ment policy to using it as an instru-ment to retain older employees onthe job (Kristensen, 1999).

Furthermore, joint ventures ofthe Ministry of Labour and the Min-istry of Social Affairs have in recentyears launched a number of activi-ties and campaigns in order to stimu-late the employment of persons withvarious types of handicaps as far astheir employability is concerned(Arbejdsministeriet & Socialminis-teriet, 1997). This development hasbeen supported by the social part-ners. In the collective agreements of1995, so-called “social chapters”were included in most agreements,implying that almost 90% of wage-earners are covered. These chaptersrecommend employment under spe-cial conditions (working time,wages, etc.) for persons with handi-caps – including older workers (DA,1997, p. 72).

A number of surveys indicate thatthere is a visible increase in the shareof firms having a senior employeespolicy as part of their personnel man-agement. A survey from 1994 sug-gests that about half of the firms withmore than 10 employees have spe-cial schemes for older workers (DA,1997, p. 53). Firms state that theyreap considerable benefits fromkeeping older workers on the job,such as preserving the human capitalinvested and perceiving older work-ers as being more stable.

In 1997, the Danish National Insti-tute of Social Research conducted aspecial survey concerning the socialresponsibility of firms (Holt, 1998).One result is that 61% of the firmswith employees aged over 60 haveoffered these employees the follow-ing special conditions:– possibility for part-time work:

50%;– change of job within firm: 29%;– benefit in relation to retirement:

20%.Thus, part-time employment is themost common offer to older employ-ees (Holt, 1998, Table 1.2). The highshare of companies offering sometype of scheme to older employees issupported by other evidence. A sur-vey in two counties conducted forthe Ministry of Social Affairs in 1994(cited in DA, 1997, p.55) indicatedthe following shares of firms offeringvarious possibilities:– 82% offered part-time work;– 56% offered a change of job;– 39% offered retraining for a new

job;– 23% offered various forms of re-

lief;– 20% offered advice of some kind.A recent case study conducted forthe Ministry of Labour looked at thesituation of older workers in tenDanish firms (Ipsen et al., 1998). Anumber of barriers to employing old-er workers were revealed:– the existence of job ladders, where

entry jobs are seen as the begin-ning of a long-term career in thefirm; this situation naturally dis-criminates towards older appli-cants for new jobs;

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Trends

– the image of younger employeesas being more flexible and moremotivated for training and furthereducation.

In many cases, the firms have noteven considered the potential advan-tages of hiring older workers. On theother hand, half of the firms in thestudy have or plan to develop a sen-ior employees policy. A further im-pression is that the norm of retiringat the age of 60 is widespread bothamong employers and employees.Thus, policies to keep older workersactive are considered relevant most-ly for persons aged 50 to 60.

Two instruments dominate thestrategy to keep older workers in thecompany:– the shifting of older workers to

jobs within the firm that are lessdemanding;

– part-time employment.Thus, the results of the surveys arealso supported by this recent casestudy.

Perspectives of olderworkersThe perspectives of the older work-ers themselves concerning their atti-tudes towards work and retirementcan be attacked from a number ofdifferent angles that concern boththe individual incentives for olderworkers and their attitudes towardswork, education and leisure (Hansen,1999).

A detailed survey from 1996 cov-ering the workforce in general alsolooked at the expected retirementage (Pedersen, 1998). This study re-vealed that:– The expected age of retirement is

lower for the younger age groupsthan for the older groups.

– Expected retirement age increaseswith the duration of formal educa-tion, but not proportionally.

– Similarly, expected retirement ageis low for unskilled workers (60years) and higher for salaried em-ployees.

Whether the combination of thesefactors over time will lead to a higher

or lower actual retirement age ishard to predict. Compared with aprevious study in 1994, there seemsto be a slight increase in the expectedretirement age (from 61.46 years to61.62 years).

When looking at the relationshipbetween gross income and expectedretirement age, one finds a U-shapedrelationship, with expected retire-ment age being higher for low-income and high-income groupsthan for the middle-income segment(Pedersen, 1998, pp. 160–62).

More than two-thirds of the adultpopulation (70% in 1996) has someform of supplementary pension cov-erage (apart from the public old-agepension), a share that has been in-creasing rapidly in recent years. Thedominant forms of supplementarypension in 1996 were employer-related pension schemes (48%) andtax-subsidised private pension sav-ings (44%). Many people have morethan one form of pension. Whenasked which source of income wouldbe the most important after retire-ment, 43% referred to such pensionschemes, while 46% mentioned theunemployment retirement allowanceas the source of income expected tobe most important.

Less than 10% of those who retiredo so gradually. This finding is incontrast with the expressed attitudesof the members of the workforce,where 55% would prefer a moregradual retirement (Nørregaard,1996). On the other hand, eight outof ten retiring on unemployment re-tirement allowance (almost all ofthem entering full retirement) ex-press the view that they do so volun-tarily (DA, 1997, p. 83). They men-tion reasons such as “finding time forsomething else in life” (52%) and“being with family and friends”(41%) as the most important positivereasons. By contrast, only one thirdof the recipients of the transitionalallowance felt that they retired solelythrough their own choice.

Among the motives mentioned forretiring, “health problems” are putforward by 28% of the recipients ofunemployment retirement allowance

and by almost half of the recipientsof transitional allowance. This couldbe one explanation of why gradualretirement is not an option for thisgroup.

Another explanation of the para-dox between the expressed prefer-ence for gradual retirement and ac-tual retirement behaviour could bethe fact that the economic advantagefrom gradual retirement until the re-forms in 1999 was very small – espe-cially among the lower incomegroups. Thus, an unskilled workerwho reduced working time to 20hours per week and received a publicpart-time pension would receive anet income equal to 85% of the pre-vious income; if the same person re-tired fully, the degree of compensa-tion would be 75%; and if the personworked the 200 hours allowed peryear while receiving the full unem-ployment retirement allowance, heor she would receive the same net in-come as a person working 20 hoursper week and drawing a part-timepension. The economic incentive forgradual retirement simply did not ex-ist (DA, 1997, p. 118).

Summing up: supply ofand demand for olderworkersThis final section looks at the currentpolicy debate in Denmark and focus-es on the new strategies being imple-mented in relation to “active age-ing”. The following points are dis-cussed:– changes in the economic incen-

tives for retirement (supply-sidemeasures);

– strategies to increase the demandfor older workers (demand-sidemeasures).

The economic incentives forearly retirement

As described above, one of the re-markable changes in recent years inrelation to older workers has beenthe sharp increase in the number ofpersons retiring before the official re-tirement age of 67 (as defined by the

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old-age pension). In reaction to thisdevelopment, a major reform of theunemployment retirement allowanceis now being implemented (Arbejds-ministeriet, 1998). The main ele-ments of the reform are:– Increased flexibility with regard to

working time, making it possiblefor the individual to retire on apart-time basis, where earned in-come will be deducted from theallowance based on the actualnumber of hours worked. Thus,the special part-time allowancewill disappear.

– A number of economic incentivesthat make it profitable to post-pone retirement age to two yearsafter the age of eligibility for un-employment retirement allow-ance.

– Stricter eligibility conditions forthe allowance and the introduc-tion of a special contribution paidby the employees. When the newscheme is fully implemented, aperson must pay this contributionfor no less than 25 years in orderto become eligible and must also,during the same period, have beena member of an unemployment in-surance fund.

As a part of the reform, the age limitfor the old-age pension will be re-duced to 65 years. At the same time,the economic incentives for recipi-ents to work will be improved some-what.

Increasing the demand forolder workers

As part of the general strategy to cre-ate a “broader” labour market forpersons at risk of marginalisation, inrecent years increased attention hasbeen given to various ways to makefirms more interested in keeping old-er workers on the job. These includea number of activities, some of whichhave already been mentioned above:– the inclusion of special “social

chapters” or chapters on “senioremployees policy” in most collec-tive agreements since 1995;

– the efforts of a government com-mittee on “jobs with special condi-

tions” (cf. Arbejdsministeriet &Socialministeriet, 1997);

– establishing a centre for the devel-opment of “jobs with special con-ditions” as a follow-up to the “so-cial chapters” in the collectiveagreements.

With special reference to the conceptof “active ageing”, in 1997 the Min-ister of Labour set up a governmentcommittee with representatives fromthe social partners on senior employ-ees policy (Wolthers, 1999). Thecommittee has launched a number ofinitiatives, including a programmewhich offers free consultancy tofirms wishing to develop a senior em-ployees policy. The committee hasalso funded some 86 individualprojects at a total cost of DKK 25million (ECU 3.5 million). The fund-ing covers 50% of the total expenses.About 75% of the projects are tar-geted at employed older workers,while the remainder aim at reinte-grating older unemployed on the la-bour market. Among the projects are(Arbeidsformidlingen, 1999):– a project by a large retail chain to

open a supermarket staffed solelywith persons aged 45 and above;

– a project by a private manufactur-ing company aimed at setting upindividual programmes for train-ing and education for all employ-ees aged 50 and over;

– a project at a public hospital whichwill set up special seminars forsenior employees in order to cre-ate discussions and awareness ofthe possibilities to remain in thelabour market;

– a manufacturer of kitchen utensilsscreening all work processes in or-der to adapt them to senior work-ers wherever possible.

The activities of the committee willbe evaluated in late 1999.

Summing up on policyperspectivesFrom the information presentedhere, it is evident that the challengesraised by the ageing of the work-force have been high on the Danishpolitical agenda since the mid-1990s.

This is the result both of long-termconsiderations concerning the chang-ing demographic composition of theDanish population in the first half ofthe next century and of a more acutefear of labour shortages in relationto the current low level of unem-ployment.

The political strategy imple-mented consists of two main ele-ments. One is to make early retire-ment less economically attractive tothe older part of the workforce andthereby remove some of the eco-nomic incentives influencing the cur-rent downward trend in the averageretirement age. The other strategy isto increase the awareness of bothfirms and older workers of the quali-fications and potentials of senior em-ployees and of the possibilities to re-locate older workers and to use vari-ous forms of flexible retirementstrategies. Both strategies have onlybeen implemented recently, and it isstill too early to tell the degree towhich they will prove to be success-ful.

Per Kongshøj Madsen

Selected bibliography2005-udvalget (1998): Videreførelse af denaktive arbejdsmarkedspolitik [Continuing ac-tive labour market policy]. Copenhagen.Arbejdsformidlingen (1999): Projektstatus1999 [Project Status 1999]. Copenhagen.Arbejdsministeriet (1996): Arbejdsmarkeds-politisk rapport 1996. Kapitel 2: De ældre,tilbagetrækning og seniorpolitik [Report onLabour Market Policy 1996: Chapter 2: Olderpersons, retirement and senior employees pol-icy]. Copenhagen.Arbejdsministeriet (1998): Den ny efterløn[The new unemployment retirement allow-ance]. Copenhagen.Arbejdsministeriet & Socialministeriet (1997):Etablering af skånejob på arbejdsmarkedet[Establishing protected jobs on the labour mar-ket]. Copenhagen.DA (Dansk Arbejdsgiverforening) (1997):Rapport om seniorer på arbejdsmarkedet –muligheder og barrierer [Report on senior em-ployment – possibilities and barriers]. Copen-hagen: DA Forlag.Danmarks Statistik (1998): Statistisk Tiårs-oversigt 1998 [Statistical Ten-Year Survey1998]. Copenhagen.Det Økonomiske Råd (1998): Dansk økonomi.Efteråret 1998 (kapitel II) [The Danish Econo-my, Autumn 1998 (Chapter II)]. Copenhagen.Finansministeriet (1999): Finansredegørelse98/99 [Economic Report 98/99, Chapter 4].Copenhagen.

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Hansen, P. V. (1999): “Tilbagetrækning fra ar-bejdsmarkedet” [Retirement from the labourmarket]. In: Samfundsøkonomen, 1, pp. 17–22.Holt, H. (1998): En kortlægning af danskevirksomheders sociale ansvar [Charting thesocial responsibility of Danish companies]. So-cialforskningsinstitutttet 1.Ipsen, S., H. Hansen & S. Laghaei (1998): Deældre på arbejdsmarkedet – et casestudie[Older persons on the labour market – a casestudy]. CASA, November 1998.Ingerslev, O. & L. Pedersen (1997): “At væreeller ikke være – på arbejdsmarkedet” [To beor not to be – on the labour market]. In: Sam-fundsøkonomen, 1, pp. 13–18.

Kristensen, J. (1999): “Seniorpolitik – fra af-vikling til fastholdelse” [Senior employeespolicy – from retirement to retention]. In:AKF-Nyt, 1, pp. 22–25.Ministry of Finance (1999): The Danish Econ-omy. Medium-Term Economic Survey. March1999 (Chapter 6 on effects of the ageing popu-lation). Copenhagen.Møller Danø, A. et al. (1999): “Kvinder,mænd og efterløn.” [Women, men and the un-employment retirement benefit]. In: AKF-Nyt,1, pp. 29–30.Nørregaard, C. (1996): Arbejde og tilbagetræ-kning i 90’erne – og fremtidens pensionister[Work and retirement in the 1990s – and theretired of the future]. Socialforskningsinstitut-tet.

Pedersen, P. J. (1998): “De ældre og arbejds-markedet” [Older persons and the labour mar-ket]. In: N. Smith (ed.): Arbejde, incitamenterog ledighed. Rockwoll Fondens Forskningsen-hed. Aarhus: Aarhus Universitetsforlag.Regeringen (1997): Indkomstoverførsler –færre på passaiv forsørgelse. Dokumentation[Transfer incomes – Fewer on passive support.Documentation]. Copenhagen.Regeringen (1999): Arbejde og service [Workand service]. January. Copenhagen.Wolthers, A. (1999): “Det seniorpolitiske initi-ativudvalg” [The committee for initiatives forsenior employees policy]. In: AKF-Nyt, 1,pp. 26–29.

Germany

IntroductionThe population in Germany is al-ready ageing, and, according to cur-rent population projections, demo-graphic change will speed up duringthe coming decades. The official pop-ulation forecast of the Federal Statis-tical Office (Table 1) predicts that theage ratio – defined as the relationshipbetween the population aged 65 orover and the working-age population(20–65) – will have increased to48.4% by the year 2040, that is, tomore than double the age ratio in1995. The increase appears to be theconsequence of both declining birthrates and rising life expectancy. Inwestern Germany, the fertility ratehas declined markedly, from a peakof 2.1 births per woman in the mid-1960s to 1.3 in 1995. Life expectancyin western Germany has increasedsince 1950 by nearly eight years forthe male population and ten years forthe female population. In general, itis assumed that life expectancy willcontinue to increase. Long-term pop-ulation projections predict a risingpopulation until 2010 and an acceler-

Table 1: Population forecastUnit 1995 2010 2040

Population million 81.9 83.9 72.1

Age ratio (65+) % 22.6 30.0 48.4

Youth ratio (< 20) % 23.8 20.1 19.9

Fertility rate births per 1.3 1.4 1.4woman

Life expectancy (at birth) years 76.4 77.3 77.2

Net immigration per year % of 0.6 0.3 0.3population

Source: Federal Statistics Office.

ating decline thereafter. The rise dur-ing the next decade will be the resultof continuing net immigration. Forthe following decades, more or lessconstant immigration flows are ex-pected; the forecasts, however, varywidely on this point.

The ageing of the population is re-flected in an ageing and shrinkingworkforce. In absolute figures, thelabour force will decline by 9 millionto 33 million by 2030 (Thon, 1995).The share of workers aged 50 or overwill rise from 23% to 34% by 2020and decline slightly afterwards.However, demographic changes are

not the main problem related to age-ing on the labour market. The per-sistence of high unemployment ismuch more important, because itleads to continuing exclusion of olderworkers. The unemployment rate ofpersons aged 55 to 60 rose from15.2% in 1992 to 22.4% in 1998.Most important, for unemployedpersons aged 45 or over, the pros-pects for re-entering the labour mar-ket are very gloomy, especially forthose with a low level of educationand health problems.

Of course, ageing is a matter of so-cial debate in Germany, given that it

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creates serious financial burdens forthe social system and opens up anintergenerational conflict as to howto solve the problem. Generationalaccounting shows that a tremendousand constantly rising financial bur-den is being shifted to future genera-tions. The role of aged persons in thelabour market and the distribution ofincome between generations is there-fore being re-evaluated in the publicand academic debate. Ageing tiesinto the economic debate via twomajor links. One link leads to the de-bate on non-wage labour costs,which warns that the rising share ofinactive older workers will increasenon-wage labour costs and thussqueeze labour out of production.Moreover, productivity will increaseas a result, and the rise in unemploy-ment might be further accelerated.The other link is related to the pro-ductivity debate, which perceivesageing as a barrier to technicalprogress and future productivitygrowth.

Changes in the policyframework: recent trendsPension reforms

The Statutory Pension Reform Actof 1992 had the aim of stabilisingcontribution rates in the mediumterm and lowering their increase inthe long term. Under the 1992 re-form, the pension age will be raisedfrom 60 for women and 63 for mento 65 years for both sexes by 2012.Moreover, early retirement has beenrestricted by a lowering of pensionlevels, family-oriented elementshave been reinforced, and the finan-cial contribution from the federaltax budget is set to increase. Thenew “Red-Green” (the SocialDemocrats and the EnvironmentalParty) government has abolished the1999 reform planned by the formerconservative-liberal governmentand submitted a new proposal. Thestarting point for both proposals isthe prospect that, without pensionreform, contribution rates must beexpected to rise to 22% of grosswages by 2010 and to almost 30%

by 2040 (Sinn & Thum, 1999). Thenew government’s proposal suggestsusing the increase in energy taxes tokeep contribution rates for statutorypensions under 20% until 2020, tolimit the increase in average pensionpayments to the inflation rate fortwo years and to introduce addition-al capital-funded pensions for work-ers. These measures will lower netpensions from 70% to 67% of netwages.

The direction of the proposal issimilar to that of the former Germangovernment, which wanted to intro-duce a “demographic factor” for thecalculation of statutory pension lev-els. Pensions, which are increasedeach year in line with changes inaverage net earnings, would be cal-culated by considering the increasein life expectancy. Thus, rising lifeexpectancy would lower the annualincrease of pensions. The adjustmentwould have reduced the long-termvalue of pensions from 70% to 64%of net wages by 2030.

Statutory pension reforms in Ger-many therefore follow a doublestrategy to counteract the effects ofrising life expectancy and early re-tirement. The extension of workinglife has already been decided andwill certainly affect the labour mar-ket directly by raising the participa-tion rates of older workers during thenext decade. The alternative of re-ducing average pension levels is stillunder debate, but a principle of re-duction is contained in all proposals.This will affect income distributiondirectly, but will also increase theprivate savings of younger genera-tions, who must expect a relative de-cline in statutory pensions.

Pathways to early exit andgradual retirement

Early retirement has been wide-spread in recent years. It has had noeffect on pension payments to indi-viduals, and it represented a relative-ly cheap way for companies to re-duce staff. Moreover, unemploymentamong persons aged 55 or older hasbeen above the average rate. At the

same time, Germany was quite suc-cessful in keeping youth unemploy-ment at a low level for many years.However, in the light of demograph-ic changes, the policy of early retire-ment has radically changed. One ofthe major elements of the pension re-form of 1992 was lowering pensionlevels in the case of early retirement.The reduction amounts to 3.6% pereach year of retirement before (ris-ing) pension age.

The Pension Reform Act of 1992also aimed at reinforcing gradual re-tirement and partial pensionschemes. A contributor with pensionentitlements can choose betweendrawing a full or a partial pension.For the partial pension, there is achoice between receiving one third,one half or two-thirds of the full pen-sion. The less an eligible personclaims, the more he or she is allowedto earn in addition to his or her pen-sion. But the earning ceilings are per-ceived as being too restrictive. Theresults of several case studies demon-strate that the partial pension is notfinancially attractive for employees(Schmähl, George & Oswald, 1996).

Labour market policy

While older workers are highly de-pendent on public support to escapefrom unemployment or even to stayin their jobs, they are clearly under-represented in labour market policymeasures. Only 5% of the unem-ployed in training programmes wereaged 45 or over in 1998, but theshare of older workers in total unem-ployment was 33% (all figures forwestern Germany). The share ofolder workers in job-creation pro-grammes was about 20%, while theyaccounted for 12% in the wage-subsidy programme for long-termunemployed. The specific wage sub-sidies granted for older workers werevery limited. Only 2.3% of the un-employed aged 45 or over were sup-ported by this programme. These fig-ures make it very clear that employ-ment for older workers is not a prior-ity in German labour market policy.Until now, the exclusion of olderworkers was more or less accepted

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Trends

by public institutions, and incomesupport was provided in the form ofdisability pensions and early retire-ment schemes.

Flexible retirement

A further pillar of the current re-forms consists in promoting gradualretirement from the age of 55 up-wards (Gradual Retirement Act of1996). The net wages of older em-ployees who reduce their averageweekly working hours by half will beat least 70% of their former net wag-es. For the next five years, employ-ers can receive subsidies from theFederal Employment Office if theyemploy an unemployed person or anapprentice on a part-time basis. Thepart-time scheme for older workerswill grant the same eligibility for ear-ly retirement (after two years ofpart-time work) as for long-term un-employment. By the end of 1997,around 70 collective agreements im-plementing this special part-timescheme for older workers had beensigned, covering 5.5 million personsand thus around 18% of all employ-ees (Bundesanstalt für Arbeit, 1999).In the recent past, very few employ-ees have made use of this option, aspeople normally do not want theirincome to be cut even if they have towork less and, moreover, they preferto retire early. This scheme has notbeen attractive financially for eitheremployees or employers. However,the conditions for this type of gra-dual retirement were recently im-proved by law (1998 law on socialsecurity aspects of flexible working-time models).

Developments at the levelof companies


Over the last two decades, economicrestructuring has been linked toyouth-centred manpower policies.Economic restructuring in easternGermany is also strongly linked tosuch strategies. The motivation for apersonnel manager to dismiss olderstaff is based on:

Figure 1: Activity rates, 1991/1997

Source: Statistisches Bundesamt.

– fear of a lack of innovative capaci-ty on the part of older workers;

– avoidance of declining perform-ance connected to health risks;

– use of human capital and the mostup-to-date skills without havinginvested in the company’s staff;

– creation of career opportunitiesfor the younger staff;

– wage differentials between youngand older workers.

Moreover, given the (still) existingpossibilities for various forms of ear-ly retirement, dismissing older per-sons on a large scale is cheaper forcompanies than dismissing youngeremployees (Bäcker & Naegele,1995). Over the last few years,youth-centred personnel policieshave been facilitated by the largesize of the cohorts entering the la-bour market, implying relativelylower wages for this generation. Inaddition, the possibilities for em-

ploying workers on the basis offixed-term contracts were extendedin 1985 in order to increase labourmarket flexibility, which has pro-moted the recruitment of a youngerworkforce. Thus, age discriminationcan be observed at the bottom and atthe top of the age structure: theyounger workforce is entering the la-bour market under less favourableconditions than the middle-agedworkforce, while older persons areoften excluded.

An empirical study carried out bythe ISO Institute clearly indicatesthat demographic change is not amatter of concern in the human re-source policies of companies. Theirplanning period is in fact quite short(Huber, 1998). However, personnelmanagers are slowly becomingaware of the pitfalls associated with ayouth-centred personnel policy, es-pecially with regard to the loss of

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skills learned by experience. Never-theless, human resource managersand works councils still stress the ad-vantages of an early exit, because itis still seen as a socially acceptablemeans of staff adjustment. Conse-quently, companies operating in Ger-many are at present not well pre-pared for coping with the future chal-lenge of an ageing workforce.

It is quite likely that the attitudesof both employees and employerswill gradually change with the fu-ture restrictions on early retire-ment. Without the early retirementschemes, the dismissal of older staffwill become more expensive, and in-tegrating older workers into thework process will become increasing-ly important. In this respect, imple-menting gradual retirement schemesis widely seen as a promising modelfor tackling the future challenges ofdemographic change, because thismight help to reduce older staff whileat the same time allowing for conti-nuity and for the possibility to bene-fit from the higher productivity ofolder persons in some areas, eventhough these schemes are still only intheir initial stages.

Company strategies andcollective agreements

Some companies have implementedtheir own gradual retirementschemes in the context of flexibleworking-time models. Much atten-tion has been given to a model oftime credits developed by theVolkswagen company: overtime pay,a Saturday bonus and other remu-neration for extra hours can be accu-mulated as time credits in a “work-ing-hours account”. Basically, the ac-cumulated time credits can later beused for gradual retirement at theage of 55. Older workers can then re-duce their weekly working time to18 hours while still earning 85% ofthe previous full-time salary. Thetime credits are capitalised and man-aged by funds, and they will be trans-ferable in the future. Other compa-nies offer more traditional gradualretirement schemes. For example,

Daimler Benz offers gradual retire-ment at the age of 60 for the lastthree years of employment for work-ers who have worked in three shiftsfor ten years. They can reduce theirworking time by half, receiving fullwages for six months and then agradually reduced income whichstops at 80% of the last gross wage.Siemens offers gradual retirementfor employees with 20 years of ten-ure from the age of 56 to 63; part-time work is possible for at most fouryears at 75% of the last gross wage(Schmähl, George & Oswald, 1996,p. 86). The German insurance com-pany Allianz offers part-time workfor older workers as of the age of 60for five years (Allianz Presseinfor-mation, 16.9.1998). The employeeworks full time for the first half ofthis period and not at all thereafter.Throughout the whole period, thecompany adds a 30% supplement tothe part-time wage and pays 90% ofthe full-time contributions to thepublic pension scheme. Splitting thepart-time scheme for older workersinto a full-time work period and a

pre-retirement period is not onlycommon in the insurance sector: sim-ilar collective agreements have beensigned within industrial sectors (e.g.chemicals). These schemes seem tobe more successful than part-timemodels that require part-time workto be carried out throughout thewhole period (Niebler, 1998; Wolf,1998).

Training and manpowerdevelopment

Continuing training has gained in im-portance within firms, but olderworkers aged 50 or over are under-represented (Barkholdt et al., 1995).The return on investments in humancapital is perceived by employersand older employees as being toolow. Statistical figures regarding par-ticipation in continuing trainingmeasures financed by the FederalEmployment Office clearly indicatethat training is targeted mainly at theyounger workforce and – to a lesserextent – at the middle-aged agegroups (Figure 2). Only 11% of all

Figure 2: Vocational training: participants by age group, 1996

Source: Bundesanstalt für Arbeit.

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participants in further training andretraining measures organised by theFederal Employment Office wereaged 50 or over in 1996, althoughthis age group represented nearly aquarter of the labour force. By con-trast, nearly 80% of the participantswere aged between 25 and 49, al-though this age group representedonly two-thirds of the labour force.Personnel managers stress that thelow participation rate of employeesaged 50 or over in further training ismainly due to low motivation ontheir part. However, companies donot normally offer special incentivesfor employees to take part in contin-uing training (Barkholdt et al., 1995).

Perspectives of olderworkers

Employment risks

The risk for older workers of becom-ing unemployed is significantly small-er than for younger workers. This hasto do with long job tenure, strict dis-missal protection and the possibilityof early retirement. However, theprospects for older workers to re-enter the labour market after a phaseof unemployment are much smaller.This is indicated by the 1998 figuresfor the average period of unemploy-ment, which were 13.8 months forunemployed aged 45 or over againstnine months for all unemployedpersons (Bundesanstalt für Arbeit,1999). Long-term unemployment iswidespread among older workers. InSeptember 1998, 55% of the olderunemployed were without a job formore than one year. Only 28% of allexits of older workers from unem-ployment led back to employment,whereas 39% of all of the unem-ployed were able to find a new job.

Earnings situation

Stipulations on seniority pay are in-cluded in many collective agree-ments. Seniority wage elements re-lated to the age of the employeehave been agreed for the youngworkforce aged between 20 and 27(WSI, 1998). Age-related seniority

Figure 3: Gross yearly earnings of male full-time white-collar workers*,1990

* Performance/wage group III (skilled workers with a formal education degree. Thereexist five basic performance groups.)

Source: Statistisches Bundesamt: Löhne und Gehälter, Fachserie 16, No. 3.

wages for workers aged up to 47 areeffective only in the public sector.However, most collective agree-ments covering white-collar workersinclude seniority wage elementslinked to experience (tenure in thecompany, position, etc.), whileseniority wages are less importantfor blue-collar workers. Taken to-gether with performance-related payelements, the wages of white-collarworkers increase rapidly at the be-ginning of their professional careers.After the age of 35 or 40, the rate ofincrease flattens out. In many indus-tries, a peak is reached between theage of 45 and 55, with stagnating oreven decreasing wages thereafter(see Figure 3).

It can be assumed that especiallythe wages of the young workforceentering the labour market do notcorrespond to their productivity, andthis might represent a strong incen-tive to recruit young persons. Theproductivity-wage ratio of workersaged 50 or over is less evident anddepends on the kind of activities car-ried out. However, employers oftenbelieve that their older workers areless productive (due to health risks,etc.; Koller, 1995), while the averagewage level of older workers does notdecline significantly. It is not certainwhether seniority wage systems willstill be effective by the time the

baby-boom generation grows older.As long as high unemployment fig-ures persist there will be pressure onwages, and seniority wages are likelyto be cut back. In general terms, per-formance-related pay policies are be-ing increasingly pursued, and thepublic sector will probably undergo astructural and organisational changewithin the coming years.

The early retirement vs.unemployment choice

The decision to raise the retirementage and to reduce the financialattractiveness of early retirementover the next decade is unlikely to berevised by public pension policy.However, it is still unclear as to howthis will affect the labour market.While the impact on the labour sup-ply is quite straightforward becausethe participation rates of older work-ers will increase, the impact on la-bour demand is somewhat unclear.Until now, it was easy to reduce thesize of the older workforce becauseearly retirement was attractive forolder workers and cheap for compa-nies. The adjustment of pensions tolonger retirement periods and the re-strictions on access to disability pen-sions will change the situation forolder workers and increase their riskof becoming unemployed.

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Following a recent study pub-lished by the IAB, it remains doubt-ful whether employers will changetheir policies regarding older work-ers. As in the past, a surplus of newlyskilled and cheaper labour will beavailable, the requirements to re-structure production and introducenew technologies will persist and de-industrialisation will continue. Inother words, the economic and la-bour market conditions which deter-mined manpower policies in the pastcan be expected to continue in thefuture. The question that remains iswho will bear the burden resultingfrom this trend. It is most likely thatsome of the burden will be financedby the companies that depend on theeconomic advantage of restructuringthe workforce. Without doubt, how-ever, a substantial part will be borneby the older workers, who will haveto accept pensions cuts of up to 18%(Wübbeke, 1999).

ConclusionsGovernment policies have alreadyreacted to the effect of ageing on la-bour costs. Two major pension re-forms were initiated during the1990s with the aim of gradually cut-ting statutory pension benefits andlengthening working life. The debateon financing public pensions in theface of demographic change is stillcontinuing and now focuses on a fun-damental reform of the pension sys-tem, mixing elements of a pay-as-you-go scheme and capital-fundedprogrammes. In order to cope withthe effects of the pension reform(longer working life and lower statu-tory pensions, both of which are in-centives for the employees to retirelater), companies are already react-ing by introducing new elements tocompany pension schemes and im-plementing flexible working-timemodels, which are designed to allowemployees to retire earlier. In con-trast to former years, these conceptsmust also be partly financed by theemployees themselves through addi-tional contributions to the companypension schemes or through time-

credit models. However, companiesare at present not well prepared forintegrating an ageing workforce:their strategies for the near futureare still focused on early exit. Thereis more awareness of the problem ofageing at the political than at thecompany level.

A major perceived difficulty relat-ed to ageing is lack of innovative ca-pacity. In particular, the aversion ofolder workers to risks might causeproblems. Moreover, a lack of hu-man capital is feared in the longterm as long as the education andtraining system emphasises initialrather than continuing training. Re-forms of the education system areunder discussion. In order to effec-tively implement concepts of life-long learning, changes in human re-source policies, as well as in the atti-tudes of employees, will be neces-sary. However, the prospects for la-bour productivity growth might notbe significantly affected, for the fu-ture generation of older workers willbe increasingly used to participatingin continuing training. A first stephas been taken by some large com-panies in the context of more flex-ible working-time models which, inprinciple, enable the individualtraining period to be spread over thewhole working life.

Ageing seems to be more a prob-lem of distribution than an obstacleto macroeconomic performance. Thedistribution of jobs between youngerand older workers, the relationshipbetween wages and pensions, and ac-cess to training are all elements of agenerational conflict which is nowwidely perceived as the fundamentalconflict of the coming decades.Macroeconomic performance – onthe other hand – seems to be funda-mental to the solution of these con-flicts, as their importance dependssignificantly on the level of unem-ployment and the growth of averageincomes. The solutions, therefore,should be primarily sought in thecreation of additional employmentrather than in age-specific labourmarket and social policies.

Kurt Vogler-Ludwig

Selected bibliographyBäcker, G. & G. Naegele (1995): “Ältere Ar-beitnehmer zwischen Langzeitarbeitslosigkeitund Frühverrentung.” In: WSI-Mitteilungen,No. 12, pp. 777–784.Barkholdt, C., F. Fredrichs & G. Naegele(1995): “Altersübergreifende Qualifizierung –eine Strategie zur betrieblichen Integration äl-terer Arbeitnehmer.” In: Mitteilungen aus derArbeitsmarkt- und Berufsforschung, No. 3,pp. 425–434.Bundesanstalt für Arbeit (1999): Arbeitsmarkt1998. Nuremberg.Deutscher Bundestag, Referat für Öffentlich-keitsarbeit (ed.) (1998): Zwischenbericht derEnquete-Kommission “DemographischerWandel” – Herausforderung unserer älterwerdenden Gesellschaft an den einzelnen undan die Politik. Bonn.Düll, N. (1998): “Population Aging and Ger-man Economic Performance.” In: B. Bosworth& G. Burtless (eds.): Ageing Societies. TheGlobal Dimension. Washington, D.C.: Brook-ings Institution Press, pp. 148–239.Huber, A. (1998): “Demographischer Wandelund Personalmanagement.” In: Personalfüh-rung, No. 1, pp. 39–43.Koller, B. (1995): “Vielen älteren Arbeitslosenfehlt nichts weiter als ein Arbeitsplatz.” In:IAB Werkstattbericht, No. 3. Nuremberg.Niebler, M. (1998): “Altersteilzeit in der Ver-sicherungswirtschaft. Praxisnahe und attrak-tive Regelung.” In: Arbeitgeber, Nos. 1/2–50,pp. 32–33.Prognos AG (1998): Prognos-Gutachten 1998.Auswirkungen veränderter ökonomischer undrechtlicher Rahmenbedingungen auf die ge-setzliche Rentenversicherung in Deutschland.DRV-Schriften, Vol. 9, published by the Ver-band Deutscher Rentenversicherungsträger.Frankfurt a. M.Schmähl, W., R. George & C. Oswald (1996):“Gradual Retirement in Germany.” In: D.Delsen & G. Reday-Mulvey, G. (eds.): Gra-dual Retirement in the OECD Countries.Aldershot: Dartmouth.Sinn, H. W. & M. Thum (1999): GesetzlicheRentenversicherung: Prognosen im Vergleich.Munich: Ifo-Institut.Thon, M. (1995): “Demographische Aspekteder Arbeitsmarktentwicklung – die Alterungdes Erwerbspersonenpotentials.” In: Mit-teilungen aus der Arbeitsmarkt- und Berufs-forschung, No. 3. Nuremberg.WSI – Wirtschafts- und Sozialwissenschaft-licher Institut (1998): “Elemente qualitativerTarifpolitik.” In: Informationen zur Tarifpoli-tik, No. 34.Wolf, R. (1998): “Bessere Bedingungen fürAltersteilzeit.” In: Arbeitgeber, No. 7/50,pp. 211–213.Wübbeke, C. (1999): “Der Übergang vonsozialversicherungspflichtiger Beschäftigungin den Rentenbezug zwischen sozialpolitischerSteuerung und betrieblichen Interessen.” In:Mitteilungen aus der Arbeitsmarkt- undBerufsforschung, No. 1. Nuremberg.

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Greece

IntroductionDue to a decline in fertility rates andincreasing longevity, the Greek pop-ulation has been ageing rapidly. Theproblem is expected to intensify withtime, given that fertility started de-clining in 1980 – up until then, fertili-ty rates had been low but relativelystable.

The problem of ageing becomesapparent when we look at the agestructure of the population. Theshare of the working-age populationunder 44 years decreased from51.8% in 1985 to 48.5% in 1997. Onthe other hand, the older dependen-cy ratio (population aged 65 yearsand over as a percentage of theworking-age population) increasedfrom 19.9% in 1985 to 27.9% in1997. This ratio is expected to in-crease more in Greece compared toother countries because of higherlongevity rates (OECD, 1997).

The effects of the ageing of thepopulation on the labour force de-pend on developments in the partici-pation rates of various groups. InGreece, the rates of younger groupshave fallen in recent years, and this –combined with the decrease in theirsize – has resulted in a decline of thepercentage of the labour force under25. On the other hand, because thefall in fertility rates started in 1980and because a relatively largenumber of older workers had an op-portunity to retire early on the basisof various clauses in the pensionlegislation, the percentage of personsin the labour force aged 45–64 de-clined between 1985 and 1997(Table 1). Thus, although there hasbeen a decrease in the size of the agegroup under 25, the problem of age-ing of the labour force has not be-come apparent yet due to the declinein the participation rates of olderpeople. However, the ageing of thepopulation will be reflected in the la-

bour force with time, particularly be-cause the financial problems of thepension system have created strongpressures to restrict the possibilitiesfor early retirement.

Implications of the ageingof the labour force

Productivity, employment andeconomic growth

Productivity is likely to be affectedadversely by the ageing of the labourforce because older workers usuallyhave a lower capacity to adjust tochanges in technology. The adverseeffects on productivity will be great-er if workers do not undergo contin-uous training to keep up with techno-logical changes. Since the return oninvestment in training decreases withthe age of those receiving it, employ-ers’ incentives to train older workerswill not be strong. Moreover, em-ployers are not likely to bear the costof training workers employed on oc-casional or fixed-term arrangements.

Older persons work on averagefewer days than younger persons,but because of seniority bonuses,their earnings are higher. This is like-ly to create a less favourable relationbetween their productivity and earn-ings, compared to younger workers,and in some cases may lead to theirreplacement. Up to now, existing ar-rangements concerning dismissals(quantitative restrictions and com-

pensation requirements) limit possi-bilities for dismissing older workers.However, rising pressure to increaseflexibility in the labour market islikely to lead to gradual liberalisationof dismissals and more extensive dis-placement of older workers.

From a macroeconomic point ofview, because of the lower produc-tivity of older workers, the ageing ofthe labour force is likely to have ad-verse effects on economic growth.

Ageing and the pensionsystem

According to national and interna-tional analyses, the ageing of thepopulation and the maturation of thealready problematic pension systemare expected to create unmanageablefinancial problems in the comingyears (OECD, 1997; OECD, 1998a;Committee for Long-term EconomicPolicy in Greece, 1997; Leandros,1997; Robolis & Kollias, 1998). In1997, total pension outlay exceededcontributions by about 4.5% ofGDP. The gap, presently covered byearmarked taxes and budgetarytransfers, is expected to increase to5.5% of GDP in 2010 (OECD,1997). According to OECD projec-tions, the ratio of expected pensionpayments to GDP will increase by1.2 percentage points for every fiveyears. The present value of the netpension outlay was 196% of the1994 GDP, by far the highest per-

Table 1: Participation of older workers in the labour force (in %)Participation rates of Percentage of the labourpersons aged 45–64 force aged 45–64

Year Total Men Women Total Men Women

1985 57.1 80.6 35.1 35.7 37.7 31.91990 53.1 74.6 32.5 34.3 37.5 28.91995 53.9 76.0 33.3 33.0 36.4 27.61997 55.0 76.9 34.8 33.7 37.3 28.2

Sources: National Statistical Service of Greece: Labour Force Surveys, 1985, 1990,1995, 1997.

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centage among all OECD countries(OECD, 1997).

The ageing of the population incombination with the other problemsof the Greek pension system create aneed for a substantial increase in rev-enue or a cut in expenditure. Contri-bution rates cannot increase further,since statutory payroll taxes for pri-vate-sector employees are among thehighest in the OECD, generating ad-verse effects on employment cre-ation. In addition, due to serious fis-cal problems, there are no possibili-ties for increasing public transfers tothe pension funds. Therefore, togeth-er with improving efficiency in theadministration of the system and re-stricting contribution evasion andavoidance, expenditure must bedrastically cut. This could beachieved mainly by extending thelength of working life and reducingthe number of pensioners. However,the ageing of the labour force willtend to create more instead of fewerpensioners.


Policies concerning retire-ment age

During the 1980s, liberal legislationconcerning retirement and invalidityand its lax application gave a rela-tively large number of workers theopportunity to retire before the sta-tutory age of 65. Under the pressureof the mounting financial problemsof the system, legislation was passedin the early 1990s to restrict early re-tirement. In addition, the method ofcalculating pensions was changed inorder to encourage workers to staylonger in the labour force (Law2084/1992).

The reform of the legislation andits stricter application since 1992have had a restricting effect on thenumber of workers retiring early.However, many possibilities for re-tiring before 65 still remain. Besidesother provisions, about 40% of thelabour force is eligible to retire be-fore 65 on account of employment in

arduous and unhealthy work. Thegovernment is considering legislationfor a radical reform of the pensionsystem, but because of the seriouspolitical and other implications of theneeded changes, their introductionhas been postponed to after the year2000.

Pathways to early retirement

There are many pathways to earlyretirement. Under Law 2556/1997,workers with 10,500 days of insuredwork can get a full pension after theage of 58 and with fewer days ofwork can get a reduced pension af-ter the age of 60. Workers employedin arduous and unhealthy work canget a full pension after 60 and a re-duced pension after 56. Certain cat-egories of other workers and ofwomen with children can retire afterthe age of 50.

Under various ministerial resolu-tions, workers close to retirementage who lose their jobs because of

mass dismissals become eligible forincreased unemployment benefits fortwo to three years. During that time,their social security contributions arepaid by the Manpower EmploymentOrganisation (OAED). This arrange-ment facilitates early retirement.

In the past, there was extensiveearly retirement on account of inva-lidity, but now this has been restrict-ed.

Policies to increase participa-tion rates and the reintegra-tion of older workers

There has been no significant effortto increase the participation ratesand the reintegration of older work-ers. This can be explained by the factthat, because of the ample possibili-ties for early retirement, the prob-lems associated with the ageing ofworkers have not become pressingyet. Moreover, because of the dis-missal restrictions and the relativelyhigh compensation requirements for

Figure 1: Unemployment rates, men and women, total and aged 45–64

Source: Labour Force Surveys.

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Trends

salaried employees with many yearsof service and labour union activity,dismissal of older workers has notbeen as frequent as in other coun-tries. As a result, the unemploymentrates of older workers, both men andwomen, have been less than half thenational rates (Figure 1). Thus, theissues associated with the employ-ment or the reintegration of olderworkers have not been in the fore-front of interest, and, consequently,there has been no public debate orpressure for policies in this regard.

Most training and employmentprogrammes benefiting older work-ers are for a broader age group (30 to64 years). Occasionally there is extrahelp for older workers. For example,in the employment subsidisation pro-gramme operated by the OAED, thesubsidy may last 12 more months forpersons aged over 55.

Under the Work ReintegrationProgramme, when firms employworkers who lost their jobs becauseof mass dismissals due to privatisa-tion, restructuring or closing down offirms, there is an increase in the em-ployment subsidy for men aged over55 and women aged over 50. Underthis programme, employment subsi-dies are combined with vocationalguidance and training. A special pro-gramme exists for subsidising theemployment of unemployed workerswho are close to retirement age(workers who need up to 700 days ora little more than two years of in-sured work), under which the subsi-dy is higher and may last for the timeneeded until retirement.

Under the self-employment pro-gramme for unemployed personsaged 30–64, there are no special pro-visions for older persons. Under theself-employment programme forpeople with special needs, a smallbonus is added to the subsidy forthose aged over 45.

Recently, the government an-nounced a pilot programme combin-ing training, placement and subsi-dised employment for 1,500 unem-ployed persons aged 45–64, to be im-plemented in the coming months.

Developments at the levelof companies and sectorsBecause of the possibilities for olderworkers to retire early, the problemsassociated with the ageing of the la-bour force have not yet become ap-parent and have not created pressureon companies to deal with them.Therefore, the issues related to re-placing or keeping older workers,providing training to enable them tokeep up with technological changes,introducing systems of gradual re-tirement, and so on, have not re-ceived much attention. There may besome forward-looking companies orlabour unions that have consideredsome of these issues, but such caseshave not been brought to publicattention.

Prospects of workerswhen they get olderUnder present conditions, the pros-pects of older workers do not seemencouraging from many points ofview. Changing jobs is usually verydifficult for them. In view of expect-ed structural changes in response tothe need of firms to become morecompetitive, the gradual liberalisa-tion of the labour market and the re-duction in the power of labourunions, the dismissal of older work-ers is likely to become a more fre-quent phenomenon in the nearfuture. This, in combination with therestriction of possibilities for earlyretirement, will diminish the employ-ment prospects of older workers andincrease their rate of unemployment.

The possibilities for older workersto receive training and enter a pro-cess of lifelong learning do not seemgood either. The incentives of com-panies to make investments in thisregard are not strong, while the vari-ous kinds of public programmes arelikely to put more emphasis on train-ing persons who are going to staylonger in the labour force.

Moreover, due to the serious fi-nancial problems of the social securi-ty system, pensions are likely to de-crease for a large number of workers.

Some pensioners may be able to sup-plement their incomes by working inthe formal or informal sector,through private insurance plans orthrough family savings, but such so-lutions cannot be of help to a largenumber of them. According to a gov-ernment committee (Committee forLong-term Economic Policy inGreece, 1997), because of the poorprospects of the public pension sys-tem, reliable supplementary privatepension plans must be developed atthe company or sector level in orderfor pensioners to be able to securesupplementary sources of income.

ConclusionsDespite the rapid ageing of the popu-lation and the growing concern aboutits impact on the labour force and theailing social security system, theissue of introducing a flexible retire-ment system and other arrangementsto deal with the problems associatedwith ageing has not received muchpublic attention and has not been inthe forefront of interest on the partof policy-makers or the social part-ners up to now.

Because of liberal retirement poli-cies in the past, Greece is one of theOECD countries with the largestnumber of pensioners. In 1997, theirnumber corresponded to 57% ofthose employed, one of the highestpercentages in the OECD. About22% of the population receive a pri-mary pension. Although the statu-tory retirement age is 65, because ofspecial arrangements for individualgroups, the effective retirement ageis between 55 and 60 years. In1995, the average age of transitionto inactivity was estimated to be62.3 and 60.3 years for male and fe-male workers, respectively (OECD,1998b).

All Greek and international ob-servers agree that the pension systemin Greece, in its present form, is fi-nancially unsustainable and requiresa major reform. Ways must be foundto expand revenues and reduce pen-sion outlays. Under present condi-tions, it will be very difficult for the

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government to restrict early retire-ment, particularly for workers whohave established such a right and areclose to making use of it. Abolishingthis right can create serious politicalproblems for any government. By in-troducing a gradual retirement sys-tem that would incorporate sufficientincentives for those eligible for earlyretirement to stay longer in the la-bour force, the government could in-crease the revenue and decrease theoutlay of the pension funds, thusleading them out of the present im-passe.

Besides the above, a gradual re-tirement system could be very usefulas an alternative to early retirementfor reducing employment when re-structuring big enterprises or sectors(e.g. banking) or privatising publicenterprises, as a means for alleviat-ing the situation in regions with highunemployment, and so on.

The existence of a sizeable infor-mal sector in the country may createsome problems for the implementa-tion of a gradual retirement system.An undetermined number of pen-sioners are currently engaged in un-declared work. If opportunities forsuch work exist, people who have es-tablished a right to retire early mayprefer to use it and engage in full- orpart-time work in the informal sectorinstead of accepting a partial retire-ment arrangement.

If a gradual retirement system isintroduced as an option for workerswho are not eligible to retire earlybut who might prefer to work on areduced schedule for some periodbefore retirement, there will be no fi-nancial gains for the pension system.In that case, the amount of contribu-

tions would decrease during theyears of reduced work, while thepossibilities for reducing pension ex-penditure would be small because, inmost cases, pensions are low. There-fore, it does not seem advisable touse this system for this group ofworkers.

The introduction of a gradual re-tirement system could have a posi-tive effect on the finances of the pen-sion system if it provided an optionfor workers who have reached thestatutory retirement age to stay long-er in the labour force on a reducedwork schedule. However, this doesnot seem advisable since it wouldlimit the employment opportunitiesfor younger persons who already suf-fer from high unemployment rates.

A well-designed flexible retire-ment system could maintain in the la-bour market a large number of work-ers who, on the basis of existinglegislation, have established a rightto retire earlier than the statutoryage of 65. Thus, it could providesome relief to the mounting financialproblems of the social security or-ganisations. Such a system could alsobe very useful for enterprises andsectors that have to reduce their per-sonnel because of restructuring andfor the alleviation of the situation inregions with high unemployment.

Under present conditions, due tothe pressing financial problems of thesocial security system, the existingpossibilities for retired persons to geta second job in the informal sectorand the relatively low level of pen-sions, it does not seem advisable toprovide the option of gradual retire-ment to those who are not eligible toretire earlier than the statutory re-

tirement age. And given the relative-ly high unemployment rate foryoung persons, it does not seem ad-visable to give workers the option ofpartial retirement after the age of 65.

Athena Petraki Kottis

Selected bibliographyBagavos, C. (1997): “Demographic Develop-ments and Impact on the Labour Market andthe Social Insurance System in Greece.” In: A.Kintis (1997).Bos, E. et al. (1994): World Population Projec-tions, 1994–95. Washington, D. C.: The Inter-national Bank for Reconstruction and Devel-opment.Committee for Long-term Economic Policy inGreece (1997): The Economy and the PensionSystem. Athens: National Bank of Greece (inGreek).Fakiolas, R. (1997): “The Cost of Social Insur-ance and Competitiveness.” In: A. Kintis(1997).Hletsos, M. (1997): “The System of FlexibleRetirement and the Possibility for its Use inGreece.” In: A. Kintis (1997).Kintis, A. (ed.) (1997): The Present and Futureof Greek Economy. Athens: Gutenberg (inGreek).Kotzamanis, V. et al. (eds.) (1996): Ageing andSociety. Athens: National Centre for SocialResearch (in Greek).Leandros, N. (1997): “Facing the Problem ofViability of the Greek Social Security Sys-tem.” In: A. Kintis (1997).OECD (1996): Ageing in OECD Countries: ACritical Policy Challenge. Paris: OECD.OECD (1997): Economic Surveys: Greece.Paris: OECD.OECD (1998a): Economic Surveys: Greece.Paris: OECD.OECD (1998b): The Retirement Decision inOECD Countries. Working Paper No. 202.Paris: OECD.OECD (1998c): “Work-Force Ageing inOECD Countries.” In: Employment Outlook.Paris: OECD.Robolis, S. & G. Kollias (1998): “Social Insur-ance.” In: X. Petrinioti & G. Koukoules (eds.):Labour Yearbook. Athens: Panteion Univer-sity (in Greek).Siambos, G. (1997): “Demographic Trends forthe Greek Population in the First Quarter ofthe 21st Century.” In: A. Kintis (1997).

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Spain

IntroductionLike other European countries, overthe last few decades Spain has ex-perienced a significant change in de-mographic trends. There are threemain elements of this long-termchange: a decrease in fertility, a de-cline in the youth cohorts and an in-crease in the share of older peopleamong the total population.

Figure 1 presents two indicators offertility: the synthetic fertility index(SFI, calculated as the averagenumber of children per woman) andthe number of recorded births for theperiod 1950–1990. These data showa dramatic decline after 1976: thesize of the cohorts has almost halved,and the SFI has fallen to levels un-thinkable twenty years ago. Whilethere has been a general decline in allEuropean countries, the decline hasbeen greater in Spain.

Figure 2 depicts the evolution ofthe number of males and females of16–19 and 20–24 years of age. Ascan be seen, the increase in fertilityof the 1960s translated into a risingpopulation aged 16–19 until the ear-ly 1980s, when it started to stabilise.People aged 20–24 also followed thesame pattern, although five years lat-er. In recent years, both groups havestarted to decline, although verymoderately.1 The changing trend hasnot yet had a visible impact on the la-bour market, but it implies that in thefuture the working-age populationwill be growing at an ever slowerpace, eventually starting to decline,while the ageing of the populationwill continue.

The Spanish Statistical Office hasjust released a full set of populationprojections for the period up to 2020on the basis of the results of the 1991census. Figure 3 presents the resultsof these projections for the working-age population (16–64 years old) interms of the percentage distribution

Figure 1: Number of births and synthetic fertility index, 1950–1990

Figure 2: The evolution of the number of young people, 1977–1997


for three main age groups: under 30,30–44 and 45 or over. The projec-tions indicate that, while in 1990people between 45 and 64 years ofage represented 32% of males and35% of females, they will representaround half of the working-age pop-ulation by 2020. The decline in theyounger cohorts and the correspond-ing increasing share of the older co-hort show that an eventual way toprevent future labour shortagescould be to promote active ageing,that is, the promotion of participa-tion of the older cohort.

But what is the current situation ofthe older cohorts? Figure 4 showsthat the male participation rates forthose older than 55 years are verylow and have declined over the lastdecade.2 In the case of females, as

1 The increase in the numbers after 1995 isrelated to the revision of the sampling frameused in the EPA, which has tended to (par-tially) correct the bias of the age structureagainst people between 20 and 45 years old.

2 The increase observed after 1995 should beinterpreted with care, as it probably reflectsthe same problem mentioned in Note 1, thatis, the effects of the revision of the samplingframe used in the Labour Force Survey.

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social security, but also in terms of thelack of participation in the labourmarket, which is the main way toavoid exclusion from social participa-tion in our society.

Changes in the policyframework: recent trendsAlthough measures affecting olderworkers are included in more generalpolicies, some specific policies can befound. Overall, we can say that thesuccessive governments since theearly 1980s have been concernedabout older workers situated in threemain areas: first, they have tried toencourage the hiring of workers agedover 45; second, they have encour-aged the early retirement of thoseaged over 60; finally, they have ex-tended the right to unemploymentbenefits to those aged over 52 untilretirement age.

As for hiring, there is a wide varietyof contracts that firms can use. At theend of the 1970s, when the economiccrisis led to a substantial increase inunemployment, the successive gov-ernments began to create a frame-work of employment promotion poli-cy. A legislative reform introduced in1984 was intended to promote the useof fixed-term contracts and othertypes of contracts in order to fosterthe hiring of workers in an economicsituation characterised by high unem-ployment rates. Table 1 shows the to-tal number of contracts registered atthe INEM (the public employmentservice) offices and those particularlytargeting older workers. As can beseen, these contracts have been usedvery rarely and represent less than1% of total contracts.

If we turn to the specific contractstargeted at older workers, there arethree main types: one is aimed atpromoting employment of suchworkers, while the other two are in-tended to encourage their replace-ment and early retirement.

The first type of contract3 was cre-ated in 1984 with the objective of

Figure 3: Projections for working-age population by gender and percent-age distribution by age groups, 1990–2020

Source: INE.

Figure 4: Male participation rates by age group, 1987–1998


can be seen in Figure 5, most agegroups tend to show an increasingpattern of participation, albeit of asmaller proportion as age increases,so that the dispersion of the rates in1998 is significantly higher than itwas in 1987. The reason behindthese decreases is the age bias of em-ployment adjustments in firms overthe last two decades: older workershave been the focus of employmentreductions entailing early retirement

or dismissals with high severance pay(covering eventual earnings lossesuntil the minimum legal retirementage of 65).

Therefore, the demographic trendsplus changes in participation rates ofhigher age groups show the relevanceof thinking about measures to acti-vate older people in order to preventa further increase of inactivity amongthese groups. This is not only relevantin terms of the eventual burden on

3 This contract is entitled “Permanent con-tract for workers older than 45” (Contratoindefinido para mayores de 45 años).

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promoting permanent contracts forolder workers. The main reason wasthe observed increase in the numberof older people unable to obtain ajob and thus becoming long-term un-employed. Therefore, the policy wastargeted at the group of workersaged over 45 who had been regis-tered as unemployed for more thanone year. The economic incentivesgiven to the firms were twofold: a re-duction by 50% of the employer’ssocial security contributions for thefirst two years of the contract and a

grant of ESP 400,000 for everyworker taken. In 1992, the two in-centives were enlarged: the reduc-tion by 50% was applied for the en-tire term of the contract and thegrant was increased to ESP 500,000.In spite of these incentives, thenumber of contracts has been veryscarce, only exceeding the figure of10,000 in the central years of theeconomic expansion in the 1980s(1987–1989).

This contract was replaced in 1997when the government and the na-

tional trade unions launched the Ac-cord on Employment Stability. Thenew contract was called the “Con-tract for promoting long-term em-ployment”. Its main difference com-pared with the “normal” permanentcontract is the reduced severancepay the employer has to pay in caseof worker dismissal. This new con-tract is targeted at specific groups ofpeople: unemployed aged between18 and 29 years, long-term unem-ployed who were registered for atleast one year at the INEM offices,workers aged over 45, disabledworkers and workers with tempo-rary or fixed-term contracts workingin the same firm in May 1997 (thedate of the agreement). The econo-mic incentives given to firms were areduction by 60% of the employer’ssocial security contributions for thefirst two years of the contract, a re-duction by 50% for the rest of thecontract and some fiscal incentives.Figures for 1997 and 1998 containedin Table 1 suggest that this new con-tract has been used more for thelong-term hiring of older workersthan the previous one.

With regard to the other two typesof contract, they are aimed at en-couraging the replacement and earlyretirement of older workers. The first

Figure 5: Female participation rates by age group, 1987–1998


Table 1: Number of contracts for older workers registered at INEM, 1985–1998Year Replacement Retirement Replacement Permanent Total contracts Total no. Older workers/

contracts at 64 -> permanent contracts for contracts total %workers > 45

1985 1,944 978 6,398 9,320 2,792,003 0.3

1986 1,171 1,098 9,503 11,772 3,443,505 0.3

1987 904 818 10,535 12,257 4,038,879 0.3

1988 1,473 894 11,296 13,663 4,714,332 0.3

1989 1,565 909 10,760 13,234 5,356,732 0.2

1990 2,283 997 8,870 12,150 5,532,673 0.2

1991 2,611 1,070 7,394 11,075 5,522,518 0.2

1992 2,182 1,305 201 6,427 10,115 5,156,795 0.2

1993 1,582 1,320 60 4,726 7,688 4,654,787 0.2

1994 219 1,534 19 8,016 9,788 6,040,602 0.2

1995 238 2,020 7,630 9,888 7,330,094 0.1

1996 213 2,779 6,872 9,864 8,627,547 0.1

1997 2,783 38,555 41,338 10,093,600 0.4

1998 2,921 76,744 79,665 11,663,300 0.8

Source: INEM.

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type of contract4 consists in reducingretirement age from 65 to 64, leavingthe pension of the worker un-changed. The condition for the firmis to take on as a replacement eitheran unemployed person receivingbenefits or a young unemployed per-son without work experience. If thenew contract is long term, the firmenjoys a 50% reduction of the socialsecurity contribution. The use of thismeasure has been very limited: anaverage of 1,000 contracts were con-cluded annually during the period1985–91, although this increased toaround 3,000 in 1997–98.

The replacement contract (Con-trato de relevo) aims at retiring olderworkers; it consists in facilitating re-tirement at a maximum of threeyears before legal retirement under apartial retirement scheme. Workinghours are halved and wages reducedproportionately, but the worker hasto draw 50% of the pension. Thecondition for the firm is to take on apart-time replacement. If this newcontract is converted into a perma-nent contract when the older workerreaches the retirement age, the firmenjoys a 50% reduction of the em-ployer social security contribution(60% if the new recruits are femalesin occupations where they are under-represented). However, in spite ofthe existing incentives, the replace-ment contracts have been used veryrarely. This type of contract wasabolished in 1997.

There is another scheme to pro-mote early retirement of older work-ers. This measure permits some ofthose who have lost their jobs be-tween the ages of 60 and 65 to re-ceive a benefit up to retirement ageequivalent to the pension they wouldhave received at age 65, while theirpension at this age remains un-changed. In 1986, this measure wasmerged with the industrial restruc-turing scheme; thus, companies insectors in crisis received funds fromthe government when they dismissed(mainly older) workers. The numberof workers involved has been moreor less constant over the 1980s and1990s (around 5,000). Workers in-

volved in this scheme are mainlyaged 60 (around 75% of all benefi-ciaries during the 1980s, increasingto 91% in 1997). The sectors inwhich the funds are devoted to reset-tlement belong mostly to manufac-turing (sub-sectors of “Productionand primary processing of metals”,“Shipbuilding” and “Production ofmachinery and electrical equip-ment”).

As for unemployment benefits,since 1984 workers older than 55who meet all the requirements forentitlement to a retirement pensionexcept age were granted the right toreceive unemployment assistancebenefits at a flat rate equivalent to75% of the statutory minimumwage) until they reached retirementage. The required age was later re-duced to 52. This implied that aworker aged 47 with a continuousemployment record of 15 yearscould lose his or her job, receive un-employment insurance benefits fortwo years, then receive unemploy-ment assistance for another threeyears (under the special provisionsmade for those over 45) and then en-ter “open-ended” unemployment as-sistance until they reached the age of65.

Finally, the data suggest that olderworkers are increasingly retiring be-fore the age of 65. This is supportedby figures referring to the number ofnew retired people receiving retire-ment pensions (information refersonly to the general regime of the so-cial security). The proportion of peo-ple aged between 60 and 64 has in-creased substantially since the mid-1980s: while that proportion was52% in 1985, it increased to around66% during the 1990s; in addition,the proportion of those aged 60years increased from 17% in 1985 toaround 33% during the 1990s.Therefore, nowadays two out ofthree new retired people are agedunder 65 and one out of three is aged60.

Developments at the levelof companies and sectorsIn order to study employers’ meas-ures for older workers, we can makeuse of the results of the “Human re-sources management survey inSpain” (Encuesta para el diagnósticodel desarrollo de los recursos hu-manos en España), which was car-ried out in the second part of 1986among 167 firms with more than 250workers.

The survey is representative byproductive sector, firm size and totalrevenue, and the sample is consid-ered representative of the situationin human resources management inmedium and large companies inSpain. Here, we focus our attentionon the information referring to pri-vate Spanish companies, represent-ing over 40% of the sample. In thequestionnaire, there are differentquestions directly and indirectly re-lated to measures and attitudes to-wards older workers. We note thatthe share of workers aged over 50with respect to the total staff of pri-vate companies is 23%. This figurevaries among sectors: “Electricity”,“Plastic and rubber” and “Metals”are above average; “Construction”and “Services” are below average.

With regard to recruitment, age isa critical factor affecting firms’ deci-sions. Of the sampled private compa-nies, 23% hire non-qualified workersaged over 45, and only 12% hirequalified workers aged over 50;these proportions are even lower inthe case of companies with morethan 1,000 workers. In addition, theselection policy is oriented towardsyoung workers: 61% of the firmswould recruit young workers if moreflexible schemes were available.These preferences of companies withrespect to hiring are reflected by thetypes of contracts. Fixed-term andtraining contracts were used by morethan half of the private firms sam-pled. However, contracts promoting

4 This contract is entitled “Contract in substi-tution of early retirement” (Contrato ensustitución por anticipación de la edad dejubilación).

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the hiring of workers aged over 45were used by less than 10%; in addi-tion, contracts encouraging the re-placement and early retirement ofolder workers were used by even lessthan 5%.

Regarding the pay system, 58% ofsampled private firms have somekind of complementary pension tothe public retirement pension, whichamounts to 100% of previous wagesonly in the case of 8% of companieswith more than 1,000 workers.

Finally, it is worth pointing outthat retirement is used as a mecha-nism to reduce jobs by private firms.Some information reinforces this:– First, only 38% of vacancies re-

sulting from retired workers arefilled with new recruits. There-fore, retirement is clearly a meth-od to downsize.

– Second, a low percentage of thesampled firms (31%) has a stan-dardised system to guide workerstowards retraining and considersthat workers have the necessarytools to obtain that retraining. Butthere are two main restrictive fac-tors hindering the retraining of anindividual: age and basic skills.When a new technology is intro-duced, the adjustment for somegroups of workers (especiallythose over a given age and with-out certain skills) is very difficult.Therefore, firms do not devotemuch effort to the retraining ofsuch workers and prefer to useother policies, such as replace-ment, early voluntary retirementand collective dismissals.

Perspectives of olderworkersProximity to retirement is the mostinfluential aspect of the working bio-graphy of older workers. This fact af-fects motivation to work, and it is in-creasingly perceptible that workersaged over 50 are afraid of unemploy-ment since this state can become a di-rect way to early retirement.

Older employees are seeing theentry into the firm of a young gener-ation of workers who are more edu-

cated and more capable of adjustingto the introduction and wide utilisa-tion of new technologies that arechanging the work environment.Changes can be perceived as the be-ginning of a staff reduction that af-fects them most. This feeling is sup-ported by the fact that the employ-ment promotion policy encouragingthe hiring of older workers is hardlyused by firms. The motivation of old-er workers is low because they havethe perception that firms do not val-ue their experience and prefer youngworkers. On the other hand, it is alsotrue that certain older workers arereluctant to communicate their ex-perience to the new entrants becausethey consider their tasks to be per-sonal and not transferable.

Unemployed older workers per-ceive the time horizon until retire-ment as a period of decreasing in-come. This group of unemployed hasa subjective low probability of find-ing a job for two reasons: first, theyknow that companies’ hiring behav-iour favours the young; second, anunemployed person aged over 52 hasthe legal possibility to obtain publicbenefits until retirement (at contribu-tory and assistance levels).

Transitions out of the labour forcecaused by early retirement put olderworkers into “statutory old age”.They do not perceive themselves assuch, given that their living andhealth conditions are better thanthose of older persons of past genera-tions. Transition to retirement im-plies losing the social role defining aperson. Therefore, it is a real prob-lem to look for a new role and newactivities which lead to a new per-sonality, and even more so if the in-dividual is still capable of performingactivities. However, adjustment tothe status of retirement differs acrossjob categories.

Transitions are easier in the twomost extreme cases: first, whenworkers have been very dedicated totheir jobs; second, when the job wasconsidered to be merely an incomesource not offering any satisfaction.The former group would consist ofintellectuals, artists and liberal pro-

fessionals who have performed jobsleading to satisfaction and socialprestige. In the latter group, workersaccept retirement (that is, leavingemployment status) well when thepension is sufficient, but not so wellwhen they do not know how to makeuse of leisure time. An intermediategroup consists of qualified manualworkers, clerical workers, and so on,who have more problems carryingout their professions after retirementand adjusting to the new status; curi-ously, individuals belonging to thisgroup are those who ask for more in-formation on the transition into re-tirement than the other groups.

Training for retirement has beenintroduced as a necessary scheme bythe government and firms. In Spain,non-profit organisations (Caritas),public institutions (the social servicesoffice – INSERSO – and town coun-cils) and some public firms (ENDESAand FENOSA) have initiated theimplementation of training pro-grammes devoted to the retirementof older workers. The above-men-tioned public firms were pioneers forthis experience, which was continuedby other public and private firmssuch as Canal de Isabel II (a publicfirm for water distribution) and cer-tain financial institutions. Nowadays,two types of programme are applied,depending on how far the retirementdate is away: some of them start asearly as five years before the date ofleaving the labour force, while othersare limited to an intensive course oneyear prior to retirement.

This kind of scheme can meet re-sistance from the older workers in-volved, as they object to being desig-nated as old people by the firm. Inthe same way, but at a different lev-el, they perceive specific retrainingcourses for them as a way to classifythem as old people. For this reason,some firms prefer to offer specificcourses not for this target group butfor all workers in order to avoid thisnegative reaction.

It is possible to keep track of allthese issues in a survey (“Survey ofStructure, Consciousness and ClassBiography”, carried out by the Insti-

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tute for Women, the AutonomousCommunity of Madrid and the Span-ish Statistical Office – INE – in 1991),which contains information on someinteresting issues related to olderworkers. The objective of this surveyis to study the Spanish social struc-ture using an internationally com-parable questionnaire. Certain ques-tions refer to matching between jobsand workers. We will use informa-tion gleaned from the responses ofolder workers to these questions inorder to obtain the subjective pointof view of this group on their work-ing conditions.

First, regarding the relationshipbetween the education level attainedby the individuals and the educationlevel required for jobs, there is aquestion that asks workers to indi-cate whether their education level ismore than, equal to or less than thelevel required for their jobs. Only14.5% of older workers feel thattheir formal education is not suffi-cient to properly carry out theirtasks, while 62% think that theireducation is sufficient. Figures for allworkers are 30% and 60%, respec-tively.

Second, individuals are askedabout the convenience of acquiringspecific training for their jobs. Fifty-

eight percent of older workers and54% of all workers believe thattraining is not necessary. However, itis possible that, while not consideringit necessary, workers would have re-ceived specific training for the job.At the same time, 22% of olderworkers and 31% of all workerspointed out that they had not re-ceived such training.

Finally, there is a question forscoring their satisfaction in the work-place. The answers range from 1 (“Ilike it very much”) to 5 (“I hate it”).The differences are not very large:nearly 60% of older workers are sat-isfied and 25% are indifferent, whilethese shares are 65% and 22%, re-spectively, for all workers.

Conclusion: policyoptionsIt seems that there is currently no de-veloped concept of “active ageing” inSpain. Although some large privateand public companies and non-profitorganisations have started to imple-ment training programmes related tothe retirement of older workers, theseschemes are not widespread through-out the economy. In fact, participa-tion of older workers in training ap-pears to be minimal, which can be due

to either workers’ motivation or tofirms’ attitudes: information fromsurveys indicate that older workersthink their matches are reasonablygood, while employers do not offerretraining courses because they feelthese workers are unable to adjust toa new work environment.

From another point of view, thereis currently a debate on the conven-ience of the use (or abuse) by compa-nies of early retirement schemes,since social security expenses due toearly retirement pensions havegrown recently and some (large)firms have announced and startedstaff adjustments (in some cases,these adjustments can imply early re-tirement for 20–25% of their work-ers). At the centre of this debate areincentives from public policies putforward during the 1980s which tendmore to foster the early retirement ofworkers than to allow them to worklonger than the legal provisions per-mit. All in all, it seems that a clearerdefinition of the concept of “activeageing” is needed in addition to anintensification of policies directed ataccommodating the transition of ear-ly retired workers to their new stateof “active inactivity”.

Carlos Garcia-Serrano,Miguel A. Malo & Luis Toharia

France

Introduction

In France the labour market is char-acterised by a division of labour be-tween the generations in which theactivity of adults aged between 25and 54 appears to be relatively wellprotected within a system of “de-

layed” entries and “early” exits. Thiscontrasts with other countries thathave opted instead for a clear policyof reducing working hours for all agegroups.

Clearly, it has been the rise in un-employment that has induced policy-makers to reduce employment

among workers aged over 55, where-as activity rates among prime-agemales have remained constant, andthose of prime-age women have in-creased.

The employment rates of workersaged 50 and older has fallen continu-ously during the last 30 years, as is

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shown by the longitudinal data re-sulting from the employment surveysconducted each year by the nationalstatistical office (INSEE).

Although there is a clear differ-ence between the sexes in participa-tion rates in the upper age categories,the difference has now virtually dis-appeared among those over 60.

France has witnessed a massivedecline in participation by older per-sons in economic activity during thepast 30 years, one that is withoutprecedent.

The following factors explain thisdecline:– changes in labour force structures,

involving the decline of certaincategories of self-employed work-ers (e.g. farmers and artisans) whotraditionally retired relativelylate;

– the softening of liquidation condi-tions, which has permitted morepeople to retire with a full pensionat an earlier age than previously;

– the aspirations of workers andtheir representatives for earlierwithdrawal from paid employ-ment, which have taken their mostconcrete form in the demand for apension at 60; and

– above all else, the massive exclu-sion of older workers from the la-bour market by a combination ofexit from, and their non-recruit-ment by companies.

France has one of the lowest partici-pation rates for 55 year-olds in theEuropean Union, and the decline hasbeen more pronounced than in othercountries.

Table 1: Participation rate of workers aged 50 and above (in %)1980 1985 1990 1995

30.2 26.7 24.5 22.4

Source: Employment survey by INSEE.

Three explanatory factors may beput forward:– the existence of measures that are

attractive for both employers andworkers;

– the rigidities of the social dialogueand labour law, which fail to gen-erate alternatives to the prevailingsituation and make it difficult toadopt innovative social measures;

– a consensus on both sides, amongemployers and workers, whichprevents any fundamental re-thinking on this issue.

The process of ageing on the labourmarket – and in French society ingeneral – poses a number of ques-tions for the future:– The first concerns the increasing

cost of benefits to older workerspaid out by the unemployment in-surance fund (in the short run) andits impact on public finances.

The proportion of older workerswho are in receipt of benefits fromthe unemployment insurance fund isconstantly rising, reflecting the per-sistent decline in the employmentrates of the population aged 55 andolder.

Such public policies incur heavycosts for society at large. The alloca-tion for replacement workers forthose taking early retirement (Alloca-tion de Remplacement pour l’Emploi– ARPE) alone has cost the unemploy-

ment insurance fund as a whole(UNEDIC) more than FRF 13 billionsince its introduction in 1995. Gov-ernment support to finance earlyretirement, both total and progres-sive, cost more than FRF 15 billionin 1997. In 1994 one quarter ofUNEDIC expenditure was ear-marked to finance benefits paid out tounemployed workers aged over 55.

Even though public policies suchas these (early retirement, benefitpayments) have undoubtedly had aneffect in reducing unemployment,this effect remains far below expec-tations, and, according to some ex-perts, “the number of jobs createdhas often been lower than thenumber of early retirements”.– The second question relates to the

financing of pensions: studies bythe State Planning Commission(Commissariat Général au Plan),or the so-called Charpin Report1,show that the vitally important re-lationship between the number ofpensioners and the number of con-tribution-payers will shift radic-ally: it is expected to double be-tween now and 2040, rising from4 pensioners to 7 pensioners per10 people of working age between

1 L’Avenir de nos retraites [The future of ourpensions]. Report by Jean-Marie Charpin tothe Prime Minister. Commissariat Généralau Plan, April 1999.

Table 2: Participation rates according to survey data, by gender and age group (in %)1975 1980 1985 1990 1995

M W M W M W M W M W

45–49 years 96.5 53.6 96.7 57.7 96.5 67.5 96.9 69.1 96.2 77.3

50–54 years 93.7 51.1 92.5 54.3 92.5 57.3 91.9 63.2 92.4 70.5

55–59 years 82.9 43.2 80.9 46.7 69.9 43.5 71.8 48.0 70.9 52.5

60–64 years 54.5 29.3 47.0 27.0 30.3 18.9 23.2 19.0 18.2 16.9

65–69 years 19.3 10.6 11.9 10.4 8.4 4.7 5.1 3.5 3.3 2.9

70–74 years 8.2 3.7 4.8 3.5 3.1 1.7 1.8 0.8 1.4 0.6

> 74 years 3.6 1.8 2.2 1.6 1.5 0.8 1.3 0.3 0.5 0.3

Source: Employment survey by INSEE.

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1998 and 2040. The over-60s pop-ulation is currently expanding at arate of 1.1% per annum. From2006 it is expected to grow twiceas fast, expanding at an annualrate of 2.5% to the year 2035.

– The third question relates to theability of companies to changetheir behaviour: employers con-tinue to favour early retirement astheir workforces grow older. Therestructuring of France’s produc-tive base (leading to redundan-cies) and weak employmentgrowth during the past decadehave led to a massive exit of olderworkers, because they were betterprotected than other age catego-ries, through the unemploymentinsurance and early retirementsystems, so that their exits wereconsidered more acceptable.

Changes in the policyframework: recent trendsThe development of early retirement,introduced in France twenty yearsago, is unmistakably to be interpretedas a steering measure by the publicauthorities to reduce participationrates among older workers.

Since the end of the 1970s, the re-tirement age has become an instru-ment of employment policy. Duringthis period the number of people af-fected by the legal provisions on ear-ly retirement has continuously in-creased, rising from 101,000 in 1997to 287,00 in 1981; the number ofbeneficiaries/(stock value) reached amaximum of 700,000 in 1984.

Since the start of the 1990s, publicpolicies in this area have beenmarked by contradictory trends:– on the one hand, older workers

continue to be induced to leavethe labour market by means ofgenerous redundancy paymentsand other benefits, or such redun-dancies are justified with refer-ence to parallel activation meas-ures (compensatory recruitments)– the ARPE is an example of this;

– on the other, the scope for firms togain access to early retirement (ei-

ther total or progressive) is beinglimited.

Yet even in 1997, the provisions onearly retirement continue to play animportant role. The more than500,000 people taking advantage ofthe measures were distributed as fol-lows:– Firstly, the state-financed meas-

ures of ASFNE (total early retire-ment) and progressive early retire-ment, and ARPE, run by UNEDIC(229,000 participants). Within thisgroup, AFSNE, which was longpreponderant, is declining in im-portance in favour of measures forreplacement recruitments (ARPEand progressive early retirement).

– Secondly, the older unemployedalso benefit from a special benefit(Allocation Chômeurs Agés –ACA) and the “specific solidaritysupport” (Allocation de SolidaritéSpécifique – ASS), offering themprivileged benefit conditions.

Recent measures in supportof the early exit of olderworkers

The introduction of the ARPE meas-ure at the end of 1995, in the wake ofan agreement reached between theemployers’ federations and the exec-utive directors of the unemploymentinsurance system for employees(UNEDIC), which is now consideredto be “historic”, opened up a new av-enue for workers who have reachedthe end of their occupational career.

It enables those workers who areable to show that they have paid con-tributions to the pension insurancesystem for a total of 168 quarters toenter retirement as early as at the ageof 56, subject to the agreement of theemployer and in return for one ormore replacement recruitments. Inthis sense, it constitutes a way to acti-vate employment policy in supportof employment-policy target groups,particularly young workers.

This agreement, which has beenrenewed every year since 1995, as-sists young people in entering the la-bour market, but it makes no provi-sion for older workers to leave the la-

bour market progressively by way ofpart-time work.

Even so, the ARPE is currently theearly retirement measure most fre-quently deployed, particularly bysmall and medium-sized enterprises,including those in industry. Compa-nies employing more than 500 work-ers, on the other hand, account forjust 18%. This measure is used partic-ularly frequently in the service sector,which is the origin of 45% of newARPE recipients. Since the introduc-tion of this measure, around 85,000replacement recruitments have beenmade, of which 35,000 occurred in1997. Of those recruited, 69% aremen and 62% aged under 30. Almostall new recruits are taken on under apermanent contract, and almost 80%of them in full-time employment.

Other measures recently intro-duced by the government haveserved very clearly to discourage“active ageing”, by freeing certaintypes of older workers from the obli-gation to look for work:– In January 1997 the benefit for

the older unemployed (ACA) wasintroduced as a result of negotia-tions between the social partners.It affects older unemployed per-sons aged under 60 who have ac-cumulated at least 160 quarters ofcontributions to the pension insur-ance system, without a minimumage. Recipients of this benefitmust be registered as looking forwork, however. At the end of1997, there were a total of 50,000recipients of ACA.

– Since 1 June 1998, under theframework of the “law against ex-clusion”, unemployed persons re-ceiving benefits under the “soli-darity regime” (ASS) or minimumincome supplement (RMI) whohave also contributed to the pen-sion insurance scheme for 160quarters may claim a special“waiting allowance”.

In future, older workers may be ex-empted from the obligation to lookfor work.

These redundancies of older work-ers aged over 55 effectively amountto disguised early retirement.

No. 33 · Winter 1999 39

Trends

In addition, ARPE is restricted toworkers aged over 58 – or in specialcases to those aged 56 and 57 – whobegan working at the age of 14 or 15,whereas the same is not true of ACAor ASS. There is a risk of the latterschemes competing with ARPE andASFNE, as they permit all unem-ployed persons who have paid con-tributions for forty years to enterquasi-retirement without an age con-straint, or compensatory recruitmentor an agreement with the authorities.

Alongside these measures that pro-mote early retirement, the Frenchstate also provides support for gra-dual retirement, although for firmsthe conditions of access to this meas-ure are being tightened in the sameway as for complete early retirement.

The only active special measurethat currently permits, at least par-tially, older workers to be retained inthe labour market, is “progressiveearly retirement”. Instituted by a lawpassed in December 1992, the pro-gressive early retirement agreementhas three aims:– to contribute to the development

of part-time work and new formsof work organisation;

– to facilitate an improved person-nel management of older workersby firms; and

– to promote the labour market in-tegration of target groups. To thisend, the firm commits itself to re-cruiting a certain, relatively largenumber of jobseekers. This obliga-tion does not apply if workforcerestructuring occurs within theframework of a social plan.

In addition, the measure aims to sup-port the transmission of skills andknow-how to new recruits, especiallyin the form of “tutorships”. In 1997the results of this scheme were notparticularly satisfactory from thispoint of view: less than 15% of en-terprises had set up such tutorships,and in most cases these were firmswith more than 500 employees.

It is industry that makes greatestuse of the measures for progressiveearly retirement, and the relative im-portance of this sector appears tohave risen further in 1997. Also pre-

dominant in such schemes are firmsemploying more than 500 workers.

In return, the enterprises signingagreements on progressive early re-tirement must meet one of the fol-lowing two conditions:– Replacement recruitments: in

1997 a reform of the provisions onearly retirement was introducedwith the aim of raising the obliga-tions in terms of recruiting unem-ployed persons from groups facingparticular difficulties on the la-bour market. Since then, the mini-mum proportion of recruitmentsfrom target groups (includingyouth, the long-term unemployedand recipients of minimum bene-fit) has been set at 50%, and two-thirds of the recruitments must beyoung people.

– Payment of a financial contribu-tion (the so-called Delalande con-tribution): with the 1997 reform,the payment of a financial contri-bution became obligatory (withthe exception of companies thathave signed re-recruitment agree-ments, employ less than 250workers and which commit them-selves to drawing 90% of their re-cruitments from among the targetgroups). This financial contribu-

tion depends on the size of thecompany and the number of re-placement recruitments fromamong the target groups.

Currently, it should be noted, thegovernment is considering whetherto double the “Delalande contribu-tion”2. The question is, namely,whether the desired reduction in thenumber of exits by the over-50sbrings with it the danger that, bypaying the contribution, fewer per-sons aged 45 or older will be recruit-ed. Moreover, the contribution mightconstrain the mobility of workersaged over 50, which would maketheir situation even more inflexible.

It has been observed that alreadythe implementation of the reform hasbeen followed by a decline in thenumber of agreements, particularlyof those with compensatory recruit-ment (cf. Table 3).

Among recent developments, itmight be thought that the incentivesto reduce working time establishedby the 35-hours law might in effectcontribute to retaining older workerson the labour market. Indeed, this isone of the aims expressed by the

Table 3: Entries into progressive early retirement by economic sectorand enterprise size (compared with the workforce in the respective sec-tor/enterprise size category) (in %)

Progressive early Progressive early Employeesretirement in 1996 retirement in 1997 covered by

UNEDIC as of31 December

1996

Economic sector Agriculture 0.8 0.4 0.1 Industry 52.6 59.5 27.6 Construction 4.8 3.7 8.2 Services 41.8 36.4 64.1

Enterprise size Less than 10 workers 23.8 23.2 26.1 10–49 workers 10.3 9.0 29.0 50–199 workers 17.0 17.3 22.6 200–499 workers 14.9 17.0 11.5 500 workers and above 34.0 33.5 10.8

Totals 100.0 100.0 100.0

Source: UNEDIC.

2 Proposed in the French National ActionPlan for employment, presented in June.

40 No. 33 · Winter 1999

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French government in its latest Na-tional Action Plan for employment.What is required, however, is ameans of evaluating the extent towhich this measure will help retainolder workers in their jobs.

The results of the law on the im-plementation of a 35-hour week, oneyear after it was introduced, aremixed in this respect:– 1.1 million workers were affected

out of a total of 15 million in theprivate sector and more than 22million in total;

– it has been the large, publiclyowned enterprises that have madethe biggest contribution (EDF-GDF, SNCF, RATP, Air France,etc.).

The vast majority of firms is awaitingthe second law and the obligation toapply it before introducing the cut inhours. The social partners take di-rectly opposing views of the reform.

In view of this, the official figureof 57,000 newly created or retainedjobs, albeit without precise detailsconcerning the nature of the employ-ment relations, must therefore prob-ably be treated with caution. It willonly be possible to make a conclu-sive evaluation once the law hasbeen introduced in full and calcula-tions of job-creation and job-destruc-tion effects have been made; manyfirms, namely, are threatening to re-sort to outsourcing or to reduce theirworkforce in line with productivitygrowth.

Even so, the application of the lawon the flexibilisation and reductionof working hours has undeniably hadthe following effects:– a renewal of social dialogue at

firm level (through the obligationto negotiate on implementation);

– the necessary recognition of theorganisation of work and its im-pact on productivity and workingtime.

There is still no discussion of the ef-fects on the retention of older work-ers in the labour market, althoughboth the resumption of the social dia-logue and the reorganisation of workare elements that could contribute tothis aim indirectly.

Developments at the levelof companiesThe policies implemented by govern-ment until recently have served toleave a primarily negative image ofolder workers in the minds of mostpeople; they are to make way foryounger workers, and government isto take responsibility for older work-ers by way of measures for targetgroups or specific measures to pro-vide additional benefits to olderworkers through the unemploymentinsurance fund and early retirementprovisions, despite the increasingconstraints on such policies imposedby the government.

An enquiry conducted by DARES(Ministry of Employment) in 1992 ofa sample of 1,000 enterprises re-vealed the rather negative view ofolder workers held by employers(DARES, 1994). More than half ofthem are reluctant to recruit, or aretotally opposed to taking on, olderworkers, even preferring young peo-ple without qualifications or thelong-term unemployed. These em-ployers justified their behaviour interms of the lower productivity ofolder workers together with higherwage costs, reflecting a reduced abili-ty to adjust to changes and to makeuse of new technologies.

Equally, a number of studies haveshown that many workers, especial-ly in the industrial sector, are keento retire early from working life. Astudy by CREDOC conducted in1994, for instance, revealed that73% of the French population con-sider early retirement to be the pre-ferred solution in case of redun-dancy.

There has therefore been a degreeof consensus between the social part-ners in this area, whether at enter-prise or institutional level. And in-deed, UNEDIC has remained com-mitted to the idea of early exit fromthe labour market, as shown by theimplementation of the ARPE schemein 1995. In 1997, ASFNE agreementswere reached for 108,000 people,55,000 entered progressive early re-tirement and 66,000 entered the

ARPE scheme; thus, a total of229,000 people entered early retire-ment.

Firms make use of public policiessupporting early retirement in orderto rejuvenate their workforce age-pyramid and reduce their total wagecosts. Gradually, public early retire-ment policies have become a tool ofhuman resource management forcompanies. Older workers are incor-porated into the social plans agreedto manage redundancies as a matterof course.

A number of companies havedrawn up their own schemes, knownas “enterprise early retirement”(préretraites d’entreprise), mostly onthe basis of an intersectoral orbranch-level collective agreement,particularly in traditional industrialsectors undergoing major changesand whose age structure is seriouslyaffected by ageing. Such “enterpriseearly retirement” schemes are nor-mally based on a reduction in work-ing time, in some cases to “zerohours”, until retirement age, where-by the employer undertakes to topoff the wage in part or full.

A look at the collective agree-ments signed reveals that measuresto retain older workers in Frenchcompanies are currently virtuallynon-existent, notably because “theviews held by managements of pastand future trends in the relativeweight of the extreme age groups intheir workforces generally reflect alack of attention to ageing processeswithin their workforces and a misap-prehension concerning the actual de-mographic data pertaining to theirstaff”.

There are a few, rare, positive ex-amples, such as that set by Crédit Ag-ricole, one of France’s leading bank-ing groups. On the basis of an agree-ment reached in December 1993 onforward personnel planning, one ofthe regional divisions of Crédit Agri-cole embarked on a cautious processof re-attaining a balanced age struc-ture. At that time, 60% of the 700staff were between 40 and 50 yearsof age, and 15% over 50, so that75% of the workforce was over 40.

No. 33 · Winter 1999 41

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Alongside an intensive programmeof further vocational training forstaff members, which enabled a totalof 120 employees to change profes-sion, the agreement provided incen-tives to switch to part-time work; thecompany paid the difference in pen-sion contributions between a full-time job and the part-time work cho-sen. Assured of receiving a full pen-sion on retirement, employees react-ed favourably to this offer, and theproportion of staff working part-timerose from 7% to 10%.

However, it is clear that the suc-cess of the agreement was based pri-marily on the organised exit, on astrictly voluntary basis, of a largenumber of workers aged between 40and 49. For a period of two months,an information point was open inwhich five advisers provided infor-mation, in response to their ques-tions, to those staff members poten-tially affected. Of 48 staff who want-ed to leave, 14 stopped working, 6changed profession totally and 24 setup or bought out another company.In addition to logistical support,those leaving received a redundancypayment slightly in excess of the pro-visions in the relevant collectiveagreement. In return, the companywas able to take on around 40 quali-fied youngsters. In the light of thisconvincing experience, other region-al divisions of the Crédit Agricolehave made known their interest inthis model, and it is likely to be emu-lated within the group.

Sectoral agreements signed in re-cent years have made no mentionwhatever of negotiations on meas-ures to retain older workers. Theonly exception that has emerged sofar is the already somewhat datedNational Construction Federation(Fédération Nationale du Bati-ment). In 1992 it reached an agree-ment with the labour ministry underwhich workers aged over 55 in theconstruction industry were to receivethe option of entering partial retire-ment; during the remaining workinghours they were to assist apprenticespreparing for a vocational qualifica-tion. At the time, the response to this

initiative was very limited, not leastin the light of the economic crisis thathit this sector in the mid-1990s. Yet asignificant proportion of the work-force in the construction and publicworks sector is aged 50 or older.

All these examples show just howlittle attention companies and the so-cial partners have paid to these issuesto date.

Perspectives of olderworkersAccording to the March 1997 em-ployment survey by INSEE, the pop-ulation aged between 55 and 59 iscomposed as follows: 53.2% are inemployment, 2.3% are on progres-sive early retirement, 5.8% are un-employed, 14.4% are retired or onearly retirement (of which 4.8% areon ASFNE and 2% on the ARPEscheme) and a further 26.7% areeconomically inactive for other rea-sons.

Although the labour market situa-tion has improved in France in thepast two years, with this leading to adecline in the number of jobseekers,the situation facing older workershas increasingly deteriorated. In1997 the number of jobseekers aged50 increased by 10% compared with1996 and by 29% compared with1995.

The unemployment rate amongpersons aged 50 or more amountedto 9.3% of the active population ofthis age group in January 1998.

The risks of remaining unem-ployed for those older than 50 arerelatively high in France, and thesituation does not seem to be im-proving, despite the positive devel-opments on the labour market as awhole in recent months.

Moreover, persons aged over 50do not constitute a priority targetgroup for (re-)integration and em-ployment policy as do, for example,the long-term unemployed, youngpeople, recipients of minimum bene-fit or women.

Older workers do, however, havefree access to general public meas-ures, provided they are registered as

looking for work. Yet they have bet-ter chances of entering such meas-ures if they are long-term unem-ployed or recipients of minimumbenefit. The only measure that is di-rectly tailored to those over 50 – andnot merely indirectly, by way oftheir classification as long-term un-employed or recipients of minimumbenefit – is the employment initiativecontract (Contrat Initiative Emploi),although here, too, other groups arealso entitled to participate. Currentlythere is not a single public policymeasure geared directly and specifi-cally to reintegrating older workersinto the labour market.

Even so, following the impetusprovided by the EU, in 1999 the con-cept of active ageing was incorporat-ed into the French NAP for the firsttime. Although this reflects a degreeof concern on the part of the govern-ment, the NAP does not contain con-crete proposals concerning what thegovernment intends to achieve byway of this concept.

In another, more positive sign ofan increased interest in older work-ers on the part of the public authori-ties, the government has just com-missioned an analysis of the pros-pects for a more gradual transitionfrom work to retirement, one based,for instance, on the idea of a volun-tary, progressive retirement.

Is this recognition necessary in thelight of the ageing of the population?

“The ageing of the population isexpected to perceptibly change theconditions for financing pensions,due to the following three factors:– longer life-expectancy;– the imminent retirement of the

baby-boom generation. Accordingto prognoses by INSEE andDARES, the entry into retirementof these cohorts will lead to a de-cline in the active population as of2006, because from this point onthe size of the cohort entering re-tirement will be greater than thatof the cohort entering the labourforce;

– entry into the labour force ofsmaller cohorts, due to the fall infertility rates”.

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The Charpin Report recommendedan increase in the duration of pen-sion contributions, confirming the re-form begun in 1993 and extending itfurther. The reform of the overallpension system in 1993 also involvedraising the insurance period (all sys-tems) required to obtain a full pen-sion entitlement by one quarter forevery year from 1994 to 2003; at theend of the reform, the insurance per-iod (all systems) required to claim afull pension will amount to 160 quar-ters (40 years), as opposed to 150quarters (37.5 years).

A number of options are open tothe state in its desire to raise the ef-fective retirement age and take ac-count of the ongoing increase in life-expectancy:– either “a general increase in the

retirement age; such a solutiondoes not, however, take accountof the different age at which peo-ple enter the employment sys-tem”;

– or “raising the contribution periodrequired to claim a full pension,which, by contrast, would take ac-count of this parameter. This sec-ond solution permits those whostarted work early in life to leaveworking life earlier; it also consti-tutes a built-in mechanism to alterthe retirement age in line withshifts in the age of entry intoworking life. This is why this solu-tion is the one preferred by theCommission convened to draw upproposals for pension reform.”

It is therefore probable that the newreform will bring about a very gra-dual rise in the retirement age to be-tween 60 and 65 years, without go-ing beyond that upper limit. Indeed,the reform specifies that “under nocircumstances should the retirementage be increased beyond 65 years”.By 2019 the insurance period is tobe raised to 170 quarters, wherebythis will be associated with betterscope for including periods of educa-tion or inactivity in this total. Thesole aim is to be an increase in par-ticipation rates among those agedbetween 60 and 65. This requirespreparations to be made for the nec-

essary lengthening of the duration ofworking life.

The French National Action Planfor employment of 1999 paid partic-ular attention to the question ofwhether older workers are to beprivileged in terms of access to life-long training. A move towards life-long learning amounts to a majorcultural change in France: training,ultimately geared to the individual,would become one of the major in-struments determining individualemployability and adjustment capa-city. Such a move would go farbeyond mere participation in indi-vidual training courses and wouldform an integral part of a profes-sional career. The secretary of statefor vocational training has stimu-lated debate by presenting a WhitePaper that seeks to mobilise the so-cial partners and all those publicauthorities responsible for voca-tional integration (the RegionalCouncils). It is not yet clear whatpolicy decisions will emerge fromthis concerted effort. More general-ly, though, it is well known that cul-tural changes proceed only slowly.

The privileged access to lifelongtraining emphasised in the NAP is farfrom being achieved, and, generallyspeaking, older workers are ex-tremely seldom the main targetgroup of firms’ training measures:whereas 28% of all employees bene-fit from continued vocational train-ing, the figure is just 19% for work-ers aged over 45.

ConclusionsThere has been a substantial im-provement in the economic situationin France, and this is grounds for thehope that in coming years firms willpay greater attention to older work-ers, not least against the backgroundof the increasing age of the workingpopulation. In the short run, the im-provement in the economic situationmay lead to two types of response byfirms:– pursuit of the current predomi-

nant trend, that is, a continued fo-cus on a policy of early retirement

in spite of its increasingly highcosts. Given that firms currentlyhave the financial scope to pursuesuch policies, they may seek tobring about a swift change in theage structure of their workforceby this means;

– a change in their behaviour pat-terns, reflecting a will to retainolder workers in the enterprise un-der the double impact of economicrecovery and the introduction ofthe 35-hour week.

Depending on how quickly a compa-ny wishes to bring about changes inits workforce age-structure, both re-main valid options, to the extent thatthe government does not introducestrong incentives to promote the re-tention of older workers in the firmand thus make a clean break with thepast thirty years.

If the new orientations that seemto be sketched out in the new FrenchNAP are to be implemented in prac-tice, it will be necessary to counter anumber of concerns on the part ofemployers in this area. Awareness ofthese concerns constitutes an impor-tant element in progress towards agovernment decision. Yet employersare not at all interested in such a de-cision, and their image of olderworkers remains negative. The neworientations must also take accountof the concerns of individuals, that is,of workers. Given that the pensionsystem permits them to retire earlywith only minor income losses, it isevident that they will continue to optto leave the labour market prema-turely. The prospect opened up bythe French government will probablytake time to come to terms with theconcerns of labour market actors.

Sandrine Gineste

Selected bibliographyCommissariat Général au Plan (1995): Per-spectives à long terme des retraites. Studygroup under the direction of R. Briet. Paris:Documentation Française.Commissariat Général au Plan (1999):L’avenir de nos retraites. Report by Jean-Marie Charpin, at present on the Internet un-der the following address: www.ladocfran-caise.gouvConseil Économique et Social (1997): Salariéslicenciés de plus de 55 ans: interventions de

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l’Etat. Study by O. Djuric. Direction des jour-naux officiels.DARES (1994): Les modalités de sortie de lavie active et le vieillissement au travail [Theprovisions for exit from working life and age-ing in occupations]. Statistical Report, Nos. 4–5, December.

DARES (1995): “Organisation du travail, em-ploi et vieillissement.” In: L. Salzberg: Collec-tion dossiers documentaires. Edition anact.DARES (1998): “Les dispositifs publics depréretraite et l’allocation de remplacementpour l’emploi.” In: Premières Synthèses, No.9812–49.1.

“Entre l’emploi et la retraite” (1996). Liaisonssociales – collection des dossiers thématiques.INSEE (1996): “Projections de population ac-tive et participation au marché du travail.” In:Économie et Statistique, No. 300.OECD (1995): “Les travailleurs âgés et lemarché du travail.” In: Études de politique so-ciale, No. 17.

Ireland

Age trends in the popula-tion and labour forceLet us begin by attempting to sketchthe likely development of the Irishpopulation over the next twentyyears or so. The current situation re-garding relevant statistics is ratherfortuitous, for new and revised pro-jections on the population and labourforce have just been issued (July1999).1

With regard to assumptions, thenew population projections envisagea continuation of the current net mi-gratory inflow (i.e. immigration) and,broadly speaking, a moderately fall-ing fertility, even though differentsets of assumptions involve varia-tions in these trends.

Future population trends

Summary data taken from these pro-jections on the likely future popula-tion are given in Table 1. The broadmessage that emerges from these fig-ures (which cover the period up to2026) is that in Ireland, as in otherEuropean countries, the populationis undergoing an ageing process. Thepopulation aged less than 25 years isset to fall significantly (especially inthe 15–24 year-old age group), whilethe numbers in the older age groupsare forecast to rise. However, a dis-

tinguishing feature of the Irish demo-graphic scene is that the advancewave of this older age bulge has, asyet, only reached the “late middleage” stage (broadly speaking, up toage 55 to 59). Only modest increasesare projected to occur in the numbersin the older age groups (i.e. aged 60years and upwards) in the period upto 2006, even though subsequentlythe rate of increase will accelerate.

If the position is viewed in relativeterms, the old-age dependency ratio(Table 2) will decrease in the ten-year period between 1996 and 2006,from 17.6 to 16.5. Inevitably, ofcourse, in the following years, as thenumbers in the older age groups be-gin to rise more rapidly, there will bea parallel rise in old-age dependency.

This increase will be particularly rap-id after 2011; the old-age dependen-cy ratio is projected to reach 23.0 bythe year 2021.

These figures also reveal the age-ing process that is currently takingplace within what is regarded as the“active” age band. The final columnof Table 2 shows the population aged55 to 64 years taken as a proportionof that aged 15 to 64 years. This isforecast to increase from 12.4 to14.9% between 1996 and 2006; bythe year 2021, this ratio will have ex-ceeded 18.

1 Cf. Central Statistics Office (1999a). Thenew projections contain projections of thepopulation up to 2031 and of the labourforce up to 2011.

Table 1: Population projections, 1996–2026 (in 1,000s)Year 0–14 15–24 25–44 45–54 55–59 60–64 65+ Total

1996 859 633 1,016 412 154 138 414 3,626

2001 828 654 1,116 471 186 150 428 3,834

2006 845 599 1,222 509 225 181 452 4,031

2011 878 538 1,278 542 243 219 504 4,201

2016 874 539 1,269 566 261 237 585 4,331

2021 841 570 1,199 620 275 255 673 4,434

2026 796 578 1,127 685 287 270 767 4,510

Note: These projections are based on the “M1F2” assumptions as set out in the CSOreport as referenced. These involve a continuation of significant net immigration (evenif declining) over the entire projection period and decreasing fertility up to 2011.

Sources: Census of Population 1996; Central Statistics Office (1999a).

44 No. 33 · Winter 1999

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Table 2: Population dependency ratios, 1996–2026 (in %)Year Total dependency Old-age dependency Pop (55–64)/

Pop (15–64)

1996 54.1 17.6 12.4

2001 48.7 16.6 13.0

2006 47.4 16.5 14.9

2011 49.0 17.9 16.4

2016 50.8 20.4 17.3

2021 51.8 23.0 18.2

2026 53.0 26.0 18.9

Notes:Total dependency = sum of the population aged less than 15 years and 65 years or overdivided by the population aged 15 to 64 years.Old-age dependency = population aged 65 years or over divided by the populationaged 15 to 64 years.

Source: Central Statistics Office (1999a).

It should be noted, however, thattotal or overall dependency, whichtakes both young and older membersof the population into account, willfall in Ireland over the coming dec-ades. Table 2 shows that the relevantdependency ratio, which was 54% in1996, will fall to less than 50% by2011 and will show only minor in-creases for some considerable timethereafter.

Labour force projections

Turning to the labour force projec-tions, which extend only to the year

2011, these show a continuing ex-pansion in the total numbers in theworkforce, even if at a falling pace(Table 3). Viewing the current situ-ation, the labour force is estimatedto rise from 1,508,000 in 1996 to1,740,000 in 2001, reflecting an an-nual average rate of increase of justunder 3%. Between 2001 and2006, the annual rate of expansionis forecast to decline to about 1.7%,resulting in an increase in labourforce size to 1,895,000 in 2006. Inthe period after 2006, labour forcegrowth is expected to fall to just un-der 1%, giving rise to a total labour

2 For married women, the participation ratesof the older age groups will continue to rise.However, this is due more to the greater in-volvement of married women in workinglife generally than to any developmentswhich relate to older women in particular.

3 It is possible, however, that the assumption offalling labour force participation rates amongolder males may have to be reassessed. Re-cent official estimates suggest that these rateshave begun to rise (see below).

force of 1,984,000 in the year2011.

The projections indicate only amodest increase in ageing in the la-bour force, at least as far as the olderage groups are concerned. The pro-portion of persons in the labour forceaged 55 years or over is predicted torise, from 10.7% in 1996 to 12.4% in2011. This upward trend is somewhatmore pronounced if the age groupcovering those aged 45 years or overis considered, but here it will be no-ticed that most of the increase is attri-butable to the female labour force.One would, perhaps, expect these in-creases to be greater, bearing in mindthe age-related trends evident withinthe active population as described inthe preceding analysis. As Table 4shows, the outcome is, in fact, largelydue to the assumptions used in theprojections, which envisage a contin-uing decline in labour force participa-tion rates among older males and sin-gle women.2 It should be understood,however, in particular for men, thatthe labour force participation ratesfor the older age categories are quitehigh in Ireland when compared withinternational norms. These rates areinfluenced by the presence of sizeablenumbers of self-employed persons,especially farmers. In this context, theongoing decline in agricultural em-ployment is likely to exert continuingdownward pressure on labour forceparticipation rates among olderworkers in general.3

Policies relevant to age-ing and older workers

Basic measures

There are only a limited number ofwhat can be described as specialmeasures in Ireland that are “age re-

Table 3: Labour force projections, 1996–2011 (in %)Year 15–24 25–44 45–54 55–64 65+ Total 45+ 55+

as % of labourforce

Men1996 154 470 182 92 27 925 32.6 12.92001 171 519 206 104 26 1,025 32.8 12.72006 156 570 220 122 25 1,093 33.7 13.52011 134 599 232 134 26 1,124 34.9 14.2

Women1996 127 328 86 34 8 583 21.9 7.22001 145 395 120 49 6 715 24.5 7.72006 130 452 149 65 6 802 27.4 8.82011 114 489 172 78 7 860 29.9 9.9

All1996 281 798 268 126 35 1,508 28.4 10.72001 315 914 327 153 32 1,741 29.4 10.62006 286 1,022 369 187 32 1,895 31.0 11.52011 248 1,088 404 212 33 1,984 32.7 12.4

Note: The labour force definitions used are those recommended by the ILO.


No. 33 · Winter 1999 45

Trends

In a labour market context, it isperhaps also appropriate at this pointto refer to the Pre-Retirement Allow-ance Scheme (PRETA), which allowspersons aged 55 years or over to“opt out” of the labour force andcontinue to receive unemploymentbenefit without requirements relatedto jobsearch, availability, and soforth. There is a condition that appli-cants sign a declaration stating thatthey will not take up employment.At age 65 or 66 years, these personswould become eligible for the nor-mal state pension support. The totalnumber of persons included underthis measure was nearly 12,000 inearly 1999. This measure is, ofcourse, quite the reverse of what isintended under policies to promoteactive ageing, as it specifically dis-courages persons from remaining inthe labour force. This scheme is notin any sense unique; similar meas-ures exist in many other countries.

There are at present no specificpolicies for maintaining the workingcapabilities of older persons or fordeveloping flexible working arrange-ments that would permit enterprisesto adapt to an ageing workforce andallow workers to stay in work in-stead of being induced to take earlyretirement. Nor are there collectivebargaining arrangements designed topromote employment opportunitiesfor older persons. While there aremanpower programmes designed toaid the reintegration of workersabove certain age limits into the la-bour market, these limits are rela-tively low, and the programme par-ticipants involved cannot be consid-ered “old” in the context of the cur-rent discussion. Some of these meas-ures are described later in this paper.

Recent policy developments

Concerning new or recent develop-ments that could be considered rele-vant to the ageing process, these canbe broadly classified under fourheadings:

1. proposed measures to deal withproblems arising from pensionprovision;

lated” in the sense envisaged. Thereare, however, as in most other coun-tries, basic support programmes,mainly in the social protectionsphere, which are designed to dealwith or alleviate ageing or withdraw-al from the labour force. There are,for example, contributory and non-contributory state pension pro-grammes. The former, which appliesat age 65 years, is dependent on thelevel of social insurance contribu-tions paid. For the non-contributorymeasure, which is means-tested, eli-gibility is established at age 66. Bothpension systems involve fixed abso-lute weekly payments (dependent onfamily circumstances), which are re-viewed annually.

There are also occupational com-pany-sponsored pension schemes forthose in paid employment. The self-employed can also make indepen-dent provision for pension income.These schemes are voluntary (in thesense that there is no statutory re-quirement to participate), and the ar-rangements vary greatly from oneemployment to another. Approxi-mately 50% of persons in the work-force in Ireland are members of oneor other of these two types ofscheme. The state also provides oc-cupational pensions for its own em-ployees, which are funded from cur-rent taxation on an ongoing basis. In

the case of private-sector pensions,for which eligibility is normally es-tablished at age 65, the amount ofthe pension is usually calculated onthe basis of one-sixtieth of currentsalary for each year of service in thecompany. Basically, therefore, theamount payable is related to the per-iod spent in pensionable employ-ment, even though in many cases thiscan be adversely affected by prob-lems of transferability of pensions inthe event of job changes. This issue isfurther discussed later in the paper.For those in state employment, theamount payable as pension (onreaching 65 years) is based on one-eightieth of finishing salary for eachyear of service, subject to a maxi-mum of 40 years.

There are also State InvalidityPensions paid in circumstances ofserious incapacity, to the extent thatthe person is classified as permanent-ly incapable of work. For the contri-bution-based component, a minimumof five years of paid social insurancecontributions is normally required toqualify. There is an equivalentmeans-tested measure (Disability Al-lowance) for persons who do notmeet the required contribution lev-els. The basic weekly payments forthese measures are similar to thosepaid in the case of equivalent statepension schemes.

Table 4: Labour force participation rates, 1996–2011 (in %)Year 15–24 25–44 45–54 55–64 65+ Total

Men1996 47.6 93.4 87.1 63.1 15.3 68.12001 51.2 93.3 87.0 62.0 14.0 69.42006 50.8 93.4 87.0 60.3 13.0 69.72011 48.7 93.4 87.2 58.3 12.0 69.0

Women1996 41.1 63.9 42.3 23.4 3.2 41.42001 45.1 70.6 51.5 29.2 2.5 46.82006 44.4 73.8 58.2 31.7 2.4 49.52011 43.2 76.7 62.1 33.6 2.4 50.7

All1996 44.4 78.5 65.0 43.3 8.4 54.52001 48.2 81.9 69.3 45.6 7.4 57.92006 47.7 83.6 72.5 46.0 7.0 59.42011 46.0 85.1 74.4 45.8 6.6 59.7

Note: The labour force definitions used are those recommended by the ILO.


46 No. 33 · Winter 1999

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2. initiatives to promote lifelonglearning;

3. anti-discrimination legislation re-lated to employment;

4. other measures.While these activities may be rele-vant to the issues under discussion,apart from the first (i.e. pension pro-visions), none of them can be regard-ed as a specific response to the agedevelopments in the population.

Provision for future pensioncoverageThis is, perhaps, the area where mostattention has been paid in Ireland tothe future consequences of an ageingpopulation. In February 1997, a con-sultative paper entitled “NationalPensions Policy Initiative: Consulta-tion Document” was issued jointly bythe Department of Social, Commun-ity and Family Affairs and the Nation-al Pensions Board.4 The purpose ofthis initiative was to set out in somedetail the main issues and problemsassociated with pension coverage (es-pecially the state schemes and occu-pational pensions) and to facilitate anational debate on how to work to-wards the further development ofthese systems in the light of expecteddemographic changes.

It is particularly interesting to notethat this report refers to the questionof activation or reactivation of theolder workforce. It raises the possi-bility of persons who have retired tocontinue to earn income throughworking part time or taking up newoccupations. The consultative reportraises the further question, in view ofchanging work patterns (particularlythe growth of atypical employment),of whether new, more flexible pen-sion arrangements are desirable,which would be based on an indivi-dual’s career rather than on each par-ticular job held. The report also addsthat because both public and privatepensions normally have a predeter-mined age at which retirement bene-fits become payable, as longevity in-creases, the difference between thelength of the contribution period andthe period for which the pension islikely to be paid will increase. The

implication here is that the normalretirement age should rise unlesscontribution levels increase. The re-port thus asks whether the currentapproach to “normal retirementage” is sustainable and whethergreater longevity renders it appropri-ate for people to work longer.5

The consultation process was fol-lowed by the publication by the Na-tional Pensions Board in May 1998of a document containing specificproposals for improving the pensionprovision for workers in relation tostate programmes and private occu-pational pensions (National PensionsBoard, 1998). In regard to state pen-sions, the report called for changes inorder to achieve a minimum pensionequivalent to 34% of average indus-trial earnings over a five- to ten-yearperiod. The attainment of this would,on the basis of recent research, resultin a pension level sufficient to ensureminimally adequate support for asingle adult (ESRI, 1996).

With regard to occupational pen-sion schemes, one of the importantaspects of the report was a recom-mendation to introduce Personal Re-tirement Savings Accounts (PRSAs).Briefly, such a device is an invest-ment account which is owned by theindividual. The contributions arelodged in investment funds, whichare held and managed by an ap-proved PRSA provider.6 At an ap-propriate moment, the sum would betransferred to an institution author-ised to offer annuities when a life an-nuity is eventually purchased. Atpresent, if an individual’s employ-ment status changes, there is an obli-gation to cease contributing to theexisting pension arrangement, if in-deed one exists and the individual isa member. Although the person maystart from scratch in a new arrange-ment, as careers become more frag-mented the costs become increasing-ly onerous and unacceptable to boththe individual and providers. In con-trast, the owner of a PRSA would beable to continue it whenever a jobchange occurs or if there is an inter-ruption of employment. Such an ar-rangement would be of particular

benefit to atypical workers and topersons in sectors which involve lowcoverage in terms of occupationalpensions.

Lifelong learning

With regard to lifelong learning, themost relevant recent development isthe publication in November 1998 ofa government Green Paper on“Adult Education in an Era of LifeLong Learning” issued by the De-partment of Education and Science.However, the document deals withadult education in a wide societalcontext and thus covers more thanlifelong learning and its relationshipto the labour market. The publica-tion of the document was not specifi-cally prompted by the ageing processin the population, but it is, neverthe-less, of obvious relevance whenviewed in this context. The GreenPaper does, however, specificallystate that changing demographictrends will soon reduce the flow ofhighly qualified young entrants intothe labour market, indicating theneed for more investment in upgrad-ing the skills of older workers, partic-ularly the unemployed and those re-turning to the workforce.

The Green Paper attempts to takestock of the achievements and trendsto date and to set out a frameworkfor the future development of anadult education system. It is intendedthat the Green Paper should be a fo-cal point for a wide-ranging debateand provide the necessary back-ground for consultation with key in-terests, including education andtraining professionals, the socialpartners, students and communityrepresentatives.

A significant event which pro-vided an impetus for this initiativewas the publication by the OECD in

4 This is a statutory body set up by the gov-ernment under special legislation to monitorand supervise the operation of occupationalpension schemes.

5 Retirement age in the United States is cur-rently 65 years, but this is to be increased to67 years by 2027, reflecting increased lon-gevity.

6 This may be a bank, insurance company oranother financial institution.

No. 33 · Winter 1999 47

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1997 of a comparative Adult Litera-cy Survey, which indicated signifi-cant literacy and numeracy deficien-cies among the Irish adult popula-tion. The study identified other as-pects of concern. For example, to theextent that existing adult educationfacilities are used in Ireland, theytend to be availed of by those whoare already relatively well educated.

With regard to institutional re-form, the Green Paper recommendsthe establishment of an executiveagency (The National Adult LearningCouncil) in order to promote coordi-nation, policy development and staffdevelopment within the adult educa-tion sector. This is considered to beof particular importance, given thenumerous agencies involved in theprovision of adult education. At locallevel, the establishment of AdultLearning Boards is proposed to coor-dinate and support the planning andprovision of adult education on a lo-cal or community basis.

In terms of actual measures, theGreen Paper recommends the devel-opment of a National Adult LiteracyProgramme to be targeted at redress-ing the major deficiencies as identi-fied in the 1997 OECD report. It isalso proposed that a national “Backto Education Initiative” should be in-troduced, aimed at widening the op-portunities for adults to completesecond-level education. It is recom-mended that third-level institutionsshould introduce a system of “ma-ture student” quotas in as many fac-ulties as feasible, and, in so doing,they should be aided by funding tosupport the additional costs of out-reach, access, guidance and network-ing services. The Green Paper alsoconsiders that a stronger commit-ment to the ongoing development ofDistance Education and OpeningLearning Opportunities is an essen-tial component of a comprehensiveadult education system.

With regard to measures specifi-cally related to the labour market,the Green Paper recommends somechanges designed to improve theflexibility and responsiveness of thevarious measures run by the Depart-

ment of Education and Science.These relate principally to assistingearly school-leavers and facilitatingthe reintegration of the older long-term unemployed. The changes en-visaged include the introduction ofmore flexible, part-time options anda move away from the dominance offull-time programmes with a once-yearly intake in September. The pa-per also recommends that the feasi-bility of putting in place a pro-gramme of paid educational leave beexplored in association with the so-cial partners.

Anti-discrimination legislation inrelation to employment

The recent introduction of the Em-ployment Equality Act of 1998 is ofparticular importance in the contextof age-related issues in the labourmarket. This legislation renders it il-legal to discriminate (either directlyor indirectly) in employment matterson a range of grounds, includingage.7 All aspects of discrimination inemployment are covered, includingequal pay for work of equal value,access to employment, vocationaltraining, conditions of employment,work experience, promotion and dis-missal. The act makes it unlawful toadvertise a job in such a way that theadvertisement could reasonably beinterpreted as indicating an intentionto discriminate. It also provides forthe insertion into every contract ofemployment a “non-discriminatoryequality clause”. The terms of thelegislation apply to employers inboth the public and private sectorsand to employment agencies, voca-tional training bodies, trade unionsand professional bodies.

It should be noted, however, thatthe inclusion of age among thegrounds for discrimination in this leg-islation does not in any sense conveya specific relative advantage of olderworkers vis à vis workers in otherage groups. Age in the context of thisact covers discrimination at all ages.Nor does the act hinder or obstructthe principle that an employer is en-titled to recruit a person with the at-tributes and skills essential for the

job on offer. The legislation also al-lows age discrimination in recruit-ment and employment in certainspecified circumstances.

The act was brought into effect on18 October 1999, when the new ad-ministrative arrangements set out inthe legislation were established.These involve the setting up of anEquality Authority, charged with re-sponsibility for promoting equalityunder each of the nine specifiedgrounds, as well as a statutory Officeof Director of Equality Investigationswhich hears claims for redress in theevent of alleged discrimination.

Other measures associatedwith ageing

There are few other special measuresor initiatives that are of direct rele-vance to older workers or the issue ofpromoting active ageing. While thereare a number of manpower supportprogrammes in Ireland which in-volve lower age limits or have com-ponents which are restricted to thoseabove a certain age, the limits inquestion (mainly 25, sometimes 35years) cannot be regarded as “old” inthe sense envisaged in this report. Infact, even with such age limits, an in-evitable degree of “creaming” oc-curs, and the ages of most of the par-ticipants in these programmes wouldtend to be close to the lower limitsspecified. In these circumstances,participants aged 50 years or overare likely to be very few in number.

Among the various employmentprogrammes involving age as a cri-terion, one of the most important isthe Part-Time Job Option componentof the Community Employment Pro-gramme. This measure, which essen-tially involves the provision of part-time work on publicly sponsoredprojects, is mainly restricted to per-sons aged 35 years or over who havebeen on the unemployment registerfor at least three years. This measureis relatively large: the target level ofparticipation has been set at 10,000.

7 The full range of grounds numbers nine –sex, age, marital status, family status, sexualorientation, religion, disability, race andmembership of the travelling community.

48 No. 33 · Winter 1999

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Perspectives of olderworkersIn view of the expected increase inthe number of older workers in theIrish labour force, it is of relevance toreview briefly the current employ-ment situation of such workers. Ta-ble 5 shows unemployment rates bysex and age for the spring of 1997and 1999. If one perceives “older”workers in this context as beingthose aged 45 years or over, the1999 data do not reveal particularlyhigh unemployment for this group.The unemployment rates for the var-ious age categories over 45 years areequivalent to, or somewhat less than,the overall unemployment rate of5.7%. The highest rates relate toyoung persons – over 11% for thosein the labour force who were aged15–19 years.

The data also reveal that unem-ployment as a whole fell significantlyover the twelve-month period con-sidered, from 10.3% to 5.7%. Whileall age categories recorded decreas-es, the relative reductions in unem-ployment were much greater forthose in the younger age groups, in-dicating that the current period ofeconomic growth in Ireland is pro-viding greater benefits to young peo-ple.

Despite these generally favour-able trends, there are some worryingaspects associated with these figures.Long-term unemployment (LTU) isparticularly high among older work-ers. Table 6 shows that LTU, whentaken as a share of total unemploy-ment, was nearly 57% for those aged45 or over in 1999 (64% for males),compared with 46% for personsaged 25 to 44 years and 27% foryoung persons in the 15 to 24 year-old age group. These results are con-sistent with many other analyses,which have indicated that the pros-pects for reintegration into employ-ment for older workers (especiallythose nearing the retirement-age cat-egories) are not particularly good. Itwas problems such as these that firstgave rise to the introduction in 1990of the previously mentioned PRETA

Table 5: Unemployment rates by age, 1997 and 1999 (in %)Year 15–19 20–24 25–34 35–44 45–54 55–59 60–64 65+ Total

Men1997 20.2 15.7 10.1 9.4 9.4 7.3 5.1 1.3 10.41999 10.6 7.6 5.4 5.7 6.0 4.8 3.2 0.4 5.9

Women1997 23.4 12.5 9.5 9.0 9.4 5.6 4.0 6.3 10.31999 11.9 7.0 4.8 4.9 4.6 4.6 4.0 1.5 5.5

All1997 21.5 14.2 9.8 9.2 9.4 6.8 4.8 2.4 10.31999 11.1 7.4 5.1 5.4 5.5 4.8 3.4 0.6 5.7

Source: Central Statistics Office (1999b).

Table 6: Proportion of long-term unemployment in total unemploymentby age, Spring 1999 (in %)

15–24 25–44 45+ Total

Men 30.1 57.2 64.2 51.9

Women 23.6 27.9 40.0 28.8

All 27.2 45.7 56.5 42.9

Source: Central Statistics Office (1999b).

measure, which allows older unem-ployed persons to opt out of the la-bour force and retain their benefits.

It is encouraging, however, to notethat the situation seems to be im-proving, albeit slowly. Apart fromthe declining unemployment rates al-ready referred to, the most recentCSO Quarterly National HouseholdSurvey8 indicates that the labourforce participation rates among oldermale workers actually increased inthe twelve-month period up toSpring 1999, following a very longperiod of decline. These more posi-tive signs can be attributed to thegeneral impact of emerging labourshortages in the Irish economy.While the evidence is, as yet, ratherlimited, the economic circumstancesseem to be prompting employers toview older workers in a differentlight, and causing some workers toreconsider the option of withdrawingfrom the labour force as they near re-tirement age.

General policy issues:perceptions of the prob-lem of ageingWhile a significant degree of ageingwill eventually materialise in the

Irish population, the evolving demo-graphic situation is different fromthat which applies in many otherEuropean countries, where the num-bers in the pre- and post-retirementage bands have already risen sharplyand are predicted to continue in-creasing. The differences are notonly a matter of timing. Even whenthe ageing process in Ireland is moreestablished, the age imbalance willnot be as acute as that predicted forother European countries. The pro-jections given in Table 1 indicatethat, by the year 2021, the propor-tion aged 55 years and over in the to-tal Irish population will be just over27%. The corresponding projectionfor all EU (15) countries taken to-gether for the same year is nearly35%, and is even higher for some in-dividual countries (e.g. Germany)(see Eurostat, 1999).

Yet, one should not view the age-ing process in Ireland in isolation.The falling population in the youngerage bands tends to offset some of thedisadvantages arising from ageing.The overall dependency ratio, whichtakes both the dependent young and

8 This survey, which was introduced in Octo-ber 1997, has replaced the annual LabourForce Survey.

No. 33 · Winter 1999 49

Trends

the effects of changing numbers ofolder persons in the population intoaccount, is set to fall in Ireland overthe next two decades. Table 2 showsthat even when it begins to rise againafter 2016, it will, broadly speaking,only return to current levels (i.e.about 50%).

It must also be borne in mind thatthe above-mentioned indicators,even where they predict higher de-pendency in decades to come, in-volve much lower levels than thosewhich prevailed in Ireland in previ-ous periods when emigration washigh. The overall dependency ratiowas as high as 75% (and old-age de-pendency nearly 20%) in the late1960s and early 1970s. It is againstthis background that one must viewcurrent attitudes towards ageing anddependency in Ireland, which do nottend to be as apocalyptic in natureas some of those prevailing in otherEuropean countries facing high lev-els of dependency for the first time.A recent 1998 paper by Fahey,FitzGerald and Maitre contains amore detailed discussion of these andrelated issues.

These reasons serve to explainwhy thus far there has not been aperceived need in Ireland to singleout the problem of ageing for specialattention, either in regard to the la-bour force or in relation to social pro-tection issues generally (apart fromthe question of pensions discussedearlier). In considering developments

such as “activation” of older work-ers, one must also bear in mind thatin recent decades the main thrust ofmany labour market policies in Euro-pean countries has been to counterunemployment, especially youth un-employment. Until relatively recent-ly, many measures, far from encour-aging the activation of older persons,were designed to promote their earlyretirement in order to open up em-ployment opportunities for others.As already indicated, market forcesin the form of labour shortages arelikely to cause this situation tochange in Ireland over the comingyears, especially as the numbers en-tering the labour market from theeducational system begin to fall.

While the longer-term demo-graphic scene need not necessarily beviewed with undue foreboding, anumber of analysts (including Fahey,FitzGerald & Maitre, 1998) have em-phasised that the easing of demo-graphic pressures which will occurover the next twenty years presentsa “window of opportunity” thatshould be availed of in order to ad-dress pressing social issues and in-equalities in Irish society. Overall de-pendency may be set to fall duringthe coming decades, but age depend-ency will eventually rise and begin toreach historically high levels towardsthe end of the second decade of thenext century. This will require a sig-nificant reallocation of public re-sources.

There is also a danger that theunprecedented levels of economicbuoyancy experienced in Irelandthroughout the 1990s may lull societyinto a false sense of security. Since1993, the public finances have beentransformed, and the sizeable budgetsurpluses that have emerged in recentyears have led to a situation in whichthe problems affecting most groups insociety are now being addressed to agreater extent than previously. How-ever, the days of plenty cannot lastforever, and there is a strong argu-ment for taking advantage of the cur-rent favourable circumstances in or-der to initiate policy measures de-signed to cater to future changes insociety and in the population at large,including those related to ageing.

Jerry Sexton

Selected bibliographyCentral Statistics Office (1999a): Populationand Labour Force Projections 2001–2031.Dublin.Central Statistics Office (1999b): QuarterlyNational Household Survey. Second quarter1999. Dublin.ESRI (1996): A Review of the Commission onSocial Welfare’s Minimum Adequate Income.Dublin.Eurostat (1999): Demographic Statistics, 1998Edition. Luxembourg.Fahey, T., J. FitzGerald & B. Maitre (1998):The Economic and Social Implications ofDemographic Change. Journal of the Statis-tical and Social Inquiry Society of Ireland.Dublin.National Pensions Board (1998): Securing Re-tirement Income. National Pensions Policy Ini-tiative. Dublin.

50 No. 33 · Winter 1999

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Italy

IntroductionTwo recent trends are particularlyrelevant in Italy in relation to theissue of older workers and the labourmarket. The first is the intensity ofpopulation ageing, which is greaterthan in other European countries.The second is the very sharp declinein activity and employment ratesamong men over 50 years old.

Recent estimates on demographictrends (Aprile et al., 1997) show thatthe ratio of the old-age (above 65years of age) to the active-age popu-lation (20–64 years of age) is going toincrease rapidly from 27% in 1996

of firms for younger, less costly andmore flexible and productive work-ers (Contini & Rapiti, 1994; ISFOL,1998). According to a recent com-parative study (Blondal & Scarpetta,1999), Italy has the biggest incen-tives for early retirement amongOECD countries.

Unemployment rates, even if stillmuch lower than those for youngercohorts (because older people out ofwork usually leave the labour force),are increasing, especially amongthose aged between 50 and 64, from2.9% in 1993 to 4.8% in 1998.

The situation of older women isdifferent than that of men: participa-tion and employment rates are in-creasing even in the 50–59 agebracket, probably because of differ-ent eligibility conditions in relationto early retirement provisions.

The possible consequences ofthese trends for the social protectionsystem are problematic, given thegenerosity of the Italian pension sys-tem and the low effective age of re-tirement.

Changes in the policyframework: recent trendsIn the 1990s, due to the need to re-duce public spending and control therapid expansion of the pension sys-tem, a process was started to reviseboth the pension and the social sup-port systems.

The pension reforms were aimedat relieving financial unsustainabilitythrough pension cuts (1992 reform),the gradual switch from an earnings-related to a contributory pension for-mula, the introduction of the princi-ple of actuarial fairness and of flexi-bility in retirement age (1995 re-form), and the speeding up of the ab-olition of remaining differences be-tween public and private employeesand self-employed workers regard-ing early retirement (1997 reform).

to 29% in the year 2000. By the year2020, this ratio is estimated to be39.5%. Trends in participation ratesare likely to worsen the problem of ashrinking active-age population. Par-ticipation rates have, in fact, beendeclining since the 1980s, especiallyamong males in the 55–59 age brack-et. In 1998, participation ratesamong males aged 55–59 were only53.9%, compared to 65.1% in 1993(Table 1). Employment rates havebeen sharply declining for males inthe 50–59 age bracket. These trendsare linked to the possibility of receiv-ing social welfare and early retire-ment benefits and to the preference

Table 1: Main labour market indicators* by age (in %)Participation rates Employment rates Unemployment rates

1993 1998 1993 1998 1993 1998

Total15–29 years 50.7 49.8 39.1 36.8 22.9 26.130–39 years 77.0 78.5 71.3 70.6 7.4 10.040–49 years 73.0 75.2 70.1 71.0 3.9 5.650–54 years 59.0 59.0 57.0 56.1 3.3 4.855–59 years 41.7 37.8 40.6 35.8 2.7 5.160–64 years 19.7 19.0 19.4 18.3 2.0 3.865 and over 4.1 3.6 4.0 3.5 2.0 1.5Total 47.9 47.6 43.0 41.8 10.2 12.3

Men15–29 years 57.2 55.4 46.2 43.1 19.2 22.230–39 years 95.6 94.9 90.9 88.3 4.9 7.040–49 years 95.3 94.8 92.8 91.0 2.6 3.950–54 years 83.0 80.0 80.8 73.3 2.7 4.055–59 years 65.1 53.9 63.3 51.1 2.8 5.260–64 years 32.3 31.1 31.7 29.9 2.0 3.965 and over 7.0 6.3 6.9 6.2 2.0 1.2Total 63.1 61.0 58.3 55.2 7.6 9.5

Women15–29 years 44.1 44.0 31.8 30.4 27.8 31.030–39 years 59.3 62.0 52.1 53.0 11.4 14.640–49 years 50.4 55.7 47.3 51.1 6.3 8.350–54 years 35.8 39.0 34.1 36.5 4.8 6.455–59 years 19.8 22.6 19.3 21.6 2.4 4.660–64 years 8.5 8.0 8.3 7.7 2.0 2.965 and over 2.0 1.7 2.0 1.6 3.7 4.3Total 33.9 35.3 28.9 29.3 14.8 16.8

* ISTAT is currently recalculating labour force time series from October 1992 on-wards in order to adapt to EU standards, but revised data are not yet available.

Source: ISTAT: Labour Force Survey 1993, 1998.

No. 33 · Winter 1999 51

Trends

Most commentators argue that thesereforms were needed, but that, inproviding for a too lengthy transitionperiod,1 they leave little room forprivate pension funds and continueto safeguard the “acquired” pensionrights of present workers (includingearly retirement provisions). In thisway, the main burden of adjustmentis placed on the younger and futuregenerations. In addition, the finan-cial imbalance of the pension systemis still a problem due to the lowweight given to the contributory por-tion of the system.

Policies concerning legalretirement age

The 1995 pension reform introduceda new mechanism aimed at the flexi-bilisation of the retirement age,which is now set at between 57 and65 years of age. Pension income isproportional to retirement age. Toget full benefits, retirement ageshould gradually increase to 65 formales and to 60 for females. In addi-tion, an age limit on seniority pen-sions was introduced, which is ap-proaching 57 years of age. The newsystem is also more generous toworkers with interrupted workingcareers; it facilitates supplementarypensions and the possibility for peo-ple older than 65 years to receive apension as well as earned income.


Public measures supporting early re-tirement and/or exits of older work-ers from employment are numerousand widespread in Italy, while op-tions for gradual retirement are notadequately supported and, up tonow, little used. The main instru-ments available for early retirementare presented in Table 2. Of the totalpensions provided by the NationalInstitute of Social Insurance (INPS)

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wor

k-er

s ha

ve a

n ag

e re

quir

emen

t of

57.

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som

e ca

ses,

ret

ired

wor

kers

wit

h a

seni

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ype

nsio

n ca

n cu

mul

ate

inco

me

from

par

t-ti

me

wor

k w

ith

part

of t

he p

ensi

on.

Wor

kers

age

d at

leas

t 55

(m

en)

and

50 (

wom

en)

empl

oyed

in r

estr

uctu

ring

indu

stri

alen

terp

rise

s w

ith

at l

east

15

year

s of

con

trib

utio

ns r

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ve t

he f

ull

pens

ion.

In

rece

ntye

ars,

wor

kers

age

d at

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t 53

(m

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48 (

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wit

h 18

yea

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f co

ntri

buti

ons

are

also

incl

uded

. Usu

ally

, ear

ly r

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emen

t sc

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es r

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sent

the

last

ste

p of

a lo

ngpe

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ce in

spe

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mpl

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ent

or s

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m s

chem

es (

mob

ility

list

san

d C

IG).

Old

er w

orke

rs o

n m

obili

ty li

sts

befo

re 1

993,

who

are

fiv

e ye

ars

shor

t of

ear

ly r

etir

e-m

ent

age

(55

year

s) a

nd h

ave

at le

ast

15 y

ears

of

cont

ribu

tion

s, m

ay r

ecei

ve b

enef

its

unti

l ea

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reti

rem

ent;

pri

me

age

wor

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may

com

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CIG

S an

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its

for

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axim

um o

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(or

six

year

s in

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ther

n It

aly)

. Mob

ility

ben

efit

s (8

0% o

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age

wit

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ceili

ng e

qual

to 6

5% o

f the

rem

uner

atio

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the

aver

age

wor

ker)

last

-in

g 12

mon

ths

may

be

exte

nded

onc

e fo

r w

orke

rs o

ver

40 a

nd tw

ice

for

wor

kers

ove

r50

, so

as to

rea

ch th

e ag

e el

igib

ility

for

seni

orit

y pe

nsio

ns. T

o qu

alif

y fo

r th

is b

enef

it, a

wor

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t hav

e an

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ploy

men

t rec

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of 1

2 m

onth

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d be

laid

off

und

er a

col

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tive

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or c

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ompa

ny, o

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a cr

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sit

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r ba

nkru

ptcy

. In

addi

tion

, wor

kers

hav

e to

hav

e be

en e

mpl

oyed

inin

dust

rial

com

pani

es w

ith

mor

e th

an 1

5 em

ploy

ees

or in

com

mer

cial

com

pani

es w

ith

mor

e th

an 2

00 e

mpl

oyee

s.

Fina

ncin

g

Indi

vidu

al/f

irm

co

ntri

buti

ons

+st

ate

Five

to te

n ye

ars

of c

ontr

ibut

ions

paid

by

the

stat

e. F

inan

cing

is

usua

lly 7

0% f

rom

pub

lic f

unds

.C

onfi

ndus

tria

(1

996)

es

tim

ates

an

aver

age

burd

en

on

publ

icfu

nds

of IT

L 1

00 m

illio

n.

Par

tial

con

trib

utio

n by

firm

s

Tak

e-up

Num

bers

fl

uctu

ate

over

tim

e, b

ut i

ncre

ased

in

rece

ntye

ars.

1,2

50,0

00 in

199

7 be

-lo

w s

tand

ard

reti

rem

ent a

ge.

Stoc

k in

Jan

uary

199

8:39

1,00

0

Stoc

k in

Jan

uary

199

8:10

0,00

0

Tab

le 2

: Mai

n pa

thw

ays

to e

arly

exi

t

1 The transition period will end only in 2035,while seniority pensions will only be abol-ished in 2013. According to most commen-tators, financial equilibrium will be reachedonly around the year 2050, when the newcontributory regime will be fully phased in.Until then, the yearly deficits will have to becovered by public funds (ISTAT, 1997).

52 No. 33 · Winter 1999

Trends

in January 1998, around two millionare seniority pensions (equivalent to14%) and 390,000 (3%) are specialearly retirement provisions. All inall, 9.4% of total pensions are grant-ed to individuals below the standardretirement age (which is currentlybetween 57 and 63), amounting to asum equivalent to 17.7% of totalpension transfers.

The different instruments are of-ten used in sequence in order to re-duce the age of retirement. A stockof around two million workers be-low standard retirement age was in-terested in these different forms ofearly retirement in 1997 – an in-crease of 66% since 1990. The com-position, however, has been chang-ing, and there has been a sharp in-crease, especially since 1995, in sen-iority pensions (+332%), mainlyaimed at male workers, and a reduc-tion of invalidity pensions (–27%),which are now subject to more in-tensive controls and restrictions.Early retirement schemes have beenreduced since 1992; they have beensubstituted in part by long-term mo-bility schemes.

In the 1990s, there has been aprogressive increase of early retire-ment among self-employed workersthrough seniority pensions; since1996, seniority pensions for self-em-ployed workers have exceeded thosefor dependent employment.

Policies to increase participa-tion rates, to retain and inte-grate older workers and topromote flexible working aswell as gradual retirementprovisions

As stated in the 1999 Italian NAP, inthe current legislative frameworkthere are no measures aimed at fos-tering the active labour market par-ticipation of older workers, and theNAP itself does not deal much withthis issue. The seniority pension sys-tem, the generosity of early retire-ment provisions and the strict con-straints on the possibility of cumulat-ing work and retirement incomehave all discouraged active ageing in

the labour market. Up to now, thetraditional approach of all social ac-tors has been to favour the exit ofolder workers in order to support theemployment of young people. An in-dicator of this approach is the tradeunions’ attitude, mainly based onguaranteeing a supported pathwaytowards early retirement.

Only in recent years, with the in-creasing evidence of the shortcom-ings of the current pension systemand the necessity of a pension re-form, is the issue of promoting an ac-tive ageing workforce beginning tobe considered by the relevant socialactors. Attention is focused on reduc-ing incentives to early retirementand supporting gradual and flexibleforms of retirement. This implies acomplete revision of the welfare andpension system and the provision ofspecial employment services to theageing population. The unions are in-creasingly aware of the need to re-vise the welfare system and to adopta more active approach, but the de-fence of acquired rights is still pre-dominant and reduces the space foragreements in this field. The lack ofextensive, integrated services for theaged places much more attention onthe need to provide effective socialand health services rather than on of-fering employment opportunities.Attention is given to supporting so-cially useful jobs and voluntary workrather than to supporting access toand maintenance of remuneratedwork.

The 1999 NAP stresses the needto support active ageing through arevision of norms relating to the pos-sibility of cumulating pension and la-bour income and the reinforcementof gradual retirement provisions andpart-time possibilities for olderworkers, together with the anticipa-tion of social security coverage forindividuals engaged in communitywork and socially useful jobs. In ad-dition, the NAP includes recommen-dations for the social partners toagree upon contractual mechanismssupporting reductions in workingtime in favour of workers’ continu-ous training and education.

The possibility of gradual retire-ment through part-time work by old-er workers has been present in theItalian legislation since 1994, but it isnot widespread due to the lack ofproper financial incentives and thegenerosity of seniority and early re-tirement schemes. Only the Treupackage of 1997 and the recent Fi-nance Law consider contributionsand financial incentives.

The May 1999 Finance Law in-cludes a mandate to the governmentto provide, by December 1999, spe-cific measures supporting the so-called “old-young relay”, that is, thepromotion of forms of work-sharingbetween older and young workersthrough part-time contracts. Full-time older workers eligible for sen-iority pensions may integrate pen-sion income and income from part-time work; the reduced working timeof older workers is to be compensat-ed through part-time employment ofyounger workers. This possibility isextended to self-employed workerswith seniority pensions who may de-cide not to retire but to reduce theirworking time and hire new workersor new partners or regularise hiddenjobs.

Other measures have been avail-able since the early 1990s but havenot been used much up to now. Self-employment and social cooperativesamong older workers currently in-volved in socially useful jobs are fi-nancially supported. Employers whohire older workers included in CIGor mobility schemes are exemptedfrom paying social security contribu-tions for one year, and special train-ing and retraining programmes arecarried out by local public agenciesfor the reinsertion of older unem-ployed in the private sector or of re-tired workers in socially useful workin the environment and in personalservices.

One of the main obstacles to theintegration of older workers in thelabour market is their lack of up-dated competencies and skills andtheir low educational attainments. In1998, only 14.4% of the populationolder than 50 years had an upper-

No. 33 · Winter 1999 53

Trends

secondary school-leaving certificate,while 57% of the male populationand 71% of the female populationhad at most the elementary level,equivalent to five years of schooling(47% and 60%, respectively, in the50–64 bracket).

The Italian NAP specifically con-siders the need to increase the learn-ing opportunities of low-skilled olderpersons through lifelong learning andindicates an experimental project bythe Education Ministry, other admin-istrations and the social partnersaimed at adult, low-skilled unem-ployed. By December 1998, 389 per-manent training centres had beencreated in 89 provinces, and 7,288courses had been organised for about150,000 trainees. This project will beextended to 200,000 beneficiaries in1999 and to 250,000–300,000 in2001. Monitoring of the results andthe characteristics of participants isalso under consideration.

Developments at the levelof companies and sectors

Restructuring the workforcemaking use of (or avoiding)early exit

Since the second half of the 1980s,collective agreements relating to in-dustrial restructuring in Italy fa-voured a gradual substitution of old-er workers (over 45 years of age) byyounger ones. This process was facil-itated by specific labour marketmeasures: the support for work-training contracts for young workersthrough social security exemptionsand the extension of fixed-term con-tracts, on the one hand, and the pos-sibility of using early retirement andother exit incentives for older work-ers (through special CIG provisionsup to 1991 and long-term mobilityschemes later on), on the other(ISFOL, 1998; Contini & Rapiti,1994). Young workers are less costlyfor firms, more flexible and havehigher educational levels: it is thusconvenient for firms to substitutethem for older workers, especiallywhen there are special public provi-

sions to ease the exit of older work-ers from employment. A recentstudy on panel microdata from la-bour force surveys relative to de-pendent workers’ flows in the pri-vate sector in the 1988–95 periodshows that the age cohorts under 25years present high net inflows intodependent employment in the pri-vate sector, while older age cohortspresent net outflows, which becomesparticularly relevant in the case ofcohorts aged 45 to 52 (ISFOL, 1998).The net employment increase in the1988–95 period of a little more than50,000 units is thus the result of aninflow of almost 1,594,000 youngworkers (+2.8% per year) and anoutflow of 1,493,000 adult workers(–2.7% per year). This turnoverprocess has characterised all privatesectors and occupational qualifica-tions, but especially blue-collarworkers in manufacturing, which re-duced their overall employmentshare in the period considered.

Company strategies and col-lective agreements for olderworkers

The main approach adopted by thesocial partners in collective bargain-ing has long been based on support-ing an early exit from employment,because this allowed industrial re-structuring without social conflict. Inthe recent past, solidarity contractshave been introduced in order toavoid lay-offs; these contracts pro-vided, in a few cases, for the hiring ofadditional part-time workers to com-pensate for the working-time reduc-tions of existing workers. These con-tracts were not much used until theywere generously supported in 1993and 1994.

In recent years, the attitude of thesocial partners is slowly changing:the emphasis is no longer on how tofacilitate the exit of older workersthrough public resources but on howto reallocate all redundant workersinto new productive activities. Insome cases (as in the recent Phillipsagreement), the reallocation is intodependent jobs, in others (as in the

AVIS case), by means of the conver-sion of a dependent contract into anautonomous one (outsourcing), pro-viding resources to continue the con-tributions for pensions.

In many cases, however, the ap-proach is still to facilitate, throughthe use of special integrative funds,the exit from dependent employ-ment of older workers. In the bank-ing sector, for example, the integra-tive pension fund may be used tosupport workers involved in restruc-turing processes through training andincome-support programmes as wellas to ease exit from dependent em-ployment through specific income-support measures and the paymentof additional contributions needed tomeet retirement requirements.

Training/manpower develop-ments

At the company level, it is hard tomeasure the commitment to trainingand learning activities aimed at olderworkers because Italy lacks a struc-tured lifelong occupational trainingsystem (ISFOL, 1998) and becausedata on public or private companies’initiatives are scarce. The data2 thatare available show that workers in-volved in lifelong training represent1.5% of the labour force and that in1997 47.6% of private-sector work-ers who had attended any kind oftraining activity promoted by theircompany were aged between 35 and49, while the 50–64 bracket repre-sented only 12.3% as against 39.6%of workers up to 34 years old. Thedata indicate a slight increase in pro-vision of training to older workers aswell as its selective nature. Olderworkers involved in training activi-ties are usually more educated(47.5% with an upper-secondarycertificate as against 3% of workerswith only compulsory education) andhave better prospects of promotion.

2 ISFOL on Eurostat Labour Force Surveyand data.

54 No. 33 · Winter 1999

Trends


Employment risks, re-employ-ment chances

Recent flow data show that olderworkers are more likely to lose theirjobs in recent years and have lowerprospects of finding another job. Ofthose in the 50–65 age bracket whowere employed in April 1997, 13%were out of employment a year later,compared to 6.3% of the 15–29 agebracket and 2.6% of the 30–49 agebracket. In addition, only 27% of theunemployed in the 50–65 age brack-et in April 1997 were employed oneyear later (20.4% women and 29%men), compared to 30.2% of the 30–49 age bracket and 23% of those un-der 30 years of age.

Availability for work is commonamong the retired population. Animportant motivation for working isthe desire to maintain social net-works and relations.3 In 1998, 5.4%of retired people between 50 and 70years of age were available for work(5.3% men and 5.5% women).Workers older than retirement ageare largely self-employed or are em-ployed in the informal or black econ-omy, for there are legal disincentivesfor adding up pensions and incomefrom dependent employment. In1998, 78% of employed workersover 70 years of age were self-employed, as were 39% of the em-ployed in the 50–69 age bracket. Ofthose aged over 70 and employed,26% were in the agriculture sector,while 58% were in the service sec-tor. Older dependent workers weremainly employed in services (65% ofworkers over 50 in 1998), while thelarger share of the over-50s wereblue-collar workers (45.4%).

Recent surveys show that olderpeople, especially the retired in the50–70 age bracket, are often em-ployed in the black economy (men)or render non-remunerated carework for their families (women).

The percentage of those in workor available for work increases witheducational level and income. In

addition, higher participation in thelabour market is found more amongolder people living in the more eco-nomically developed regions ofnorthern Italy than among those inthe south, and in larger cities, whereemployment opportunities are bet-ter.

Older people are also active in theprovision of social activities throughvoluntary work: in 1994, 3.2% ofthe population aged over 65 was in-volved in voluntary activities (4.2%in the 65–74 age bracket and 4.5%for males); this percentage increasesto 5.1% when the entire retired pop-ulation is considered (including theunder-65s) and to 8.9% for peoplewith upper-secondary and universityeducation. Participation in voluntarysocial activities is much higher forhighly educated older people, an as-pect favouring the development oftraining provisions for older people.

Earning situation and pensionexpectation

Recent research based on surveydata (Brugiavini & Fornero, 1999; DiBiase & Gandiglio, 1998) showedthat about 80% of pensioners’ in-come comes from public pensionsbenefits (either old-age pensions,early retirement or survivor bene-

fits), income maintenance provisionsor disability benefits. The remainingshare is either investment income orearnings.

As shown in Table 3, the averagegross income4 for people living onpension provisions is about EUR675. Seniority pensions and early re-tirement schemes provide a moregenerous average income than old-age pensions do (EUR 1,096 andEUR 1,055, respectively), and inboth cases desegregated data showthat the younger the worker, themore convenient the early exit. Bycontrast, the average old-age pensionincreases as the worker gets older.

Both seniority pensions and earlyretirement provisions have a greaterconcentration of recipients in thecentral income brackets: 59.6% of

Table 3: Percentage distribution of pension schemes in force on/up to1.1.1998 by pension amount and average gross monthly income(Employee Pension Fund)*Amount Seniority Old-age Early Total Invalidity(in Euros) pensions pensions retirement (retirement pensions

pensions)

Under 500 4.2 67.2 2.9 48.5 78.8

500–750 13.9 18.7 17.3 17.5 14.7

750–1,000 35.0 8.4 33.3 16.2 5.3

1,000–1,250 24.6 2.8 25.8 9.3 1.0

1,250–1,500 10.5 1.2 11.6 4.1 0.2

Over 1,500 11.8 1.7 9.1 4.5 0.1

Total 100.0 100.0 100.0 100.0 100.0

Average grossmonthlypension 1,096 502 1,055 674 439

* We only took into consideration the Employee Pension Fund; employees represent62.8% of the labour force.

Source: INPS (1999).

3 A survey carried out for the Ministry of theInterior in 1994, based on a sample of 796individuals over 55 years of age, showedthat 42% of those in the 55–71 age bracketwere still working, of which a quarter wereworking for social motivations. Amongthose not working, about half were avail-able for work (Ministero dell’Interno,1994). Another survey based on a nationalsample of the population over 54 years ofage showed similar results, with 46% avail-able for employment in socially useful workin environmental protection and personalcare services (SPI-CGIL & CER, 1997).

4 Calculated as the ratio of the total amountof expenditure to the number of pensionsgranted.

No. 33 · Winter 1999 55

Trends

the former and 59.1% of the latterare in the EUR 750–1,250 bracket,whilst 62.7% of old-age pensions areunder EUR 500.

The old-age pension replacementrates5 for a dependent worker with along contributory history (40 years)and earning the median wage of hiscohort are at present around 80%(Table 4). Once the 1995 reform isphased in, this ratio will drop slightlyto about 75%.

The Italian pension system differsconsiderably as regards the provi-sions for private and public employ-ees and the self-employed, even ifthe 1995 and 1997 reforms havemapped out a convergence path forthe three different schemes whichaims for gradual harmonisation. Sen-iority pension eligibility criteria andthe pension determination formulafor public employees are more fa-vourable than the system for privateworkers. As for the self-employed,pension entitlements are substantial-ly higher than contributions, espe-cially for some categories; on aver-age, replacement rates are estimatedin the 46–59% range (Censis, 1999).

Older women usually face worseeconomic and social conditions thanmen. On average, they have lowerpension incomes due to interruptedcareers and/or living on the husband’sincome/pension. In 1997, 70% of

pensions paid to men were senioritypensions, while 70% of pensions paidto women were old-age pensions (DiBiase & Gandiglio, 1998). Recent sur-veys (SPI-CGIL, 1997) show that39% of older women live alone, andthis percentage increases to up to49% for women over 75 years of age.More than one third of older womenwho live alone (40% among thoseover 74 years) live only on reversibil-ity pensions, which are usually toolow to guarantee a sufficient income.The increasing share of workingwomen in younger generations im-plies an improvement in the incomeconditions of older women in the fu-ture, but a worsening in the provisionof assistance coming from relativesdue to the reduction in birth rates andincreasing participation rates amongwomen.

Private pension funds have playeda negligible role in the Italian pen-sion system and economy as a wholeup to now. After a failed attempt in1992 to encourage the creation of aprivate pension system, the 1995 re-form took up this issue and 1999 leg-islation provides for a change; finan-cial flows are now directed towardsseverance pay funds (Tfr) (Brugiavini& Fornero, 1999). Expected financialflows from pension funds are esti-mated at EUR 2.6 billion in the five-year period 1996–2001, involving

six million employees (Censis, 1999).The recent legislative proposal to beapproved by the end of August 1999provides for allocating Tfr flows inshares of pension funds instituted byworkers. Participation in pensionfunds is voluntary. The lack of sup-port given to the development of anintegrative private pension system isparticularly problematic given the in-creasing share of workers with inter-rupted work histories or freelance orcollaboration contracts who cannotrely only on the low public pensionincome from the new contributorysystem.

Access to training and lifelonglearning

Adult education and lifelong learn-ing have been little developed in Ita-ly. Only recently, with the support ofthe ESF and the attention given tothese issues by the 1993 IncomeAgreement and the 1996 Employ-ment Agreement, some initiativeshave been implemented.

The most considerable financialsupport for lifelong training andmanpower development at the com-pany level comes from the institutionof a training fund under Law No.236/93 and from the European So-cial Fund (Objective 4), both ofwhich support experimentation inthis field. In particular, ESF projectshave been carried out through the in-tegration of local institutions andfirms.

On 21 July 1999, the Italian gov-ernment approved the IntegratedLong-term Plan on training, educa-tion and research guidelines (MasterPlan). As far as lifelong training isconcerned, it aims to quadruple thecurrent number of individuals in-volved in lifelong training activitiesin a few years’ time.

In recent years there has also beena diffusion of different activitiesaimed at the aged (Tramma, 1996),

5 The replacement rate measures how con-venient it is for the worker to exit the labourmarket: it is usually defined as the ratio ofthe last earned income to pension provi-sions.

Table 4: Replacement rates pre and post 1995 reformPension income in percentage

of gross average wage*

Pre-reform rules 50 75 100 150

Type of pension

Old-age pensions** 78.4 78.4 78.4 78.4Seniority pensions*** 68.6 68.6 68.6 68.6

Number of contibutory years

Post-reform rules 25 30 35 40

Retirement age

57 years 38.9 46.7 54.5 62.360 years 42.6 51.1 59.6 68.262 years 45.5 54.6 63.7 72.865 years 50.6 60.7 70.9 81.0

* Estimated for workers in manufacturing.** 40 contributory years hypothesis.

*** 35 contributory years hypothesis.

Source: Di Biase & Gandiglio (1998).

56 No. 33 · Winter 1999

Trends

especially in the field of “older-gen-eration universities”, which num-bered more than 300 in 1997 (Carac-ciolo & Frey, 1997). A 1993 survey(Gammarota, 1994 and 1996)showed that most users are women(70%) with relatively high educa-tional levels: 12% have a universitydegree (compared to only 3.8% ofthe population aged over 50), while37% have an upper-secondary cer-tificate (compared to 8.7% of thepopulation). The average age is 58–60 years, and the main motivationsfor attending courses are the need toovercome the social exclusion linkedto ageing, the need to improve men-tal and physical autonomy, the needto be involved in new cultural andleisure activities and the need to im-prove one’s knowledge.

The main problems with these ac-tivities relate to the low investmentin new methodologies and compe-tencies specifically targeted at theaged, for most of the teaching and or-ganisation are carried out by volun-teers. Some interesting experimentsare, however, being carried out in re-cent years, with the support of theESF, with a focus on widespread dif-fusion throughout the country in or-der to favour: participation and theapplication of the principle of inter-generational solidarity through theprovision of training and educationalservices; the development of ade-quate training methodologies aimedat the less educated among the aged;and recognition of the experience ac-cumulated by the aged through theirinvolvement in social activities.

There is an increasing need to co-ordinate the various activities cur-rently operating in Italy and to de-velop specific strategies for the aged.According to experts, the develop-ment of long-distance learning repre-sents an important opportunity forolder people, and specific attentionshould be given to the use of televi-sion as a vehicle for training. A fewexperiments in this field are beingcarried out by Italy’s public televi-sion company, which reaches a largeshare of the aged population in Italy6

(Caracciolo & Frey, 1997).


Public pensions have been, and stillare, largely used in Italy for generalwelfare provisions, given the lowlevel of other income-support provi-sions. Early retirement measures aremuch more convenient than unem-ployment benefits, both for workersand firms: because they are muchmore generous,7 they are more easi-ly accepted by workers and unionsand ease the substitution of older,more costly workers with younger,more flexible workers. They thusease the restructuring process of theindustrial sector in Italy, but theyare very expensive for public finan-ces, create equity problems in termsof differences in treatment of thoseout of work, and, since in most casesthere are disincentives to adding anyincome from employment, reducethe intensity of jobsearch and jobmobility while increasing the supplyof labour in the black economy.

The partial reforms of the pensionsystem in the 1990s did not removeearly retirement provisions, an issuetoo delicate and difficult to tackle bythe unstable political governmentalliances of these years without amore comprehensive reform of thewelfare system. A government com-mission is currently working on thereform of social shock absorbers.The government proposal should becompleted by the end of 1999, afterconsultation with the social partnersand the parliament. The aim is to de-sign a system that adequately sup-ports the unemployed without, how-ever, reducing the incentive to bothsearch actively for a new job and ac-cept existing employment opportu-nities. The system is to be based onthree instruments: a temporary un-employment benefit to insureagainst the risk of losing a job, asubsidy in case of reductions inworking hours and an assistancebenefit for low-income groups.8 Ear-ly retirement schemes should beabolished by the year 2000, and sen-iority pensions should be reduced byat least 40%, while part-time workshould be strongly supported for

older workers. Main problems relateto the amount of public resourcesnecessary to finance assistance bene-fits and the trade unions’ oppositionto the reduction of seniority pen-sions.

Conclusion: policyoptionsIt is only recently that the concept of“active ageing” is emerging amongsocial actors and policy-makers inItaly because of the large and in-creasing share of relatively youngpersons retiring from working life,together with increasing life expect-ancy. The approach adopted is, how-ever, more concerned with improv-ing the social integration of olderpeople than with their “employabili-ty” through specific actions to sup-port labour market participation.

Unions representing retired work-ers within the major confederationsare the only ones registering increas-ing memberships, which compen-sates for declining unionisation ratesamong employed workers.9 This hasincreased the attention given byunions to the needs of retired work-ers through defending acquiredrights in the pension reform processand implementing measures to sup-port the activation of older workersin voluntary and socially useful

6 A recent survey (Zuliani, 1994) showed thatmore than 97% of people aged 45 or overwatch television, while books are read byonly 35% of people aged between 45 and54; the latter percentage declines to 16%with increasing age.

7 Ordinary unemployment benefit providesonly 30% of the last wage for no longerthan six months, while mobility benefits arepaid for one year (two years for older work-ers) and amount to 80% of the last wage,with a ceiling equivalent to EUR 750. Dur-ing the 1980s, early retirement measurescontributed to limiting the increase of ex-plicit unemployment.

8 Nationwide experiments are currently un-der way on a minimum income scheme anda fund for individuals who cannot providefor themselves, which should initially re-duce the improper use of other instrumentsand then substitute them.

9 Between 1980 and 1996, the share of activeworkers declined by 25.8% among theunions’ base to 51%, while the share of re-tired workers increased from 18% to 48%(Cesos, 1998).

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work. Unions also promote self-helpassociations, assistance centres andconsulting services in which experi-enced retired workers provide pro-fessional assistance and training toyounger workers, newly establishedenterprises and social enterprises.

The Labour Ministry and the Min-istry of Social Affairs are addressingspecific measures to older people,with special emphasis on the need toimprove the quality of the social andhuman relations and networks ofolder people so as to reduce their iso-lation and activate their resources forsociety at large, to develop integrat-ed services for persons and families,to implement permanent trainingand to foster a flexible relationshipbetween working time and other lifetimes (Ministry of Social Affairs,1999). The Ministry of Social Affairshas proposed legislation to supportthe social activity of older workersthrough the recognition of voluntaryand civil work by local authorities,which could, in exchange, offer re-duced rates for recreational and cul-tural services for older people. Thegovernment is also considering theintroduction of special fiscal treat-ment for retired older people in-volved in voluntary activities. At thelocal level, special attention is givento the need to integrate social andhealth services, to promote the sup-ply of cultural, recreational and lei-sure services specifically aimed atolder people, and to encourage so-cially useful activities employing old-er people.

In the near future, the increasingageing of the Italian population andthe lower retirement income due tothe pension reform will demandgreater attention to the developmentof specific schemes to support late re-tirement and private pensionschemes. Such policies should con-sider not only the supply side (withcontinuous training or measuresaimed at improving working condi-tions, etc.), but also the demand side(with attention to firms’ needs andspecific consultancy services and in-centives) in order to increase the“employability” of older workersand change existing attitudes.

Manuela Samek Lodovici

Selected bibliographyAprile, R., M. Palombi & C. Gargiulli (1997):Le previsioni ISTAT della popolazione ital-iana. Mimeo. Rome.Blondal, S. & S. Scarpetta (1999): “Early Re-tirement in OECD Countries: The Role of So-cial Security Systems.” In: OECD EconomicStudies, No. 29.Brugiavini, A. & E. Fornero (1999): “A Pen-sion System in Transition: The Case of Italy.”In: Quaderni del dipartimento di scienze eco-nomiche e finanziarie “G. Prato”, No. 38.Università degli studi di Torino, Facoltà dieconomia.Caracciolo, L. & L. Frey (1997): “Formazionee benessere degli anziani in Italia.” In: Quad-erni di economia del lavoro, No. 60.Censis (1999): Rapporto sulle pensioni. Milan.Cesos (1998): Le relazioni sindacali in Italia,1996–97. Rome: Edizioni Lavoro.Contini, B. & F. Rapiti (1994): “Young in, oldout: nuovi pattern di mobilità dell’economiaitaliana.” Lavoro e Relazioni Industriali, No.3.Di Biase, R. & A. Gandiglio (1998): “Prestazi-oni sociali per i lavoratori in uscita anticipatadal mercato del lavoro nel settore privato. Ita-

lia e confronti internazionali.” In: L’AssistenzaSociale, Nos. 3–4.Federazione Nazionale Pensionali Cisl (1997):Anziani ’97. Tra emarginazione e opportu-nità. Rome: Edizioni Lavoro.Gammarota, G. (1996): “Le università dellaterza età: Un’indagine Auser.” In: V. Gallina& M. Lichtner (eds.): L’educazione in età adul-ta. Primo Rapporto nazionale. Centro Euro-peo dell’Educazione. Milan: Angeli.ISFOL (1998): “I percorsi della formazionecontinua.” In: Rapporto ISFOL 1998. Milan:Angeli.ISFOL (1998): “I processi formativi gli aspettistruttutrali.” In: Rapporto ISFOL 1998. Milan:Angeli.ISFOL (1998): Il lavoro in Italia: profili, per-corsi, politiche. Milan: Angeli.ISTAT (1997): Anziani in Italia. Bologna: IlMulino.Ministero del Lavoro (1999): 1999 NationalAction Plan for Employment. Rome.Ministero dell’Interno, Direzione Generale deiServizi Civili (1994): La famiglia anziana: ter-za e quarta età a confronto. Ricerca condottadall’Istituto per gli Studi sui servizi Sociali.Rome: ISTISS.Ministero per la Solidarietà Sociale, On.le Liv-ia Turco (1999): “Terza età: tempo dell’agio.”Relazione alla Conferenza per l’Anno Interna-zionale delle persone anziane, Rome, 27–29May 1999 (mimeo).Olini, G. & L. Ricciardi (1994): I contratti disolidarietà- una guida alla normativa e allacontrattazione. Rome: Edizioni Lavoro.Quaderni CER (1999): La solidarietà intergen-erazionale nell’ambito familiare. Rome:Tipografia Città Nuova.Rostagno & Utili (1998): The Italian SocialProtection System: the Poverty of Welfare. In-ternational Monetary Fund, European IDepartment.Saporiti, A. & G. B. Sgritta (1997): La staffet-ta. Anziani e giovani: una ricerca sui rapportigenerazionali. Rome: Edizioni Lavoro.SPI-CGIL & CER (1997): Gli anziani in Italia.VI Rapporto. Consumi pubblici e privati e con-dizioni di vita. Rome: Ediesse.Tramma, S. (1996): “Le università della terzaetà.” In: V. Gallina & M. Lichtner (eds.): L’edu-cazione in età adulta. Primo Rapporto nazio-nale, Centro Europeo dell’Educazione. Milan:Angeli.

58 No. 33 · Winter 1999

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Luxembourg

SummaryThe first section of this report pro-vides an overview of the demo-graphic situation on the Luxembourglabour market. The forecasts for2010 predict an activity rate of 63%for 50–54 year-olds, 35% for 55–59year-olds and 10% for 60–64 year-olds.

The second section describes thelegal and institutional framework forLuxembourg measures concerninglabour market exit. Of the benefici-aries of the various types of pension,28.8% are 55 to 64 years old. Thethird section gives the perspectivefrom the enterprise side. In 1998, 59firms made use of measures on earlyretirement.

The reintegration of older workersinto the labour market is described inthe final section. During 1997, about150 persons made use of supportmeasures for re-entering the labourmarket.

Table 1: Total resident population by age group and economic activity, 1 March 1991Age groups Total Employed Unemployed Retired Housekeeping Student Other

15–19 years 21,443 5,555 400 205 15,175 108

20–24 years 28,059 19,881 658 1,511 5,712 297

25–29 years 33,296 26,521 587 4,698 1,128 362

30–34 years 33,121 25,099 496 6,936 177 413

35–39 years 30,365 22,914 393 6,554 30 474

40–44 years 28,149 20,896 313 6,298 3 639

45–49 years 23,653 16,430 234 6,041 948

50–54 years 22,486 13,298 129 2,064 6,806 189

55–59 years 21,207 7,811 67 5,836 7,361 132

60–64 years 21,391 2,987 19 10,369 7,869 147

65 years andolder 50,298 638 1 27,089 22,084 486

Unknown 4,748 1,898 20 435 858 1,257 280

All age groups 318,216 163,928 3,317 45,793 77,221 23,482 4,475

Note: Age group 0–14 years: N = 66,418; total population, including 0–14 year-olds: N = 384,634

Source: STATEC (1999, p. B12).

IntroductionThe age structure of the residentpopulation of Luxembourg aged 15years and over (Table 1) shows that20.5% belong to the 50–64 agegroup. Of the employed population,14.7% are older workers. Of thepopulation aged 50 to 64, 37% areemployed, while 37.6% are mem-bers of the labour force (either em-ployed or registered as unemployed).

Luxembourg’s statistics office hascalculated four different populationforecasts for the year 2010 based onthree variables. All four forecasts arebased on a fertility rate of 1.72 in1994 and 1.75 in 2010, male mortali-ty of 72.4 years in 1991 and 75.2years in 2010, and female mortalityof 79.1 years in 1991 and 81.0 yearsin 2010. The migration rates used forthe first forecast are 4,000 immi-grants in the year 1995 and zero im-migrants in the year 2010; the sec-ond model is based on 4,000 in 1995and 1,000 in 2010; the third calcula-tion uses 4,000 in 1995 and 2,500 in2010; and the fourth forecast is

based on 4,000 immigrants annuallythroughout the whole period.

In 2010, Luxembourg can expectbetween 10,000 and 30,000 moreresidents active on the labour mar-ket.

In 1995, the active population in-cluded 14.6% older people in the50–64 age category. Based on Fore-cast 1, in 2010 this age group willhave increased to 19% of the activeresident population; the figure comesto 18.6% in Forecast 2, 18% in Fore-cast 3 and 17.5% in Forecast 4, withthe latter taking the highest immigra-tion to Luxembourg as its hypothe-sis.

Changes in the policyframework: recent trendsExit from the labour market on thepart of older workers is regulated bytwo main laws:1. the law on old-age, invalidity and

survivor pensions of July 1987(Loi du 27 juillet 1987 concernantl’assurance pension en cas de viel-

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lesse, d’invalidité et de survie);and

2. the Early Retirement Act of De-cember 1990 (Loi du 24 décembre1990 sur la préretraite). This sec-ond measure is described below(“Developments at the companylevel”), because it is addressed toenterprises.

The first legislation covers:– old-age pensions starting at age

65;– the “early old-age pension”, avail-

able for 57 year-old employeesand ending at 65 years; and

– the invalidity pension, available inthe event of long-term illness, dis-ability or persons being unable tocarry out an occupation.

Table 2 shows the breakdown of thenumber of persons benefiting fromthe different measures as reported bythe General Inspectorate of SocialSecurity (IGSS). In December 1997,72,157 persons were receiving inva-lidity, old-age or early old-age bene-fits.

Of special interest are the age cat-egories 55–59 and 60–64 years (Ta-ble 3). In December 1997, 20,785 re-cipients in this age group were regis-tered for the different pension. Theyrepresent 28.8% of the individualsdrawing invalidity and early old-agepensions.

The average starting age for pen-sions fell from 57 years in 1990 to 55years in 1996.

On 12 February 1999, the adop-tion of the 1998 EU EmploymentGuidelines in Luxembourg (seeMémorial, Journal Officiel du Grand-Duché de Luxembourg, 1999, p. 65)simplified the schemes and added anew measure, which allows employ-ees aged 50 years or older to switchfrom full-time to part-time employ-ment.

The simplification allows workersaged 57 years or older to reduce theirworking time by between 40% and60% for three years. If a registeredunemployed person is recruited forthe vacant position, the EmploymentFund pays the social security contri-butions for up to one third of the

Table 2: Recipients of various pensions in December of each year, 1980–1997Year Invalidity pension Old-age pension and Total individual

early old-age pension pensions

Men Women Men Women Men Women

1980 8,754 3,001 20,800 10,740 29,554 13,7411985 10,138 3,584 20,788 10,753 30,926 14,3371990 12,010 4,470 25,766 11,784 37,776 16,2541991 12,074 4,634 27,369 12,132 39,443 16,7661992 12,411 5,036 29,064 12,504 41,475 17,5401993 12,926 5,332 30,972 12,863 43,898 18,1951994 13,503 5,652 32,773 13,112 46,276 19,7641995 13,901 6,088 34,253 13,430 48,154 19,5181996 14,471 6,470 35,514 13,758 49,985 20,2281997 14,737 6,734 36,732 13,954 51,469 20,688

Source: IGSS (1998, p. 185).

Table 4: Mean age of recipient on entering retirement by type of pen-sions, 1985–1996

Invalidity Old-age and early Invalidity, old-ageold-age and early old-age

Year Men Women Year Men Women Year Men Women

1985 52.1 53.4 1985 62.6 64.2 1985 55.5 56.71990 52.6 52.9 1990 61.9 64.4 1990 57.1 57.21993 51.5 52 1993 60.4 63.5 1993 56.9 55.11994 50.8 51.4 1994 61.3 63.6 1994 56.1 54.81995 50.4 51.4 1995 61.5 63.8 1995 55.8 551996 50.2 51.4 1996 61.2 63.5 1996 55.7 55.2

Source: IGSS (1998, p. 198).

wage costs. The social contributionsare paid by the Employment Fund ifworkers aged 50 years or olderchange to part-time work and the va-cant part of the job is given to a regis-tered unemployed person. Bothmeasures have the aim of keepingthe older worker in the labour mar-ket, adapting working conditions toindividual needs and opening up newopportunities for the unemployed.

Developments at the levelof companiesThe 1990 Early Retirement Act de-scribes the measures for enterprises,which can be applied to employeesaged 57 or older (52 in the miningsector):– early retirement by “solidarity”,

which allows the enterprise to re-form the age structure of theworkforce by hiring young em-ployees;

Table 3: Types of pension by age group of the recipient in December1997

Invalidity Old-age and early old-age

Age groups Men Women Men Women

N % N % N % N %

55–59 years 4,462 30.28 1,962 29.14 1,335 3.63 84 0.6

60–64 years 5,170 35.08 2,328 34.57 4,995 13.6 449 3.22

Total 14,737 100 6,734 100 36,732 100 13,954 100

Mean age* 55.43 54.97 70.19 74

* Including persons under 55 and over 64 years of age.

Source: IGSS (1998, p. 192).

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– early retirement for shift workersand night workers;

– early retirement by adjustmentenables the employer to restruc-ture the workforce in his enter-prise while at the same time pro-tecting workers against unemploy-ment; and

– progressive early retirement al-lows employees to reduce theirworking time by between 40%and 60%.

On 31 December 1998, 59 enter-prises participated in the applicationof the different measures under theEarly Retirement Act (Table 5). Thisis one enterprise more than the pre-vious year.– 141 white-collar and 55 blue-col-

lar workers were involved in thesolidarity scheme.

– The shift-work and night-shift partof the law was applied to 55white-collar and 87 blue-collarworkers.

– 432 white-collar and 546 blue-col-lar workers participated in the ear-ly retirement by adjustmentscheme.

– 4 white-collar workers enteredearly retirement on the basis ofprogressive reduction of workingtime.

Perspectives of olderworkersMeasures for reintegrating olderworkers and long-term unemployedare based on the Law of July 1993.

For people aged 50 years or olderwho have been unemployed for atleast one month, the EmploymentFund takes over the social contribu-tions of the employee and the em-ployer for the new job. These contri-butions are paid for three years forworkers aged 40 years or older whohave been unemployed for 12 monthsat a minimum. And the social contri-butions are financed by the Employ-ment Fund for two years for peopleaged 30 years or older who have beenunemployed for 12 months.

Since 1993, about 350 personshave found a new job with the help

Table 6: Mean monthly pensions in December of each year (not includ-ing early old-age pensions) (in LFR)

Invalidity pension Old-age

Year Men Women Men Women

1994 43,119 29,059 49,477 23,1801995 45,907 31,162 51,744 24,7561996 46,274 31,660 51,231 25,0161997 49,231 33,651 53,280 26,660

Source: IGSS (1998, p. 203).

of this law. In 1997, around 150 per-sons participated in the scheme. Atthe end of December 1997,– 274 persons aged 30–40 were reg-

istered as unemployed for longerthan 12 months;

– 364 persons aged 41–50 were un-employed for at least one year;and

– 480 persons aged 50 or older wereregistered for one month.

These 1,118 individuals represent17% of the registered unemployed inLuxembourg (cf. Ministère du Tra-vail et de l’Emploi, 1999, p. 20).

Incomes from pensions

The invalidity benefits for male re-cipients increased by 14.1% between1994 and 1997; old-age pensions formen increased by 7.6% during thesame period. Women received

Table 5: Use of the early retirement regulations, 1990–1998Solidarity Shift work Adjustment Progressive

31 December 1990: number of enterprises = 63

White-collar 14 53 732 n.a. Blue-collar 31 146 1447 n.a.
















White-collar 141 55 432 4 Blue-collar 55 87 546 0

Sources: Ministère du Travail et de l’Emploi (1998, 1999).

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15.8% more invalidity benefits in1997 then in 1994. Their incomefrom old-age pensions was 15%higher in 1997 than in 1994.

In Luxembourg, older employeeshave the tendency to leave the la-bour market by using the possibilitiesof the Early Retirement Act or theprogressive pensions scheme (Pland’action national pour l’emploi,1999).

Uwe Warner

Selected bibliographyChambre des Employés Privés (1998):L’assurance pension du secteur privé. Ana-lyse, réflexions, propositions. Luxembourg.

IGSS (ed.) (1998): Rapport général sur la sécu-rité sociale 1997. Luxembourg.Jacobzone, S. (1999): Ageing and Care forFrail Older Persons: An Overview of Interna-tional Perspectives. Labour Market and SocialPolicy. Occasional paper, No. 38. Paris:OECD.Langers, J. (1997): “Prévisions de popula-tion.” In: CEPS/INSTEAD (eds.) (1997): Re-cueil d’études sociales 1996. PSELL Docu-ment, No. 100.Mémorial, Journal Officiel du Grand-Duchéde Luxembourg (1987): Loi du 27 juillet 1987concernant l’assurance pension en cas de vieil-lesse, d’invalidité et de survie. A-No. 60. Lux-embourg.Mémorial, Journal Officiel du Grand-Duchéde Luxembourg (1990): Loi du 24 décembre1990 sur la préretraite. A-No. 75. Luxem-bourg.Mémorial, Journal Officiel du Grand-Duchéde Luxembourg (1999): Plan d’action national

en faveur de l’emploi 1998. Loi du 12 février1999 concernant la mise en oeuvre du pland’action en faveur de l’emploi 1998. A-No. 13.Luxembourg.Ministère du Travail et de l’Emploi (1998):Rapport d’activité 1997. Luxembourg.Ministère du Travail et de l’Emploi (1999):Rapport d’activité 1998. 2 volumens. Luxem-bourg.OECD (Hg.) (1997): Ageing in OECD Coun-tries. A Critical Policy Challenge. Social Stud-ies, No. 20. Paris: OECD.Plan d’action national pour l’emploi. Großher-zogtum Luxembourg, National Report 1999.Luxembourg, May 1999.STATEC (ed.) (1999): Annuaire Statistique1998. Luxembourg.

Netherlands

IntroductionCompared to most other EU coun-tries, the Netherlands experienced avery strong decline in the participa-tion of older workers in the labourmarket during the 1970s and 1980s.Both high youth unemployment anddifficulties experienced by olderworkers in keeping up with rapidtechnological developments contri-buted to a culture in which early re-tirement became highly accepted andvery common. Employers and em-ployees alike made ample use of thepossibilities offered by early retire-ment, unemployment and disabilityschemes for an early exit from the la-bour market. However, this trendnow seems to be reversing.

Male workers were those with thehighest rates of labour market exit.In 1970, 81% of the men aged 55–65years were working. Since then this

percentage has declined consider-ably, reaching its lowest level in1994: only 38% of the men aged 55–64 had a job of at least 12 hours perweek that year. The labour marketparticipation rate of women was tra-ditionally low in the Netherlands,and the participation of older womenremained at a steady, low level dur-ing those decades.

Table 1 provides a detailed over-view of the labour market participa-tion of older people in 1997. It showsthat participation is still strongly de-creasing with age and that genderplays an important role in participa-tion rates.

Since 1994, the labour marketparticipation rate of men aged 55 orover has been increasing again. Theparticipation of women in this agegroup has also been increasing (CBS,1997, 1998; SZW, 1998).

It is expected that overall labourmarket participation will increase, inspite of the population ageing effects.Higher participation rates forwomen, combined with rising educa-tion levels, will compensate for theseeffects. The education level is impor-tant here, since low-skilled olderworkers are more likely to leave thelabour market by means of the un-employment and disability benefitschemes, the two main exit routes. Inaddition, they do so at a youngerage. The fact that women have to alarge extent caught up with men inthe labour market will in future raisethe labour market participation ofthe older age groups. Policy changes,in particular in the early retirementpension schemes, may provide fur-ther impulses for this trend.

Three problems in particular haveprompted the development of poli-cies with regard to age and work:

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– the upward pressure on benefitand pension payments and contri-butions;

– labour shortages caused by theoutflow of workers into social se-curity schemes;

– an ageing workforce: outdatedqualifications and skills as well asdecreasing flexibility and produc-tivity are problems that can be en-visaged in this respect.

In the Netherlands, the social part-ners play a prominent role in the de-velopment and implementation ofthese policies. To a large degree,these are developed in a tripartiteconsultation process at the centrallevel and further elaborated in secto-ral collective agreements.

Changes in the policyframework: recent trendsThe current Dutch government coali-tion has promised that the labourmarket participation of older peoplewill become a higher priority inDutch labour market policy. It has

called for a change of mentality inthis respect both from employers(automatic lay-off of older workers)and from employees (gradual phas-ing out of early retirement schemesand a longer working life).

The government prefers an indi-rect approach (creating frameworkconditions), in which action is left tothe social partners, individual com-panies and persons. So far, this ap-proach has been quite successful inthe area of old-age (supplementary)pensions. Progress in the field of hu-man resource management, includ-ing training, has, however, been verylimited (see the section on develop-ments at the company and sectorallevels below).

Statutory retirement age

The government considered increas-ing the age at which the public old-age pension can be claimed (current-ly 65) in combination with a higherlevel of benefits. This proposal was,however, rejected by the Social andEconomic Council (SER)1. The cabi-

net then announced that it would ex-amine the possibilities for later vol-untary take-up (Sociale Nota, 1998).


Early retirementThe Dutch government encouragesthe social partners to substitute flexi-ble old-age pensions for early retire-ment schemes in collective agree-ments (see below). Withdrawing fis-cal incentives for early retirementschemes is under consideration.

UnemploymentOlder unemployed (57.5 years andolder) are exempted from the obliga-tion to actively look for work. Thegovernment would like to changethis, but it has had to postpone itsplans in view of the heavy resistanceencountered. A phased introductionof an “application duty” (duty tolook for work) will be consideredonce other measures have substan-tially increased the chances of olderunemployed in finding a job.

In the meantime, since 1 May1999, older unemployed in receipt ofunemployment benefits have againbeen required to register at the publicemployment service. They also havethe obligation to accept a suitable jobif such an offer is made to them.

Older unemployed who accept ajob at lower wages are guaranteedtheir level of benefits should they be-come unemployed again. Since 1 June1999, the unemployed have beengranted more time to find such a job(one year instead of six months), andthe guarantee applies for a longer pe-riod (36 instead of 30 months).

Further initiatives under consider-ation are the introduction of financialdisincentives (differentiation of con-tributions according to “take-up”) inthe unemployment benefit scheme(WW) for employers who are tooquick to lay off employees and con-trol mechanisms on dismissals.

Table 1: Labour market participation, 1997 (in %)Participation ratea Employment rateb Unemployment ratec

Men and women35–49 years 77 72 650–64 years 44 42 5of which: 50–54 years 66 62 6 55–59 years 44 42 4 60–64 years 12 11 3

Men35–49 years 94 90 450–64 years 61 59 3of which: 50–54 years 87 84 4 55–59 years 62 60 3 60–64 years 19 19 2

Women35–49 years 59 53 1150–64 years 27 25 8of which: 50–54 years 43 40 9 55–59 years 25 24 5 60–64 years 5 5 6

a Labour force as a percentage of the total population in that age group.b Working population as a percentage of the total population in that age group.c Unemployed labour force as a percentage of the total labour force in that age group.

Source: SCP (1999) (calculations by the Social and Cultural Planning Bureau [SCP]based on data from the 1997 Statistics Netherlands [CBS] Labour Force Survey).

1 The SER is a prestigious and influential con-sultative body of employers’, employees’and “Crown” representatives. It has pub-lished, amongst others, an extensive adviceon old-age provisions in 1997.

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Disability

A differentiation of contributionswas already introduced for disabilitybenefits (WAO). In addition, an ex-tensive prevention and reintegrationpolicy for recipients of disability ben-efits exists in the Netherlands. Morethan half of WAO recipients are agedbetween 50 and 64. There are veryfew specific provisions for older ben-eficiaries. In fact, older disabilitybenefit recipients are less likely toparticipate in reintegration activities,either because they have been classi-fied as “unplaceable” or becausethey were exempted from the obliga-tion to look for work (CTSV, 1999).

Maintaining older workers atwork

On 9 July 1999, the cabinet agreedto a proposal for a (new) law on agediscrimination at work. The new lawwill prohibit age discrimination in re-cruitment and selection, promotion,work-related training and integra-tion into work. Employers can onlyclaim exemption if the company oremployment is endangered.

The government is consideringmaking working life easier towardsits conclusion as one means to keepolder workers at work, for examplethrough shorter working weeks or achange of function or job. This wouldrequire that barriers in career pen-sion and public social securityschemes be removed, for example byintroducing so-called “incision” pro-visions (level of pension to be calcu-lated proportionally over last wagebefore and after the “incision” in aworker’s career). This applies to so-called “end-wage” systems, whichare still used by many of the careerpension schemes. As of 1 June 1999,older workers (55+) whose wagesfall – for instance, because they ac-cept a lower function, reduce theirnumber of working hours or are as-signed different tasks – retain entitle-ments to unemployment and disabili-ty benefits based on their formerwage level.

With regard to training, since 1 Jan-uary 1998, companies can claim a tax

deduction for the training of employ-ees. Additional provisions also existfor SMEs and for older (>40) employ-ees under this regulation. The Nation-al “Lifelong Learning” Programme(Nationaal programma “Een leven-lang leren”) was also launched in1998, which aims to increase the em-ployability of employees. This pro-gramme, however, does not specifi-cally address older workers.

Developments at the levelof companies and sectorsIn the Netherlands, older workershave been a concern for the socialpartners for several years already. Inthe Labour Foundation (Stichtingvan de Arbeid), the consultationbody for the social partners and theplace where framework collectiveagreements are reached, the issue of“work and older people” has beenon the agenda since 1993. Centralaims were increasing the labour mar-ket participation of older workersand better use by companies of thevaluable knowledge and skills ac-quired by older workers throughmany years of work. Continuingtraining and work adapted to agewere also considered to be part of a“policy for older workers”, but con-crete actions are relatively slow todevelop. An exception to this is anumber of agreements reached atcompany level in larger companies.

In 1997, the social partners con-cluded an agreement in the LabourFoundation on “policies for olderpeople” (ouderenbeleid). The agree-ment stipulated that the collectivebargaining partners at sector andcompany level would (re-)examinethe early retirement schemes in or-der to see how they could stimulatelabour market participation of those55 or older. The agreement alsocalled for “age-conscious” personnel(HR) management and recommend-ed activities with regard, for exam-ple, to recruitment and selection, ac-cessibility of training, career guid-ance, adaptation of tasks and/orworking hours, and suitable workingconditions.

A policy for older workers is alsoone of the items on “Agenda 2002”,the 1997 framework agreement be-tween the social partners that set theagenda for negotiations in the com-ing years.


As of 1 January 1994, the so-called“older guideline”, which made itpossible to lay off older workers firstin the case of collective dismissals,was withdrawn. According to the lat-est report from the Labour Inspector-ate, the number of reorganisations ormergers entailing mass reductions inthe number of employees has de-creased considerably. Only in 3% ofthe cases (as opposed to 20% in1996) were older workers the “firstto go” (Arbeidsinspectie, 1999).

Early retirement

On 9 December 1997, the cabinetconcluded a covenant with the socialpartners on (supplementary, i.e. ca-reer) pensions. The aims of the cov-enant were to modernise the pensionschemes and to come to a reductionof employer contributions and thuslabour costs. The government hasagreed not to take legal measures un-til 2001, but in the coming years itwill monitor the progress made bythe social partners in this area. Thecovenant builds on the agreementthe social partners reached earlierthat year in the Labour Foundation(the “pension agreement”).

Since then, early retirementschemes are increasingly being re-placed with pre-pension schemes. Ina pre-pension scheme, the costs areno longer paid by current contribu-tors, and they include incentives tocontinue working because everyyear worked will yield a higher pen-sion level.

According to 1998 data from theLabour Inspectorate, in 54 of the 129collective agreements analysed, pro-visions on retirement and pensionswere included. Usually, the provi-sions concern a shift in the age atwhich early retirement can be taken(e.g. from 60 to 62). Another com-

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mon provision is a reduction in theamount of the pension (on averagefrom 78% to approximately 71% ofthe gross salary). Workers who con-tinue working longer generally re-ceive a higher pension. Often, a sortof savings plan for an additional pen-sion is included for people retiringearlier. In 17 agreements, the earlyretirement scheme had actually beenreplaced by a pre-pension (i.e. flexi-ble pension) scheme. The collectiveagreements analysed cover some70% of the employees. Since provi-sions for changing early retirementare found more often in the largeragreements, these will affect some60% of the employees. In most othercollective agreements, stipulationsare included that concern a furtherstudy or discussion of these schemes(SZW-Arbeidsinspectie, Spring re-port 1998; SCP, 1999).

This year’s Spring report from theInspectorate found five collectiveagreements that included provisionsallowing workers to continue work-ing after the age of 65.

Human resource management

In 1997, the Labour Foundation pub-lished recommendations for an age-conscious human resource policy. Inits latest study of collective agree-ments, the Labour Inspectoratefound some improvements in this re-spect in comparison with the situa-tion in 1996, but it concluded that inpractice too little is being done. It ismainly in larger companies thatmeasures are being taken.

Some of the findings are (Ar-beidsinspectie, 1999):– Of the collective agreements, 19%

include career counselling provi-sions.

– In 7% of the collective agree-ments, provisions for career ad-justments were found.

– According to the business surveyalso carried out, in one third of thecompanies career interviews areheld with employees. In 11% ofthese companies, these interviewscease when workers reach the ageof 50.

– In 63% of the companies, irregu-lar working hours exist. In 10% ofthese companies, workers aged 55or over are not obliged to worksuch hours.

– Also in 63% of the companies,“strenuous” (physical or mental)work is carried out. In 24% ofthese companies, older workerscan ask for an adaptation of theirfunction if they feel this is neces-sary.

– The number of companies offeringtraining to their employees has in-creased from 53% to 66% since1996. Participation (still) decreas-es with age, but the participationof older workers per se has in-creased.

Perspectives of olderworkersThe policies outlined above aim toimprove the perspectives of olderworkers during their working life.This means that their chances of be-coming or remaining unemployedshould decrease, whereas their op-portunities to update their qualifica-tions and skills should increase. Onthe other hand, the income prospectsof older workers will probably de-cline.

Employment risks

Older people are currently over-rep-resented amongst recipients of un-employment benefits (WW). This ispartly due to the fact that they are ingeneral entitled to a longer period ofbenefits, because this period dependson the number of years worked. Theentry rate for the over-40s is similar

to that of younger people. The mainproblem, however, is that older peo-ple are less likely to leave the bene-fits scheme, that is, find work again.Table 2 illustrates how people’schances of leaving the unemploy-ment benefits scheme decrease withage. For unemployment assistance(ABW), the prospects for exiting areeven lower.

Access to training

According to a study carried out in1997 by Wim Groot and HenriëtteMaassen van de Brink, employeesaged 45 years or younger participat-ed twice as much in training coursesas workers aged between 45 and 60years of age. According to the re-searchers, this was the result of dif-ferential treatment by superiors andentailed a reduction in their relativeproductivity.

An earlier longitudinal panelstudy carried out by the Organisa-tion for Strategic Labour Market Re-search (OSA) came to similar conclu-sions. Participation in job-relatedtraining was considerably lower forthe 55-and-over age group (seeTable 3).

Income

The typical pension scheme in theNetherlands grants three-quarters ofprevious income (up to around twiceaverage earnings, at which pointcompensation rates drop to half ofnet earned incomes). Typically, part-time earnings could not be combinedwith a reduced pension payment.Exiting the labour force before thenormal retirement age does not re-duce old-age pension entitlements

Table 2: Chances of entering the unemployment benefits (WW) schemeand of returning to work for people in receipt of unemployment benefits(WW) by age group, 1996 (in %)

Entry Exit (work)

< 25 years 14.0 44.925–35 years 9.6 41.335–45 years 6.8 34.145–55 years 5.6 26.255–65 years 6.8 6.4

Source: SZW (1998).

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(SZW, 1997). This situation is chang-ing rapidly into a situation whereboth the retirement age and the levelof the (supplementary) old-age pen-sion increasingly depend on indi-vidual choices and arrangementsmade by workers.

Further policy develop-mentsFuture policy developments in theNetherlands are awaiting the advicethe government has requested of theSocial and Economic Council (SER).This advice will cover five areas(SZW, 1999):1. How to change the mentality of

employers and employees: whatmeasures are needed to changetheir attitudes towards a longer la-bour market participation of olderworkers?

2. Making it more attractive for olderpeople to continue working: whatcombination of measures is need-ed, including, for example, age-conscious human resource man-agement, flexible terms of em-

ployment, working conditions andavoiding negative wage costs andincome effects in the case of achange in task or activities?

3. Substituting pre-pension schemesfor early retirement schemes.

4. Discouraging dismissal of olderworkers.

5. Reintegration (flow out of unem-ployment) of older workers: usingsectoral labour market policies tothis end, specific measures for eth-nic minority members in this agegroup, introducing fiscal incen-tives, reviewing provisions in regu-lations that might discourage a re-turn to work (exemption for pen-sion contributions in the case of dis-ability, old-age contribution sys-tem for unemployed workers), andreintroduction of the obligation toactively look for work for unem-ployed aged 57.5 years or older.

The advice is expected to be pub-lished later this year.

Marjolein Peters

Selected bibliographyArbeidsinspectie (1999): Ouderenbeleid: Eenonderzoek naar maatregelen in ondernemin-gen en afspraken tussen sociale partners metbetrekking tot de arbeidsparticipatie vanoudere werknemers [Ageing policies: a studyon measures in companies and agreements be-tween social partners on the labour marketparticipation of older workers]. Den Haag.CBS – Centraal Bureau voor de Statistiek(1997): Enquête Beroepsbevolking 1997 [La-bour Force Survey 1997].CBS (1998): Werken en leren. Feiten en cijfersover de arbeidsmarkt en het onderwijs in Ned-erland [Working and learning. Facts and fig-ures on the labour market and on education inthe Netherlands]. Kluwer Bedrijfsinformatie.CTSV – College van toezicht sociale verzeker-ingen (1999): Augustusrapportage arbeidson-

geschiktheidsverzekeringen 1999. Een over-zicht van ontwikkelingen tot begin 1999 [Au-gust report on disability benefits 1999. Anoverview of developments until the beginningof 1999]. Zoetermeer.Maassen van den Brink, H. & W. Groot(1997): Bedrijfsgerelateerde scholing en ar-beidsmarktflexibiliteit van oudere werkne-mers [Enterprise-related training and labourmarket flexibility of older employees].OSA – Organisatie voor Strategisch Arbeids-marktonderzoek, A. Gelderblom, J. de Koning& P. van Winden (1998): Integratie van lerenen werken [Integrating learning and working].OSA-werkdocument W162, September 1998.SCP – Sociaal en Cultureel Planbureau (1998):Rapportage ouderen [Report on older per-sons]. Den Haag.Stichting van de Arbeid (1993): Werkend oud-er worden [Ageing while working]. Publica-tion No. 5/93. 26 July 1993. Den Haag.Stichting van de Arbeid (1997a): Convenantinzake de arbeidspensioenen. Overeenge-komen tussen het Kabinet en de Stichting vande Arbeid op 9 December 1997 [Convenanton old-age pensions for workers. Agreedbetween cabinet and the Labour Foundationon 9 December 1997]. Publication No. 12/97.Den Haag.Stichting van de Arbeid (1997b): Leeftijds-grenzen bij werving en selectie [Age limits inrecruitment and selection]. Publication No. 5/97, 7 May 1997. Den Haag.Stichting van de Arbeid (1998a): Een levenlang lerend werken [Lifelong learning whileworking]. Publication No. 3/98, 3 June 1998.Den Haag.Stichting van de Arbeid (1998b): Najaarsover-leg [Autumn consultations]. Publication No. 8/98, 3 December 1998. Den Haag.SZW – Ministerie van Sociale Zaken enWerkgelegenheid (1997a): Income benefitsfor early exit from the labour market in eightEuropean countries. A comparison. Dezember1997. Den Haag.SZW (1997b): Sociale Nota 1998 [Social Re-port 1998]. Den Haag.SZW (1998): Sociale Nota 1999 [Social Report1999]. Den Haag.SZW (1999): “De arbeidsparticipatie van ou-deren: analyse en vooruitberekening”. Ad-viesaanvraag aan SER, brief van 12 mei 1999,met bijlage [Request for advice to the Socialand Economic Council, letter of 12 May 1999with appendix: The labour market participa-tion of older people: analysis and forecasts].Den Haag.

Table 3: Number of job-relatedcourses by age, 1994–1996 (n =2,061)Age group Average number

of job-related courses

< 25 years 0.4425–34 years 0.7935–44 years 0.4645–54 years 0.58> 55 years 0.25

Total 0.63

Source: OSA (1998).

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Austria

Introduction

In times of full employment, in the1950s and 1960s, older workers wereoffered substantial incentives to re-main in the labour force. In the wakeof rising unemployment since themid-1970s and the rising supply ofyounger labour in the 1980s, by con-trast, the over-50s increasingly foundthemselves facing, similar to the situ-ation of younger workers, a high riskof losing their job irrespective of theirqualifications. The reasons for the de-terioration in the situation of olderworkers in terms of both the risk ofbecoming unemployed and the dura-tion of unemployment are both cycli-cal and structural in nature. Sectoral-structural employment change takesplace partly by way of the naturalshedding of older workers, but partlyby artificially intensifying this processas well. The end of a number of “oldindustries” also marked the end ofstable jobs for many older workerswith long tenure; at the same time, thesectorally and firm-specific qualifica-tions characteristic of such industriesdeclined in value.

Since the start of the 1980s, thetight labour market led to a risingnumber of entries into early retire-ment, with respect to the totalnumber of retirements, and an in-crease in the number of instrumentsproviding for the transition into earlyretirement – an example being the(since abolished) special support(Sonderunterstützung) – resulting ina marked reduction in the supply oflabour. In 1996, for example, thesupply of labour would have been4.6% higher in the absence of suchmeasures. “If this increase in supplyhad been directly reflected in a cor-responding increase in unemploy-ment, the administrative unemploy-ment rate (i.e. on national defini-tions) would have been 9.8% ratherthan 6.3%” (Lutz, 1997).

Table 1: Participation rates of selected age groups (in %)Men Women

50–54 55–59 60–64 50–54 55–59 60–64years years years years years years

1987 87.8 65.5 15.5 52.7 25.4 6.71990 91.2 64.2 14.5 58.1 24.9 5.61993 87.4 63.0 11.8 57.8 24.3 5.71996 81.9 61.5 12.2 57.3 22.1 5.61998 82.0 62.1 13.7 65.6 23.3 5.7

Source: WIFO database.

Table 2: Demographic scenarios for Austria (in 1,000s)Year Total 15–59 years Older % share of

than 60 over 60s

1998 8,072 5,096 1,601 19.82000 8,083 5,059 1,677 20.72010 8,048 4,973 1,947 24.22020 8,075 4,726 2,273 28.12030 8,067 4,193 2,800 34.72040 7,900 4,029 2,881 36.52050 7,605 3,846 2,812 37.0

Source: ÖSTAT (1998).

Between the 1960s and 1987, theparticipation rate of those aged be-tween 50 and 60 fell from 58% to42%. As a result, this age bracket de-clined as a proportion of total de-pendent employment from 19% to14%. Among women aged between55 and 60, the participation rate fellby 2.2 percentage points between1993 and 1996 to 22.1%; amongmen of the same age, the figure alsofell by 2.2 percentage points to61.5%. Since 1997, participationrates in the age group prior to thestatutory retirement age (women at60, men at 65) have begun to riseonce more. This can be interpreted asan outcome of the measures imple-mented to raise the effective retire-ment age.

Once the potential for early retire-ment to ease supply-side pressure onthe labour market had been exhaust-ed, unemployment among older per-sons in Austria rose markedly. Inspite of the fact that participation

rates among older workers are lowerin Austria than the OECD average1,their unemployment rate is higherthan among younger cohorts. The in-creasing duration of unemploymentspells among older persons, and thefact that they represent a more thanproportionate share of the long-termunemployed, both point to the diffi-culties faced by older workers in re-gaining employment after losingtheir job.

Prognoses suggest that occupa-tional behaviour in Austria will gra-dually approach EU averages. In par-ticular, the participation rates of old-er workers and of middle-aged wom-en will rise, primarily because – aslong-term prognoses (to 2050) of la-bour supply in Austria show – laboursupply is expected to age rapidly asthe baby-boomer generation, that is,

1 Alongside Italy, Austria has the lowest par-ticipation rates among older persons (Ziniel,1997).

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those born in the late 1950s and ear-ly 1960s, grows older and as thesmall cohorts born in the 1970s enterthe labour market (Höglinger et al.,1997).

Current trends and labourmarket policy strategies

Effective retirement age

The statutory retirement age is 60 forwomen and 65 for men. In the wakeof the sharp rise in unemployment atthe end of the 1980s and start of the1990s, early retirements increased asa proportion of all entries into retire-ment. In 1997 the effective retire-ment age, leading to receipt of an old-age pension, was 58.2 years for wom-en and 61.0 years for men; includingdisability pensions, the figures were56.8 and 58.4 years, respectively(Hauptverband der ÖsterreichischenSozialversicherungsträger, 1999).

In order to counter the anticipatedfinancial problems resulting from de-mographic factors and increasing lifeexpectancy, along with the trend to-wards earlier retirement, policy hasrecently been geared to raising theeffective retirement age2. Continuingthe reforms enacted in 1993 and1996, a pension reform was adoptedin 1997; further adjustments havebeen introduced under the “Pact forOlder Persons” (Pakt für Ältere)concluded in 1999.

Starting in the year 2019, the sta-tutory retirement age for men andwomen is to be gradually broughtinto line. In order to restrain thegrowth in the burden of contribu-tions for those in work, and in orderto guarantee the long-term financialviability of the Austrian pension in-surance system, the recent changes inpension laws have, in particular, ex-tended the contribution period usedto calculate pension entitlements; inthe case of civil servants, contribu-tion periods were introduced as thebasis for calculation rather than “thelast salary”. Between 2003 and2020, the minimum insurance periodwill be gradually extended from 180months to 216 months. In addition,

the conditions for access to early re-tirement schemes have been tight-ened. In the longer term – the full ef-fects of the pension reform will notbe felt until 2040 – these measuresare expected to bring about savingsin the pension volume of around 10–15%.

Early exit avenues

There are a number of ways to retirebefore reaching the statutory retire-ment age, each subject to certainconditions. Women aged over 55 andmen aged over 60 who have workedand paid pension insurance contribu-tions for a total of 35 years have theoption of claiming the “early old-agepension on the grounds of long con-tribution period”. Those aged over55/60 who have been unemployedfor more than one year can, subjectto a number of other special condi-tions, claim the “early old-age pen-sion on the grounds of unemploy-ment”. Those aged over 55 (women)or 57 (men) whose health is such thatthe income they can earn would de-cline by at least half are entitled toclaim the “early old-age pension onthe grounds of reduced work capaci-ty or occupational disability”. Final-ly, the part-time pension (Gleitpen-sion) enables those with long contri-bution periods and aged over 55/60to claim a certain percentage of theirpension entitlement while reducingtheir workload by switching to part-time employment.

Until the end of the 1980s, the im-pact of structural change on the la-bour market was primarily coun-tered by measures that opened upavenues into early retirement forolder workers. The special support(Sonderunterstützung), since abol-ished, was an important instrumentthat was used to provide financialsupport, up to the earliest possiblepension age, to workers, particularlyolder workers, who were affected bystructural change, had lost their jobsand had no chance of re-employ-ment; in doing so, it eased supply-side pressure on the labour market.Labour market factors exerted a cru-cial influence on the number of peo-ple entering early retirement, be itfor health reasons or due to unem-ployment. And the restrictions relat-ing to the recognition of disabilitypensions (work incapacity) also tend-ed to correspond to the prevailing la-bour market situation (Finder, 1997).

Pension entry data show that,since the mid-1980s, the number ofnew pensioners receiving the stan-dard old-age pension has declined asa share of the total of new entries. Atthe same time, there has been a shiftaway from the disability pension infavour of the early retirement pen-sion on the grounds of reduced work

Table 3: Structure of new pension entries1985 1990 1998

Absolute % Absolute % Absolute %

Normal old-age pension 21,226 24.7 17,600 24.0 14,759 19.9

Early old-age pension onthe grounds of– long contribution period 26,397 30.7 23,933 32.6 27,414 37.0– unemployment 3,217 3.8 4,143 5.6 3,566 4.8– reduced work capacity* –* –* –* –* 12,547 16.9

Partial pension (Gleit-pension*) –* –* –* –* 324 0.4

Disability pension 35,019 40.8 27,763 37.8 15,514 21.0

Total 85,859 100.0 73,439 100.0 74,124 100.0

* Introduced in 1993.

Source: Umbrella organisation of the social insurance funds.

2 In 1980 the “pension dependency rate” –number of pensions per 1,000 people pay-ing pension insurance contributions – was522; in 1998 the figure was 619 (Hauptver-band der Österreichischen Sozialversiche-rungsträger, 1999).

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capacity, introduced in 1993. Thepartial pension is claimed by just0.4% of those entering retirement.

Demographic factors are increas-ingly leading to financial difficultiesfor the pension system. In the firsthalf of the 1990s, this led to the abo-lition of certain special measures anda tightening of the conditions of enti-tlement to early old-age pensions.The minimum age at which mencould claim a pension on the groundsof reduced work capacity, for in-stance, was raised to 57. Those enter-ing retirement prior to attaining thestatutory retirement age now facesubstantial deductions from theirpension entitlement level.

Policies and measures to raiseparticipation rates and to re-integrate older workers

Following negotiations lasting morethan six months between the socialpartners on the precise details, at thestart of 1999 the “Pact for Older Per-sons” (Pakt für Ältere) was ap-proved by parliament. A series ofmeasures that are to come into forceon 1 January 2000 aim to promotethe retention of older workers in em-ployment and support the re-em-ployment of the older unemployed.Alongside modifications to existingmeasures, the Pact for Older Personscontains a new model for a part-timepension (Altersteilzeit – see below).However, a number of experts havecriticised these efforts as being inade-quate in view of the task of ensuringthe long-term financial stability ofthe pension system.

As a rule, labour market policymeasures are targeted at all the unem-ployed; they are not instruments spe-cially tailored to the needs of olderworkers. Moreover, the older unem-ployed are not mentioned as a prioritytarget group in the 1999 labour mar-ket policy targets of the Austrian pub-lic employment service (AMS). How-ever, for persons aged over 45 accessto employment-promotion measures(enterprise work familiarisation al-lowance, socio-economic enterprisesupport) is conditional on an unem-

ployment period of just six months,rather than 12 months as for other agegroups. This is because older personsare considered to be a group particu-larly likely to suffer from long-termunemployment. Even so, evaluationsshow that the proportion of older per-sons in total participation in, for in-stance, reintegration measures issignificantly lower than their share ofthe unemployed population (Riesen-felder et al., 1999).

In the past, the so-called labourfoundations (Arbeitsstiftungen) havebeen an effective instrument fordealing with the consequences ofstructural industrial change. In thewake of the restructuring of state-owned industries in the 1980s, tensof thousands of jobs were lost in thesteel industry. In 1987 the VoestSteel Foundation was set up, a labourmarket policy experiment that aimedto offer the unemployed industrialworkers the opportunity to train in adifferent area and thus a chance offinding alternative employment. Inthis first such reintegration measureas many as 13% of participants wereaged over 45, more or less in linewith this age group’s share of theoverall working population.

The foundations have been rela-tively successful – in 1995 around60% of participants were successful-ly integrated into the labour market– although the intensive measures of-fered within the framework of thefoundations have not really workedyet in the case of older persons. Inparticular, older participants in foun-dation-based schemes, constitutingaround 17% of all participants, mustexpect serious income losses on re-entering working life.

In future, the older unemployedare to be incorporated into employ-ment projects to a greater extentthan previously, especially in thegrowing area of non-profit agencywork. In the state of Upper Austria,the public employment service andthe state government support the oc-cupational reintegration of the olderunemployed (women aged over 50,men over 55) by promoting a non-profit leasing company that recruits

the older unemployed as agencyworkers and leases them out to pri-vate and public sector employers atparticularly attractive conditions. Anevaluation showed evidence of high-ly satisfactory successes in labourmarket integration.

From the year 2000, unemployedpersons entitled to claim an earlyold-age pension have a legal entitle-ment to an employment relationshipin an employment project at collec-tively agreed rates of pay. In addi-tion, job coaching for unemployedpersons over the age of 50 is to be in-tensified, in order to prevent themfrom sliding into long-term unem-ployment.

If older workers (over 45) accept ajob paying less than their previouswork, the income basis used to calcu-late future benefits from the unem-ployment insurance fund remains un-affected by the lower earned incomelevel. This is because experience hasshown that the prospect of reducedentitlements to unemployment bene-fit, by way of a lower earned-incomecalculation base, reduces the willing-ness to accept lower-paid jobs, evenwhere they are in line with the per-son’s qualifications.

The bonus/malus system intro-duced into the unemployment insur-ance system in 1996 is currently theonly measure explicitly geared toolder persons. It aims to reward em-ployers who recruit older workersand to “punish” those making olderworkers redundant. The bonus con-sists of a reduction in the employer’sunemployment insurance contribu-tions by 50% (in the case of recruit-ments of workers aged over 50) and100% (for workers aged over 55).Employers making redundant em-ployees aged over 50 who haveworked in the enterprise for morethan ten years must make a compen-sation payment (“malus”) to the un-employment insurance fund, the lev-el of which depends on the level ofthe income base used to calculate thebenefit level and the difference be-tween the current age of the personaffected and his/her pension age. Ex-perience has shown that since the in-

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troduction of the measure thenumber of insured employees forwhom reduced contributions or nocontributions were paid has doubled;there has been no trend increase inthe number of employers payingpenalties, on the other hand.

Support for partial retirement

A new measure introduced under thePact for Older Persons is part-timeretirement (Altersteilzeit), which willcome into force on 1 January 2000 intwo variants. Under the provision fora partial retirement grant (Alters-teilzeitgeld), women aged over 50and men aged over 55 can reducetheir standard working hours by half,while receiving 75% of their previousearnings. The enterprise receives agrant of 25% of the gross wage, butsubject to the obligation to recruit areplacement worker. This obligationto recruit a replacement worker doesnot apply in the case of the “allow-ance to promote partial retirement”(Beihilfe zur Förderung der Alters-teilzeit); the level of the allowance issuch as to offer only partial compen-sation, however. Moreover, the mini-mum age for the cut in working hoursis two years higher. Both models canbe used until reaching early retire-ment age. The employer must con-tinue to pay insurance contributionsbased on the full salary, in order toavoid subsequent deductions fromthe pension level and so maintain in-centives for employees. Experts seethis model as an accompanying meas-ure at best, as the potential number ofworkers for such partial retirementmodels is considered to be of the or-der of 2,500. In labour market policyterms, the effect will largely be that ofgenerally reducing supply-side pres-sure on the labour market (to the ex-tent that the model with an obligationto recruit a replacement worker isused); other advantages may arise interms of reducing the problems in-volved in “passing on the baton”(work familiarisation and training ofsuccessor, etc.).

Experience with the solidaritypremium model (Solidaritätspre-mienmodel) suggests that expecta-

tions should not be set too high. Un-der this model, firms in which work-ing time is reduced are entitled tosupport for two or three years, pro-vided replacement workers are re-cruited. So far, programme take-uphas been marginal.

Support for short-time working(Kurzarbeitsbeihilfe) is available forfirms facing temporary crises in or-der to preserve existing jobs. Nor-mally, an enterprise may reduce itsworking hours by one fifth. Thewage losses are offset by short-timeworking compensation paid by theemployer, who in return receives fi-nancial support from the social secur-ity ministry. Under a new provisionthat forms part of the Pact for OlderPersons, a cut in working time by upto one fifth is possible if a significantproportion of the workforce is agedover 45 and affected by short-timeworking. The cut in working hoursmay last up to one year.

Those meeting the conditions foran early old-age pension on thegrounds of sufficient contributionyears may enter retirement in stagesunder the Gleitpension (partial pen-sion) scheme introduced in 1993.Working time must be reduced by atleast 30%, that is, from 40 to 28hours per week. Those on the schemeare paid a reduced wage by the firmand a partial pension by the pensioninsurance fund. Until the end of1997, the pension levels were as fol-lows: those reducing their workinghours by 30% received 50% of theirpension entitlement; those reducingtheir working time by half to 20hours per week were able to claim70% of their pension. This system fa-voured higher earners, and indeed itwas this group that constituted themajority of the 1,138 participants inthe scheme at the end of 1997. As of1 January 1998, new regulationscame into force: those on low earnedincomes were entitled to almost theirfull pension (80%), whereas for high-er earners the percentage figure wasreduced to 40%. In 1999, under thePact for Older Persons, the minimumpartial pension was again raised, thistime to 50%.

It cannot be determined at presentto what extent this measure has ledto an increase in the recruitment ofreplacement workers. The relativelysmall number of claimants – in 1998the 1,058 cases represented 0.1% ofall old-age pensions paid out – havesobered expectations in this regard,and the same is true of hopes of re-ducing expenditure by the pensionfunds through encouraging only par-tial claims for early old-age pensions.

Trends at company andsectoral levelEarly retirement as an elementin workforce restructuringThe efforts to facilitate the transitionto early retirement as a social-policymeasure for countering unemploy-ment in old age increase firms’ scopefor shedding older workers (Höglin-ger et al., 1997). While the technicaland structural changes, and therationalisation requirement thesemade, affected all categories ofworkers, older workers are amongthe most prominent risk group. In-creasingly, the excess supply of la-bour has led to a tightening of theselection criteria in the case of bothlabour-shedding measures and newrecruitment. Employers justify theirrejection of older workers primarilyby claiming that they are too expen-sive, too inflexible, unable to adjustor to cope with the demands of work-ing life, that they are often off sick orhave health restrictions, that they areunwilling to undergo further train-ing, that they will not remain in thefirm for long, or that they do not fitinto the firm’s workforce age struc-ture. Only to a limited extent arethese reservations backed up by theempirical evidence. Studies haveshown that the typical reservationsand arguments put forward by firmsare a conglomerate of socially ossi-fied age-linked stereotyping, on theone hand, and supposed cost-benefitarguments, on the other (cf., amongothers, Höglinger et al., 1997). Whatis certainly clear is that any mono-causal explanation for the poor la-bour market chances of older work-

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ers is inappropriate to complex socialreality.

That the difficult economic and la-bour market situation is not the solereason behind the precarious situa-tion faced by older workers3 hasbeen clearly shown by Höglinger etal., who emphasised that “the reduc-tion in employment among olderworkers has also occurred in thosebranches characterised by growth ef-fects, and thus an increase in overallemployment, such as the service sec-tor”. Yet this growth primarily re-flects flexibilisation and rising num-bers of part-time jobs. Moreover, ifthe service sector is disaggregated, itis revealed that the service branchesin which employment growth wasrecorded offer either traditional, of-ten physically demanding jobs (hoteland catering, social services) or pro-ducer services, which tend to have anabove-average proportion of young-er workers (Höglinger et al., 1997).

Whether the shedding of olderworkers occurs as a way of reducingstaffing levels in the course of ration-alisation programmes or, via replace-ment by younger workers, as ameans of workforce restructuring,experts have criticised firms for in-strumentalising socially motivatedmeasures, such as easier access toearly retirement, as an element intheir personnel management strate-gies (cf., for example, Höglinger,1997; Ziniel, 1997).

Corporate strategies andcollective regulation

It is difficult to find examples of com-pany-level models based on the“productive ageing” or “active age-ing” approach. Indeed, Austrianfirms must be motivated to take ad-vantage of the legal options alreadyavailable, as experience with the rel-evant models has shown. Collectiveagreements have been reached, forinstance, by the electricity supplyfirms in such a way that the right toone (paid) week per year for the fur-ther training of younger employees isto be used to make it easier to retainolder workers until retirement age.

Personnel development

Given an excess supply of labour andsocial policy measures that cushionredundancies in a socially acceptablefashion, firms have no incentive toinvest in older workers. Moreover,rapid technological change and struc-tural upheavals mean – on the sur-face, at least – that the experienceand know-how of older workers areincreasingly dispensable.

Internal personnel managementstrategies for older members of staffconsist, in the case of highly qualifiedstaff, in promotion to leadership andexecutive positions; for the less highlyskilled, the usual option is to redeploythem to low-skill or less demandingroutine activities (“sheltered work”).Experts have criticised the fact that, inview of the prevailing practice of ear-ly retirement, firms have failed to de-velop models, relating to workingstructures, working time regulationsand training processes, that promotethe integration of older workers anduse and maintain their performancepotential in advanced age (Höglingeret al., 1997).

Studies have shown that those re-sponsible for personnel managementbase their decisions on a stereotyp-ical understanding of the strengthsand weaknesses of the young and theold, with scant regard paid to well-founded empirical evidence. In a sur-vey conducted in the state of Tyrol,personnel managers exhibited an as-tonishing view of their role: askedabout measures considered neces-sary within the company, the mostfrequent responses were “to rethinkprejudices and judgements about

older workers” and “forward per-sonnel planning” (quoted fromPresse- und Informationsdienst fürSozialpolitik, 1997).


The risk of unemployment andthe chances of re-employment

Older workers are less at risk of be-coming unemployed than youngerworkers. Entries into unemploymentas a proportion of employee num-bers in the over-50 age category arelower than the average entry rate4.The principle of seniority providesadded protection against redundan-cy, although, as the unemploymentfigures show, this by no means im-plies an “employment guarantee”; atthe same time, it serves to make itmore difficult to regain employmentonce unemployed. The above-aver-age duration of unemployment spellsis evidence of the poor re-employ-ment chances of the older unem-ployed; this is what is responsible forthe above-average unemploymentrates among older persons.

The data on long-term unemploy-ment clearly reveal the above-aver-

3 Although, of course, via the excess supplyof labour, which permits discriminatorymechanisms to make their full effects felt, itdoes play a crucial role.

4 However, these figures do not include exitsfrom employment resulting from early re-tirement on the grounds of the number ofcontribution years or of reduced work ca-pacity.

5 The indicator “exits from registered unem-ployment” also contains exits for other rea-sons than taking up employment.

Table 4: Unemployment rates for older workers by age category andgender (in %)

Men* Women*

50–54 55–59 Total 50–54 55–59 Totalyears years years years

1989 4.8 6.2 4.6 6.7 4.8 5.51993 8.4 12.1 6.7 12.2 8.3 6.91996 8.4 9.9 6.9 10.4 6.0 7.31998 8.7 12.7 6.9 11.2 8.9 7.5

* In interpreting the data, it is necessary to take account of the differences in the statu-tory and early retirement ages for men (65/60) and women (59/55).

Source: AMS.

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age degree to which the older co-horts are affected and point to thepoor chances of regaining employ-ment as the most serious problemfacing older people on the labourmarket. Whereas in 1998 around59% of all those affected by unem-ployment (exits from unemploy-ment) were able to find work withina period of three months5, this wastrue of only around 44% of thoseover age 50. They accounted foraround 21% of the annual averagestock of unemployment: amongthose registered unemployed for be-tween six months and one year, thefigure rises to 29%; and among thoseunemployed for more than a year, to41%. Half (51%) of the annual aver-age stock of the registered unem-ployed aged over 50 were long-termunemployed (more than 6 months).The average duration of an unem-ployment spell was 127 days; differ-entiating by age group, this figuresrises consistently with age. Thoseaged between 50 and 55 remainedunemployed on average for 182days; for the 55–60 year-olds, thefigure is 249 days, with a figure of359 days for the over-60s. In all cas-es, women are worse affected thanmen6.

Tough competition resulting fromthe excess supply of labour meansthat workers are becoming “old”ever earlier and have to struggle withthe difficulties that that brings. Astudy by the Ludwig Boltzmann In-stitute for Growth Research showsthat “age” is set very differently, ac-cording to gender, qualification andbranch. The age limit for women isset even earlier than that for men,whereby gender appears to be seenas a more important criterion thanqualification level. Of those respon-sible for personnel decisions in thesurvey, 30% set an age limit for newrecruits of 35 years; a further 17%set the limit at 40 (Finder, 1997).

Pension levels

The Austrian pension system is basedon the insurance principle and thus onthat of “contribution-equivalence”.As a result, the pension level is deter-

mined by the level of earned income(calculation base) and by the numberof insurance-months paid during thecourse of working life (duration ofemployment). There is no provisionwithin the statutory pension systemfor a basic provision in the form of aminimum pension. However, there isa minimum supplementary benefit(Ausgleichszulage) that guarantees aminimum income, oriented towardsneed and allowing for other forms ofpersonal or household income.

Almost all pension income (93%)is derived from the statutory pensionsystem. The average pension level isrelatively high – average net pen-sions represent 72.7% of net wageand salary income – but there aresubstantial differences between so-cial groups and particularly betweenthe sexes. In December 1998, theaverage old-age pension (all pensionfunds) amounted to ATS 11,493. Onaverage, men received ATS 14,999;women, by contrast, just ATS 8,779.The lowest pensions were paid out tofarmers (ATS 7,807) and to blue-col-lar workers (ATS 9,122). Averagepensions for white-collar workersamounted to ATS 14,6647 (Haupt-verband der Österreichischen Sozial-versicherungsträger, 1999).

The difference in pension levelsbetween the sexes can be explainedwith reference to the generally lowerearned income of women and inter-ruptions to occupational biographiesdue to childcare. Under the 1993pension reform, the recognition ofchildcare periods was improved andnow amounts to up to four years perchild.

Access to training and furthertraining measuresThe half-life of knowledge is steadilydeclining: as technological break-throughs occur at ever-shorter inter-vals, patterns of work organisationand occupational contents change,making it necessary to undergo per-manent further training. Furthertraining and adjustment training as apreventive measure to avoid unem-ployment is becoming increasinglyimportant. This is particularly true of

older workers, whose experienceand know-how are increasingly be-ing devalued in the face of constantchange.

A study into the further trainingbehaviour of workers over 40 hasshown that 39% of employees agedover 39 had not undergone furthertraining during the previous fiveyears, whereby participation in train-ing measures was significantly loweramong women. Differentiating thestatistics by age group does not re-veal statistically significant differen-ces between the age groups amongthe over-40s, which suggests that asubstantial proportion of older work-ers is cut off from further training at arelatively early stage (Heimgartneret al., 1996).

Studies have shown that the will-ingness to participate in further train-ing is heavily dependent on the indi-vidual’s state of knowledge; it cantherefore be profoundly influenced ifinformation and incentives are pro-vided by and in firms. If the employ-er provides a stimulus, there is a ma-jor jump in participation in training(Heimgartner et al., 1996). In prac-tice, however, firms’ training policiestend to be age-selective: in view ofthe short “operating life” of olderworkers, firms have little incentiveto invest in training their older mem-bers of staff. The neglect of thisgroup in further training by compa-nies was clearly revealed through anevaluation of Objective 4 of the Eu-ropean Social Fund (measures for theemployed), which showed workersaged over 45 to be seriously under-represented in qualification-adjust-ment measures (IFA Steiermark,1997).

Yet not least with a view to demo-graphic changes, continuous furthertraining, especially of older workers,will be of ever-growing importance.Whereas the major technological andstructural upheavals of recent yearswere largely accomplished by young-er workers, in future they will increas-

6 Source: AMS (public employment service);own calculations.

7 The figures include the means-tested sup-plementary benefit and child allowance.

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ingly have to be borne by generallyolder employees (Höglinger et al.1997). However, labour market poli-cy measures to promote the vocation-al training of older workers are still intheir infancy. In the state of UpperAustria, within the framework of the“productive ageing” support area ofthe Regional Employment and Quali-fication Pact, the Austrian public em-ployment service (AMS) and the Up-per Austrian state government pro-mote further training for workersaged over 45 by assuming the greaterpart of the costs of training; supportfor women workers is ten percentagepoints higher. Training leave is avail-able to permit the employed to takeup between three and twelve monthsoff work for further training. TheAMS pay a further training allowanceof EUR 404 per month. In order to es-tablish incentives for older workers toclaim, a provision under the Pact forOlder Persons established that forpersons aged over 45 periods ontraining leave are counted as insur-ance-months in determining the pen-sion level.

Conclusion: PolicyoptionsPolicy action is clearly urgently re-quired in the face of demographicscenarios indicating that the Austrianlabour force is rapidly ageing and lifethat expectancy is increasing, as isthe duration of claims on benefitsfrom the pension insurance system.

Against this background, and in viewof rising unemployment among olderpersons, further measures are re-quired with the aim of developing aconsistent strategy of “active age-ing”. Steps to raise the effective re-tirement age and prolong workinglife, in order to ensure the viability ofthe pension system, cannot be imple-mented without an overall concep-tion that incorporates support meas-ures for the continued employmentof older workers; otherwise, theproblems will merely be pushed intoother areas.

Additional active labour marketpolicy measures are required to pro-mote the reintegration of the olderunemployed. Secondly, attractivemodels must be implemented thatcombine a reduction in workinghours with a gradual move into re-tirement, so as to keep older workersin the employment system longer.Although there are examples of suchmeasures in operation in Austria, sofar take-up levels for these measureshave been far from satisfactory. Ithas emerged that both employeesand employers lack adequate infor-mation on the models in existence;thus, an awareness-raising campaignconstitutes a necessary accompany-ing measure.

The required two-track strategy ofcompensation and prevention will infuture need to be applied to increas-ingly younger cohorts. In doing so,there must be a clear focus on sup-port for further training.

The agreements reached withinthe Pact for Older Persons mark animportant step forward in the direc-tion of “active ageing”. The pactconstitutes a successful attempt tobring together all the relevant labourmarket actors in order to implementa strategy of active ageing.

Ferdinand Lechner &Irene Pimminger

Selected bibliographyFinder, R. et al. (1997): Die DiskriminierungÄlterer am Arbeitsmarkt. Vienna.Hauptverband der österreichischen Sozialver-sicherungsträger (1999): Handbuch der öster-reichischen Sozialversicherung 1999. Vienna.Heimgartner, A. et al. (1996): Barrieren derWeiterbildung älterer ArbeitnehmerInnen.Graz.Höglinger, A. et al. (1997): Beschäftigungs-strategien und Arbeitsmarktintegration älte-rer Arbeitnehmer und Arbeitnehmerinnen.Vienna: Zentrum für Soziale Innovation.IFA Steiermark/COMPASS Bremen (1997):Mid-term Bericht Ziel 4 Evaluierung Öster-reich. Graz.Lutz, H. (1997): “Beschäftigungschancen undsoziale Sicherheit: Ein Problemaufriß.” In:WIFO-Monatsberichte, No. 10.Österreichisches Statistisches Zentralamt(ÖSTAT) (1998): Bevölkerungsvorausschät-zung 1998–2050, Österreich, Mittlere Vari-ante. Vienna.Presse- und Informationsdienst für Sozialpoli-tik (1997): Kontraste, No. 105, Schwerpunkt:Ältere ArbeitnehmerInnen.Riesenfelder, A. et al. (1999): Evaluation derBESEB 1997. Im Auftrag des Arbeitsmarkt-service Österreich. Final report. Vienna.Soziale Sicherheit, No. 7/8, 1998 (Fachzeit-schrift der österreichischen Sozialversiche-rung).Ziniel, G. (1997): “Altersarbeitslosigkeit.” In:Kontraste, No. 105.

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Portugal

Introduction

Portugal has one of the highest em-ployment rates for older workers inthe European Union; for the agegroup 55–65, it amounted to 46.9%in 1997, compared with an EU aver-age of 35.9%1. The unemploymentrate of these workers (>54 years old)is below the national average (3.7%compared with 6.7%), but their long-term unemployment rate is higher(60.5% of the unemployed com-pared with 42.5%2). More than 74%of these workers have had no morethan four years of schooling3.

As far as demographic trends areconcerned, the situation in Portugal,as in other European countries, ischaracterised by an ageing popula-tion, at both the top and the bottomof the age pyramid; the number ofyoung people has fallen from 29% ofthe population in 1960 to 18% in1995. This trend is explained by adecline in the birth rate – the grossfertility rate has fallen from 3.1 in1960 to 1.4 in 1995 – as well as byincreasing life expectancy (61.2years in 1960 compared with 71.6years in 1995 for men, and 66.8years compared with 78.6 yearsfor women). These demographicchanges have been reflected on thelabour market. Between 1992 and1997, the size of the active popula-tion increased by 24.6%.

Prognoses suggest that by the year2020 those aged 65 or over will in-crease as a proportion of the popula-tion from 14.7% in 1995 to 18%. In2020 working adults aged between50 and 64 will account for 20.4% ofthe entire working population, com-pared with 16.5% in 1995. In 2000,the number of people aged over 65will overtake the number of youngerpeople (aged under 14), and the“ageing index” – the number of old-er people for every 100 young peo-ple) will be above 100 in 2015, com-

pared with 83.5 in 1995. The numberof older people will remain constantas a share of the working populationuntil 2000, but will increase afterthat date.

The ageing of the population clear-ly represents an extremely tight con-straint on the evolution of the socialsecurity system, for its effect both re-duces receipts and raises expenditure.Unlike the trends observed in otherEU countries, in which the socio-economic situation of older persons isrelatively satisfactory, in Portugal theliving conditions of this group of thepopulation are very precarious4. In-deed, a number of studies considerolder persons to be one of the mostvulnerable social groups in terms ofthe risk of poverty. The decline in in-formal protection networks (whichsome authors have termed Portugal’s“providential society”) makes it nec-essary to restructure the mechanismsof social protection, but at the sametime it requires that particular atten-tion be paid to the changing relationsbetween older persons and familystructures.

In Portugal social security expend-iture amounted to 18% of GDP in1993 (compared with 28% for theEU12), and the system is not in dan-ger of collapsing until at least 2010 to2015. Old-age and disability pen-sions account for 73% of total spend-ing on social security (excluding ben-efits paid out by the health insurancefunds). Such spending is growing at arate of 8%, whereas the number ofbeneficiaries is growing at a rate of4.4%. Disability pensions still ac-count for 20% of spending, althoughthe number of recipients has beenfalling since 1990. Thus, spending di-rectly linked to demographic trendsis rising very rapidly, and this factoris becoming increasingly importantbecause the average number of life-years following the date of retire-ment is progressively increasing.

Consequently, it appears to be vi-tal that the social security system berestructured in order to guarantee itsviability. The socio-economic vulner-ability of the affected population alsocalls for specific employment policymeasures (training for certain groupsof this population, given their lowlevel of education and the spread ofsectoral restructuring processes cur-rently under way) and the develop-ment of new spheres of activity (inorder to counter the risk of unem-ployment).

Changes in the policyframework: recent trendsWithin the framework of Guideline4, the 1999 National Action Plan foremployment defines “maintainingthe employment level of the 50–64-year age group” as a target. The aim,therefore, is more to restrain earlyexits from the labour force than topromote “active ageing”. The newinstruments to be deployed in 1999are:– the application of a regime to flex-

ibilise the retirement age;– the re-evaluation of the fiscal and

para-fiscal framework for laboursupply and demand and of allmeasures that stimulate workersto leave working life early;

– revision of the unemploymentbenefit regime in such a way thatit provides as few disincentives aspossible to re-entering the labourmarket.

1 Data from the Eurostat’s Labour Force Sur-vey. The same data also reveal that the fig-ure for the 15 EU Member States has fallensince 1985, whereas it has risen in Portugal.

2 These figures were provided by the Nation-al Statistics Institute (INE).

3 These data refer only to wage- and salary-earners and are taken from the Labour Min-istry’s Quadros do Pessoal.

4 See the information given below on pensionlevels.

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Policies relating to (statutory)retirement age and pathwaysto early exit

The statutory retirement age is cur-rently 65 years for all workers, fol-lowing a decision a few years ago toraise the retirement age of womenfrom 63 to 65.

Early retirement was instituted asa legal category in 1991, essentiallyas a social policy measure for work-ers facing difficulties in adaptingto technological and managerialchanges. Although the measure wasoriginally conceived for workers af-fected by restructuring, it has exhib-ited a tendency to spread to othersectors and professions, a trend thatcan also be observed for “anticipatedretirement” (see below).

Policies to increase the parti-cipation rates of older workersand retain/reintegrate olderworkers

There are a number of instrumentsthat aim to promote the reintegrationof workers in general, but none ofthem are geared specifically to olderworkers:– general measures in support of job

creation/recruitment, of whichsome discriminate in favour of un-employed women aged above 45;

– measures to aid jobsearch (build-ing up self-confidence, personal-ised guidance, etc.) for the long-term and older unemployed;

– employment policy programmesto re-establish contacts with the la-bour market for the most vulner-able workers (recent data indicatethat those aged over 45 constitutearound 25% of those in employ-ment).

The National Action Plan for em-ployment makes provision for the in-itiation of the so-called “CrackClub” programme, the aim of whichis to make use of the know-how ofhighly skilled retired workers bytransmitting their knowledge and ex-perience by way of training projectsand/or technical assistance schemesin support of companies or newprojects.

Finally, following the adoption ofDecree-Law No. 119/99 of 14 April1999, the social security system is tomake provision for a part-time un-employment benefit, which can bedrawn while working part time, per-forming an “occupational” activityor undergoing subsidised training,amongst other things5.

The situation on the Portugueselabour market does not imply an ur-gent need to promote active ageing,which is why there is no genuine pol-icy dedicated explicitly to retainingworkers in employment. However,the social security system does con-tain a number of measures that serveto counter early exit from the labourforce. One of the incentives to re-main in the active population is thepossibility of accumulating the old-age pension – and under certain con-ditions, the disability pension – withearned income, a measure that is ac-companied by a reduction in socialinsurance contributions.

Policies promoting flexible(part-time) working and gra-dual retirement provisions

Decree-Law No. 6/99 of 8 January1999, introduced a new regime thatprovides for a flexibilisation of ac-cess to a retirement pension, one thatdepends on the “contribution pro-file” of the worker; it means thatthose with a “complete” career interms of contribution years are freeto choose their retirement age in ac-cordance with general practice with-in the EU (resolution of the Europe-an Council No. 82/857/CEE). Underthis regime a deduction factor was in-troduced for the statutory old-agepension for those retiring early –which is now possible from the age of55 – and a premium of 10% per yearwas introduced for workers agedover 65 who have paid contributionsfor at least 40 years and who remainin employment until the age of 70.

As far as part-time work is con-cerned, the government recently pre-sented to the National Assembly abill defining the legal provisions forpart-time work and providing incen-

tives that will serve to promote it. Itis possible that this type of provisionmight benefit older workers by giv-ing them the opportunity to retireprogressively from active life.

Developments at the levelof companies and sectorsSectoral restructuring measures areaccompanied by certain provisionsexplicitly targeted at older workers.They include the extension of entitle-ment to unemployment benefit – theentitlement period can be extendedto a maximum of 30 months for theunemployed aged over 45 – or in-creases in certain family benefits.Other measures include early retire-ment agreements applying in certainsectors or enterprises declared to beundergoing restructuring, which pro-vide for reductions in contributionrates and early retirement.

A special early retirement scheme(“anticipated retirement”) imple-mented in 1993 for workers agedover 60 was initially intended forworkers in physically demandingprofessions (those working at sea, inports and mining); however, thescope of the measure has been pro-gressively extended for reasonslinked to the inability of the labourmarket to absorb surplus labour andto the flexibilisation needs of certaineconomic sectors and enterprises.

Data relating to 1995/96 showthat around 50,000 people (of whichonly around 5,000 were women)were drawing an anticipated pensionfor labour market-related reasons.As in the case of early retirement,these measures are linked to adjust-ments in the context of the restruc-turing processes currently underway, in which the external flexibili-sation of older workers is one of themost widely used measures. Thissame aim has been pursued by alarge number of legislative measuresadopted over the last 25 years, whichhave benefited, in particular, work-

5 The level of the part-time unemploymentbenefit corresponds to the difference be-tween the level of the total benefit plus 25%and the earnings gained from part-time em-ployment.

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ers in the merchant navy and ports,mining and metallurgy.


Income situation and pensionexpectations

Knowledge of the pension level con-stitutes a very important basis for ap-propriately evaluating the relevanceof promoting active ageing. Averageearnings in Portugal are among thelowest in Europe, and this is also trueof retirement pensions, as can beseen in Table 1.

The average level of effective pen-sions is below the national minimumwage, which itself, in terms of take-home pay, is located close to thepoverty threshold. This indicates thata very large majority of older per-sons have a very low standard of liv-ing. This is explained by the fact thatmany of these pensioners have had avery short “contribution career”,that is, they have paid contributionsfor too few years and thus are onlyentitled to a minimum pension, thelevel of which was below PTE 3,000in 1996. The situation for individualpensioners improves as the numberof contribution years increases, and

the pensions drawn by those with acomplete contribution record aresubstantially higher than the mini-mum wage, although they are lessthan the average wage.

Two conclusions can be drawnfrom this state of affairs:1. As the social security system “ma-

tures”6, expenditure on social se-curity will rise substantially, forthe number of contribution yearsrecorded by each new entrant intothe pension system, and thus thelevel of their pension entitlement,will continue to rise until 2015. Inaddition, the number of pension-ers will increase by a factor of sixbetween now and 2015. The jointimpact of these trends is expectedto be a rise by 50% in the propor-tion of GDP allocated to old-agepensions.

2. The vast majority of workers hasno “economic” interest in volun-tarily leaving the labour force pri-or to the statutory retirement age,as this results in pension levelsthat are even lower than their cur-rent salaries. It is only those work-ers who have a complete contribu-tion biography and high earned in-come who will be willing to acceptearly retirement. As far as activeageing is concerned, it is precisely

this group of workers, whose edu-cational level is higher than theaverage, that might wish to remainactive beyond the official retire-ment age; the vast majority of oth-er workers, who find little or nosatisfaction in their work (all themore so in view of the type of jobsand the specialisation characteris-tic of the Portuguese economy,which is characterised by low-skillworkers and jobs), want nothingmore than to stop working – pro-vided this is economically feasible.

Access to vocational trainingand lifelong learning

The educational level of the Portu-guese labour force is particularlylow, especially among those agedover 40. Within the framework ofGuideline 6, the Portuguese NationalAction Plan for employment has paidparticular attention to promoting ac-cess to lifelong learning by workersaged over 45.

Among the new measures plannedfor 1999, perhaps the most importantis the ENDURANCE initiative, whichaims to promote lifelong educationand training by means of providinginformation, orientation and aware-ness-raising activities; stimulatingcollective bargaining on these topics;developing new training methods andstrengthening continuing training,education-training programmes andadult education. The development ofthe programme “Social ProjectS@voir+” (“knowing more”) is also astep forward towards this goal. In par-ticular, it makes provision for the es-tablishment of a National Agency forAdult Education and Training, theopening up of “clubs s@voir”, theprogressive establishment of a formalsystem of validation for informallyacquired knowledge and skills and aninvitation to tender for assistancewith adult education and training ini-tiatives.

Table 1: Retirement pensions calculated as a function of referenceearnings (in PTE)Averages at the start of the year 1990 1994 1996 1997*

Average wagea 67,808 112,925 124,580 127,196National minimum wage (NMW) 35,000 49,300 54,600 56,700Average pension (AP) 25,140 39,490 44,710 46,800AP/NMW in % (including all pensions) 72 80 82 83

Average career length in yearsb 20 21 22 24Pension after average career (PAC) 29,836 47,429 54,815 61,054PAC/AP in % 119 120 123 130PAC/NMW in % 85 96 100 108

Complete career length (in years) 37 40 40 40Pension after complete career (PCC) 54,246 90,340 99,664 101,757PCC/AP in % 216 229 223 217PCC/NMW in % 155 183 183 179

* The figures for 1997 have been extrapolated on the basis of an increase of 2.1% onthe average wage in 1996.

a Corresponds to average earnings (indicator that approximates best to the base con-cept used to calculate social security contributions).

b Corresponds to the number of years for which the worker has paid contributions.

Source: Department of Labour, Employment and Training Statistics: Quadros do Pes-soal.

6 The social security system in Portugal is ofvery recent date; the Basic Social SecurityLaw dates from 1984. This explains why thecontribution records are so short for mostworkers, exceptions being public sectorworkers, those working in large companies,and certain sectors of the economy.

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Although no study has been made ofthis topic to date, it is highly likelythat many workers aged over 50 havea very reduced “employability”.Faced with the prospect of unemploy-ment, many older workers attempt toobtain a minimum income levelthrough recourse to early retirement,“anticipated retirement” or other,more informal “arrangements”7. Thissituation is well illustrated by thenumber of redundancies on thegrounds of work incapacity (whichamounted to almost 40,000 cases in1996) in the various social securityregimes. Although on the decline, thisfigure remains high. Several indica-tors show that claims under this meas-ure are linked to the difficulties en-countered in gaining access to the la-bour market. On the other hand, thevery low level of pension entitle-ments is an incentive to look for sup-plementary work, which is often pre-carious in nature, in order to top upthis source of income.

Conclusion: policy optionsIn spite of the probably limited pro-pensity of the greater part of theworking population to take steps to-wards active ageing, a commissionset up by the former minister for so-cial solidarity in 1996 in order toidentify the reforms necessary in thesocial security system (see above)elaborated a number of possible sce-narios. Both an increase in the statu-tory retirement age and a flexibilisa-tion of the entry into retirementwere put forward. Raising the retire-ment age from 65 to 68, under waysince 1997 by adding one year to theretirement age each year, postponesthe point in time at which the totalcosts of the system go into the redwith respect to GDP by five years.Although this will not solve the prob-lem of the financial viability of thesocial security system, the additionalscope for action it creates is not negli-gible. However, for a number of rea-sons, this increase in the retirementage has not received the support of

all experts. The arguments in favourof an increase are as follows:– later entry into the labour market

due to longer initial education andtraining,

– sustained increase in the life ex-pectancy of pensioners,

– the tertiarisation of the economy(decline in physically demandingoccupations).

The principal argument against suchan increase relates to the fact that alarge proportion of those retiring inthe next decade will consist of work-ers who entered the labour marketearly in life and worked in demand-ing professions (women in the textileindustry, men in the metallurgy andmechanical engineering sectors andin construction). By contrast, there iswidespread agreement on the needto flexibilise the age of retirement bymeans of:– positive incentives to prolong ac-

tive working life (supplementarypension entitlements proportionalto the additional years worked be-yond 65);

– providing access to a retirementpension for all those aged between62 and 65 who have paid contri-butions for 40 years;

– negative incentives regarding “an-ticipated retirement”, which is cur-rently not possible before the ageof 65 (apart from certain cases stip-ulated by law); such retirementshould be legally permitted, butwith a reduction in pension entitle-ment in line with the length ofworking life. A revision of all legalprovisions relating to the antici-pated pension is also recommend-ed.

A bundle of measures was also intro-duced under the auspices of the Stra-tegic Concertation Accord signed inDecember 1996 between the govern-ment and certain social partners, themost important of which are: partialretirement, or the opportunity to re-duce working hours progressively;converting employment contractsinto fixed-term contracts when work-ers reach the statutory retirementage; and reducing employer social se-

curity contributions for those workerswith a full contribution record. How-ever, many of the elements envisagedin this accord have not yet been trans-lated into concrete measures.

As far as the attitudes of workersthemselves are concerned, a numberof social groups have brought pres-sure to bear on the public authoritiesto introduce support measures for ear-ly exit from the labour force. This re-flects the great difficulties faced byolder workers if they are forced to re-gain employment or even just to re-tain their existing employment rela-tions.

In spite of recent measures intro-duced in Portugal to increase the flex-ibility of working hours and retire-ment ages, the emergence of ad-vanced forms of organising workinglife comes up against serious obsta-cles: low-skill labour, very low wages,short contribution periods and a lowlevel of pension entitlements; indeed,on the contrary, all of these factorsare arguments for extending workinglife, provided this is of better quality.

As a result, it is income maximisa-tion that tends to be the basic andmost frequent choice of workersthroughout their active life. In Portu-gal early exit from the work force isfrequently involuntary, particularlyin sectors and professions in whichunemployment is especially high.

Helena Lopes & Rui Fiolhais

Selected bibliographyComissão do Livro Branco da Segurança So-cial (1998): Livro Branco da Segurança Social.Ministério do Equipamento, do Planeamento eda Administração do Território (MEPAT)(1998): Plano de Desenvolvimento Económi-co e Social.Ministério do Trabalho e da Solidariedade(1999): Plano Nacional de Emprego para1999.Ministério do Trabalho e da Solidariedade –Instituto de Gestão Financeira da SegurançaSocial (MTS-IGFSS) (1998): Estatísticas da Se-gurança Social – Dados Físicos 1996.OECD (1998): Employment Outlook. Paris.

7 Most enterprises seeking to reduce the sizeof their workforce try to minimise involun-tary redundancies, and most terminationsare reached “in joint agreement” betweenthe worker and management. Normally, theworker is provided with a redundancy al-lowance and then leaves “voluntarily”.

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Finland

IntroductionThe population is ageing at a rapidrate in Finland, as in other Europeancountries. Due to low fertility rates,the population shares of young agegroups have declined. Today theFinnish labour force is older thanever before.

In 1998, about 19% of the popula-tion was under 15 years of age, andas many as 15% had reached the ageof 65. It is expected that by 2030over a quarter of the population willbe 65 years or over (Figure 1). Thelarge age cohorts that were born af-ter the Second World War have al-ready passed the age of 50. They willqualify for an old-age pension duringthe period 2010–2020. When thishappens, about 80,000 to 90,000people will exit annually from the la-bour market, while at the same timeonly 60,000 people will be enteringit. Without immigration, the Finnishlabour force is expected to shrink inthe future. The combination of anageing population and a shrinking la-bour force puts heavy pressure onthe labour market and the social pro-tection system.

According to an OECD survey,Finnish expenditure on old-age pen-sions in 2030 could rise to a level cor-responding to 18% of GDP. Thiswould be the second-highest figureamong OECD countries (Italy is atthe top of the list). In 1995, old-agepensions accounted for about 10% ofGDP in Finland.

A further challenge related to theageing labour force comes from theearly exit behaviour of Finnish work-ers. Due to different early retirementschemes, pensioners make up a lar-ger share of the population in Fin-land than the average for other EUcountries. The tendency towards ear-ly retirement has lowered the labourforce participation rates of olderworkers. The cost pressure due to

Figure 1: Age structure of population, 1998–2030

Source: Statistics Finland: Population 1998, p. 6.

early exit behaviour and prolongedlife expectancy in Finland has beenone of the highest among OECDcountries. It has been found that, dueto the combined effect of these twofactors, the burden on social securityrose in Finland by 25% between theyears 1976 and 1995. If the presentsituation prevails in the future, allpension payments (including family,early retirement and old-age pen-sions) will rise to a level which corre-sponds to one third of GDP in 2030(Rantahalvari & Ropponen, 1998).

In 1997, only one out of four menand less than one out of five womenaged 60–64 participated in the la-bour market (Table 1); most of thesewere employed and very few un-employed. This positive picturechanges, however, when recipientsof unemployment pension are takeninto account. Including unemploy-ment pensioners, unemployment hashit hardest in the 60–64 age group.

Of all ageing workers, open unem-ployment is highest among those aged55–59: the employment share in thisage group is only 50%. At present,

over-50 year-olds account for a quar-ter of all unemployed jobseekers. Bythe year 2000, this group is expectedto account for as much as 45% if nopreventive steps are taken.


Policies related to accumula-tion of pensions before andafter (statutory) retirement age

There has been serious concernabout the disincentives for activeageing inherent in the social securitysystem in Finland. The average pen-sion age of 59 is regarded to be fartoo low. The government has an-nounced its long-term intention toraise this age to 61–62, to a levelcloser to the formal retirement age of65. Different legislative and labourmarket measures have been taken toachieve this goal.

In 1994, regulations for the ordi-nary old-age pension were revised inthe hope of increasing older workers’incentives to remain employed. In

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Table 1: Labour force participation and employment by age and genderin 1990 and 1997 (in %)Selected age groups 1990 1997

Men Women Men Women

Labour force participation rate45–50 years 92.1 90.2 89.1 89.050–54 years 85.7 83.7 83.0 84.555–59 years 63.2 61.6 60.9 59.060–64 years 30.3 21.0 24.5 17.7

15–64 years 79.6 73.4 74.6 69.4

Employment rate45–50 years 90.1 89.3 80.9 80.550–54 years 82.7 82.4 73.5 75.555–59 years 61.2 59.0 50.5 49.260–64 years 30.0 20.8 22.7 16.3

15–64 years 76.7 71.4 65.4 60.3

Source: Statistics Finland Labour Force Survey.

1994, the percentage increase in thelevel of pension for each year ofservice was raised from 1.5% to2.5% beyond the age of 60, makingit more profitable to remain em-ployed after this age. Due to thesechanges, the early old-age pensionchoice (and other early retirement)has become more costly than before.

Further, in 1996, the accumula-tion criteria for early pensions wererevised for the period when a personis already on early retirement pen-sion but not yet on old-age pension(for the so-called “future time”).These changes permanently reducethe level of final pension and, there-fore, create an additional disincen-tive to retire early.

Even though pensioners who deferretirement beyond the age of 65 re-ceive a 1% increase for each month inthe final pension level, there are fewindividuals who actually work afterthe age of 65. Despite this very highfinancial incentive to defer retire-ment, only 6% of men and 2% ofwomen aged 65–74 were employed in1997. This fact reflects attitudes ofboth employees and employers.There appears to be a social consensusthat older workers should considerretirement options when possible.


Regulations about statutory pensionschemes provide guidelines for early

exit behaviour in Finland; 96% of to-tal expenditure on pension benefits isstatutory by nature. In addition toordinary disability pension, there arefour early retirement schemes avail-able for older workers, each targetedtowards specific groups.1 Figure 2shows population shares of pensionrecipients at different ages in 1997.Nearly 18% of those aged 55 are al-ready on a pension, mainly due todisability. At the age of 64, almost90% have retired. Thus, only oneperson in ten stays in the labour mar-ket until the formal retirement age of65.

The unemployment pensionscheme was introduced in 1971. Un-der this scheme, the unemployedaged between 60 and 64 are eligiblefor the unemployment pension, pro-vided they have been under the un-employment allowance system for acertain period. During the years1991–1996, the unemployed aged 55or over were allowed to receive un-employment allowance for a pro-longed period, until they reached theage of 60. Together with other regu-lations, this meant that, in practice, aperson who became unemployed atthe age of 53 and received unem-ployment allowance was guaranteedan unemployment pension at the ageof 60 without having to search for ajob in the meantime. In 1997, the agelimit for the extended unemploy-ment allowance period was raised to57 in order to improve incentives forthose between 53 and 55 years of ageto search for a job. The unemploy-ment pension scheme has been thelargest early retirement scheme inFinland. In 1997, about 18% of thoseaged 60–64 were on an unemploy-ment pension.

In 1986, the individual earlyretirement pension scheme was

Figure 2: Pension recipients as a percentage of population, end of 1997

Source: Statistical Yearbook of Pensioners in Finland.

1 In addition, there are special farmers’ pen-sions and ordinary old-age pensions avail-able before the age of 65.

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launched for employees aged be-tween 55 and 64 with a long workinghistory in the private sector (ex-tended to the public sector in 1989).People are eligible for this scheme iftheir ability to work has declinedsuch that it is no longer possible forthem to continue in their current em-ployment. This became the secondlargest early retirement scheme. In1994, the qualifying age for the pen-sion was lifted to 58 years in an at-tempt to increase the employmentrate of older workers. In 1997, 3% ofthose aged 55–59 and 16% of thoseaged 60–64 received individual earlyretirement pensions.

The early old-age pension schemewas introduced in the mid-1980s inthe private sector and later in thepublic sector. Employees can take anearly old-age pension at the age of 60in the private sector and at the age of58 in the public sector. The old-agepension is normally determined bymultiplying 1.5% of the wage or sal-ary by the number of years of serv-ice.2 The maximum pension is 60%of the average pay in the private sec-tor. If an individual takes an earlyold-age pension, his or her level ofpension will be permanently reducedby 6% for each year short of age 65.Despite this negative incentive, theearly old-age pension has been oneof the main channels of early exitfrom the Finnish labour market. In1997, nearly 7% of those aged 60–64 were on early old-age pensions.

In Finland, it is possible to enjoytax allowances for private pensionsavings that allow for early retire-ment when a person is 58–64 yearsof age. This year, the regulations forthese tax allowances have been tight-ened, so that in new pension con-tracts a tax allowance is possible onlyif the pension starts at the age of 60.The amount of the tax allowance hasalso been revised, especially in casesin which the pension savings are tak-en on behalf of a spouse.

Policies to increase participa-tion rates and to retain/reinte-grate older workers, by meansof active labour market policymeasures as well

In 1998, a combination supportscheme was introduced to promoteemployment among the long-termunemployed. Over 60% of the un-employed aged 55–64 are long-termunemployed, and it was thought thatthis scheme would offer them an ad-ditional pathway to employment.Under this scheme, labour marketsupport, which long-term unem-ployed jobseekers often end up re-ceiving, is paid directly to the em-ployer. There is also an additionalemployment benefit that is decidedseparately in each case. A person canbe employed under this scheme forat most 12 months. Due to the rela-tively modest income support relatedto this scheme, it is not likely to bevery attractive for older workers. Inparticular, pension rights may be im-paired if an older worker is placed ina job with earnings that do not matchprevious income levels. This problemhas been tackled by a new law thatwill be described below. During1998, about 2,600 people on averagewere employed under this scheme.

Temporary employment has beenmade more attractive to older work-ers through a law according to whichan unemployed person, who is 55years of age or older, can accept tem-porary employment (lasting at mostfor 10 months) at a lower incomethan what he or she was used to with-out it having a negative effect on thefuture pension level. This law is in ef-fect from 1 July 1998 until 31 De-cember 2000.

In 1996–1997, a pilot study evalu-ated the needs for different labourmarket services among ageing long-term unemployed. In 1998, this eval-uation was extended to the wholecountry. Through these evaluationsit is possible for labour market au-thorities to examine each jobseeker’sindividual employment possibilities,needs for rehabilitation and pensionoptions.

Policies promoting flexible(part-time) work and gradualretirement provisions

The job alternation compensationscheme, which is in effect until theend of the year 2000, makes it pos-sible for an employee to go on leavefor a specified period, if his or heremployer hires an unemployed per-son as a replacement. This is not anage-specific scheme, but it is relatedto ageing in that it helps people re-tain their working ability while stillbeing employed. About 4,000 peo-ple, on average, were on alternatingleave in 1998. According to a surveycarried out by the Ministry of La-bour, this scheme has mostly attract-ed middle-aged women in the munic-ipal sector.

Another scheme designed to re-lieve the workload of the employedand to offer employment opportuni-ties to the unemployed is the part-time subsidy. It is granted to a full-time employee who voluntarily takespart-time employment for a certainperiod, on the condition that his orher employer recruits an unemployedjobseeker for the same period. Thisscheme started as an experiment in1994 and became a permanentscheme in 1997. In 1998, an averageof about 7,000 people participated inthe scheme. It has been used mostlyby those in the age group 34–50, andthe people hired to replace these em-ployees have been quite young – inthe age group 26–30.

In 1994, in an effort to improvethe labour market attachment of old-er workers, the eligibility age for thepart-time pension was lowered from60 to 58. Along with other early re-tirement pensions, the part-time pen-sion was introduced in the mid-1980s. Despite its many attractivefeatures, its use has been limited. In1997, less than 2% of those aged 60–64 were on a part-time pension. Oneof the reasons for this is that a part-time pension is voluntary by natureand requires an employment con-tract.

To boost the use of the part-timepension, parliament has temporarily

2 This is the case in the private sector. In thepublic sector, the multiplier is between1.5% and 2.2%, depending on the person’sage and years of service.

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lowered the qualifying age for thepension from 58 to 56 years for theperiod from 1 July 1998 to 31 De-cember 2000. Employers are alsoobliged to try to arrange part-timeemployment for those who wish totake it. Furthermore, legislation onprivate-sector pensions has been al-tered in order to increase the level ofpension in cases in which an em-ployee becomes qualified for a dis-ability pension while in part-timeemployment. It seems that, due tothese changes, the number of part-time pensions has started to rise.

Developments at the levelof companiesIn Finland, early exit behaviour isregulated through general legislationrather than through individual/col-lective agreements.3 In terms of em-ployment, collective agreementshave a limited scope of action. Inprinciple, the role of collective agree-ments is to specify the terms of anemployment contract for every sin-gle employee. Therefore, they do notinclude regulations on the level ofemployment as such (and, hence,early retirement) and on the substitu-tion of one group of workers by an-other.

It has been argued that employers’indirect labour costs are one of thebiggest obstacles to employment be-cause they raise the threshold for hir-ing new employees. About half of in-direct labour costs consist of statu-tory social security contributions.Employment pension contributionsare progressive with respect to theemployee’s age in firms that have 50employees or more. For large firms,which have more than 1,000 em-ployees, there is full experience rat-ing in disability pensions, and forfirms with more than 300 employees,there is a partial experience rating inunemployment pensions. Thus, if anindividual working in a firm withmore than 1,000 employees exitsfrom the labour market due to a dis-ability, his or her firm has to pay100% of the costs of a disability pen-sion until he or she is entitled to old-

age pension. In the case of unem-ployment pension, firms with morethan 300 employees have to pay50% of the costs of unemploymentpension for each person that hasbeen made redundant until he or shereceives old-age pension. Thepresent system of experience ratingmeans that it is favourable for largeemployers to maintain the workingability of their workforce, and it iscostly to dismiss people on loosegrounds. On the other hand, experi-ence rating means that recruitingageing workers is risky, which cre-ates obstacles to the labour marketentry of older workers.

There has been an ongoing debateabout the employability of olderworkers and the role of the social se-curity system in this regard. In 1998,as part of an incomes policy agree-ment, labour market organisationsand employees’ pension institutionsformed a working group to discussthese problems. This so-called KariPuro’s working group produced ashort list of suggestions at the end ofJune 1999 for improving the em-ployability of older workers on theFinnish labour market. Among otherthings, in order to make it less riskyto employ a 50-year old worker, itwas suggested that the last employershould not be solely liable for disabil-ity and unemployment pensions dur-ing the first three years of employ-ment; the risk should be sharedamong a larger group of insured em-ployers. Further, it was proposedthat the experience rating should beset at the same level (80%) in thecase of both disability and unem-ployment pension. Other changes re-lating to the eligibility criteria andthe level of unemployment pensionwere also suggested. The workinggroup, however, emphasised the im-portance of training and rehabilita-tion of older workers, so that theycan be employed in the open, non-subsidised labour market. The gov-ernment has been reviewing thesesuggestions, and it is expected thatthe impact of this work will be seenin legislative changes during the au-tumn.

There has been a huge effort at thecompany level, in connection withthe National Programme for AgeingWorkers launched by the Finnish gov-ernment in 1997, to develop means tokeep up employees’ working abilityand professional competence. TheFinnish Institute of OccupationalHealth has been playing an integralpart in this process. Many develop-ment projects have received supportfrom the European Social Fund. Ac-cording to the Working Ability Baro-meter, this effort has been quite suc-cessful: in 66–78% of firms with atleast two employees, maintainingworking ability has been on the agen-da. However, a much smaller share offirms has been truly active. In largecompanies, 38% of managers claimedthat they had a lot of activities relatedto maintaining working ability. Insmall companies, this figure was muchsmaller: 9%. This may reflect the factthat, due to the lack of experience rat-ing in early retirement pensions insmall firms, their interest in keepingup the working ability of their work-force is not as high as in large firms,which are experience-rated.


Employment risks, re-employ-ment prospects

When one considers the perspectivesof older workers, the main factors tobe considered concern the risk of ear-ly withdrawal from the labour mar-ket and unemployment. Older work-ers’ future prospects are very differ-ent to those of other age groups as re-gards becoming unemployed or not.

How difficult is it for ageing work-ers to find work after unemploy-ment? In Table 2, transition ratesfrom unemployment to employmentbetween the years 1996 and 1997are reported for different age groups.These figures give a clear message.

3 Labour market organisations, however,play an important role in the backgroundwork when legislation is under revision, andthey are also involved in the administrationof pension funds.

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Compared with other age groups,older workers have a negligibleprobability of becoming employed.About 3–5% of those aged 55–59and 3–4% of those aged 60–64 whowere unemployed in 1996 found ajob in 1997. Employment in the pub-lic sector includes subsidised employ-ment. One third of those aged 15–44found employment during the sameperiod. Women had a higher prob-ability of finding employment in thepublic sector than men.

Age discrimination in working lifeis prohibited by law in Finland. How-ever, this does not guarantee equaltreatment in practice for ageing work-ers. A recent study on age discrimina-tion showed that in recruitment situa-tions unemployed jobseekers experi-ence more indirect than direct age dis-crimination (Kouvonen, 1999). A typ-ical example of this type of discrimi-nation is an abrupt termination of tel-ephone calls by an employer when thejobseeker reveals his or her age. Age-ing women suffer from gender dis-crimination in addition to age discrim-ination. An interview of employers inSMEs showed that 14% of them feltthat there were tasks in their compa-nies to which people over 45 years ofage would have difficulties adapting.About 8% of wage-earners aged 55–64 said that they had experienced agediscrimination at their workplaces.An interesting, and somewhat surpris-ing, result from the study was that aconsiderable part of age discrimina-tion was coming from co-workers.

When one considers legislation inrelation to lay-offs or redundancies,protection of ageing workers per seappears to be fairly limited in Fin-land. Even though there have beensome recommendations in collectiveagreements to take seniority into ac-count in redundancies, this has notbeen a priority in practice. It appearsthat between 1996 and 1997 theprobability of becoming unemployedwas only slightly higher in the male55–59 age group than in other agegroups – except for women in the15–44 age group (Table 3). In thisage group, 5% of those who werestill employed in 1996 became un-

employed in 1997. Among thoseaged 60–64, about a quarter exitedfrom the labour market between theyears 1996 and 1997, which explainstheir lower than average unemploy-ment propensities.


The attendance rate in adult educa-tion in Finland is, on average, twicethat of other EU countries. Duringthe period 1995–1999, the govern-ment worked together with the socialpartners to implement the concept oflifelong learning. This work is report-ed in a committee report which in-cludes examples of good practices in-volving lifelong learning (Komitea-mietintö, 1997).

During the 1990s, the share ofwage-earners and salaried employ-ees who attended adult educationsubsidised by the employer has beenhighest in the 45–54 age group (Ta-ble 4). The lowest attendance ratehas been among those aged 55–64.

Access to adult education declinessignificantly among the unemployed.According to the 1995 Adult Educa-

tion Survey, only 14% of the unem-ployed participated in vocational orwork-related education in 1995.Among the unemployed aged 55–64,only 1% participated in adult educa-tion.

To improve the lifelong learningof the unemployed, the governmenthas initiated a subsidy programmefor self-motivated studies. Since 1August 1997, the long-term unem-ployed with a long work history havebeen able to receive financial assist-ance for self-motivated studies ortraining that improves their skills andemployability. The level of assist-ance is the same as the unemploy-ment allowance, which is higher thanthe financial support for ordinarystudents. It was found that about14,000 long-term unemployed usedthis option in 1997. By the end of1998, however, only 800 partici-pants had started studies under thisscheme, which took policy-makersby surprise. There are many reasonsfor this disappointing result. Thescheme started too late in the yearfor people to be able to enrol, someapplicants were not approved by theeducational authorities and the quali-

Table 2: Transition rates from unemployment to employment, 1996–1997 (in %)Selected Percentage getting Percentage of new jobsage groups new jobs in public sector

Men Women Men Women

15–44 years 32.1 35.8 15.5 50.545–49 years 24.5 30.1 15.1 54.350–54 years 20.7 22.7 18.5 55.455–59 years 5.1 3.6 14.0 52.360–64 years 3.9 2.9 15.2 48.7

Source: Statistics Finland, Register-based Employment Statistics.

Table 3: Transition rates from employment to non-employment, 1996–1997 (in %)Selected Percentage becoming Percentage exiting fromage groups unemployed the labour market

Men Women Men Women

15–44 years 4.2 5.2 4.1 7.145–49 years 3.1 3.8 2.0 1.750–54 years 3.0 3.9 2.5 2.155–59 years 4.9 5.1 6.3 7.460–64 years 2.7 3.6 24.1 25.4

Source: Statistics Finland, Register-based Employment Statistics.

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fying time limit regarding work his-tory was thought to be tough (Silven-noinen, 1998). In 1998–1999, thequalifying time limits regarding workhistory are to be relaxed, which willincrease the number of people eli-gible for the assistance. It does not,however, provide a solution forwhen there is a lack of interest. Inadult education, there seems to be aparadox: people who, on subjectivegrounds, think that they do not needadditional education are often theones who, on objective grounds,have the most urgent need for it.

To promote labour market train-ing among ageing jobseekers, specialcourses have been designed to meetindividual needs. The share of olderjobseekers who have received labourmarket training has, however, re-mained at low levels. In 1998, about1% of those aged 55–59 and a 0.5%of those aged 60–64 attended labourmarket training. In the 35–39 agegroup, over 13% of jobseekers par-ticipated in labour market training. Itis rather disappointing that labourmarket training has not provided aproper pathway to education amongolder jobseekers. The need is there,for there appears to be very little in-terest in self-motivated educationamong older workers. Labour mar-ket training among older jobseekershas remained at low levels.

When older age is combined witha low basic education, which is oftenthe case, the educational needs aregreater than ever. According to a re-cent study, reallocating more moneyfrom employment subsidies to labourmarket training would benefit olderand long-term unemployed jobseek-ers, who would then have a higherprobability of becoming employed(Hämäläinen, 1999).

The early retirement vs.unemployment choiceThe willingness to retire early has re-mained high in Finland despite thechanges in social security provisionsmade to deter early withdrawal fromthe labour market. About two-thirdsof those aged 45–64 would like totake an early retirement pension.Their reasons are closely connectedwith the level of burn-out (Kalimo &Toppila, 1997). Among those whoclaimed serious symptoms of burn-out, as many as 74–87% had thoughtabout an early pension. In the 1970sand 1980s, the solution to labourmarket problems was early retire-ment. The above sentiments reflectthe inheritance of those years.Changing prevailing attitudes willtake time and effort.

In recent years, regulations on ear-ly retirement pensions have beentightened in order to reduce the out-

flow of older workers from the la-bour market. The government hasstated that tax allowances grantedfor private pension savings will bereduced in the future. The evidencethat has been gathered until now,however, suggests that tighteningearly pension rights has not been aparticularly effective way to raise theemployment rates of older workers.In fact, those who have lost their eli-gibility for pensions, in particular inthe 55–59 age group, have becomeunemployed in increasing numbers(Hytti, 1998; Gould, 1999). Thisgives us a clear message: supply-sidemeasures alone do not provide solu-tions to the early exit problem in Fin-land. Extensive efforts to improvethe demand for older workers in thelabour market are needed.

Conclusion: policy optionsThe extensive structural changes thatthe Finnish economy went through inthe 1970s created a policy frame-work that supported older workers’early withdrawal from the labourmarket. This policy line wasstrengthened by early retirementschemes launched in the 1980s. It be-came clear quite soon that the costsincurred by these kinds of policiesare high. Despite measures designedlater to reduce incentives for earlyretirement, willingness to retireamong older workers has been un-precedented.

In 1997, the Finnish governmentlaunched the National Programmefor Ageing Workers for the years1998–2002. The programme aims atproviding employment opportunitiesfor the ageing through informationand training, adult education, im-provements in employment servicesand measures targeted at loweringbarriers to employment. Its generalgoal is to shift prevailing social atti-tudes towards ageing workers in amore favourable direction. It ishoped that this goal will not changeand that the problem of an ageingworkforce will also remain one of themajor concerns among policy-mak-ers in the future.

Table 4: Participation rates in employer-subsidised adult education (% ofall employees)Selected age groups 1991 1995 1998

Both genders15–64 years 41.7 44.4 41.625–44 years 44.9 46.3 44.045–54 years 45.2 48.8 45.855–64 years 36.1 39.7 37.8

Men15–64 years 39.0 45.3 40.625–44 years 41.5 47.4 42.145–54 years 43.9 47.2 47.255–64 years 32.9 48.7 36.6

Women15–64 years 44.3 43.7 42.525–44 years 48.2 45.3 46.245–54 years 46.4 49.9 44.655–64 years 38.9 33.6 38.7

Source: Sosiaali- ja terveysministeriö (1999c), Table 5, p. 36.

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Maintaining working ability andprofessional competence among age-ing workers is of vital importance intackling the early exit problem inFinland. Arriving at concrete resultshere is a major challenge, however.At present, there are about 400,000people aged 40–54 in Finland whohave only a basic education. In orderto meet the demand for a qualifiedlabour force, which internationalcompetition and technologicalchange require, substantial resourcesshould be invested in the educationand training of those who lack theskills needed in the labour market.

Reija Lilja

Selected bibliographyAsplund, R. (1993): Essays on Human Capitaland Earnings in Finland. Series A 18. Helsinki:The Research Institute of the Finnish EconomyETLA.Employment & Social Affairs (1998): ProjectsAssisting Older Workers in European Coun-

tries. Employment & European Social Fund.Brussels: European Commission.Gould, R. (1999): Varhaisen työmarkkinoiltapoistumisen reitit. Eläketurvakeskuksen mon-isteita 1999: 26. Helsinki.Hämäläinen, K. (1999): Aktiivinen työvoi-mapolitiikka ja työllistyminen avoimille työ-markkinoille. Elinkeinoelämän TutkimuslaitosETLA. Sarja B 151. Helsinki.Hytti, H. (1998a): Varhainen eläkkeelle siirty-minen – Suomen malli. Kansaneläkelaitos. So-siaali- ja terveysalan tutkimuksia 32. Helsinki.Hytti, H. (1998b): “Ikääntyvät ja työhön kan-nustava sosiaaliturva.” In: Yhteiskuntapoliti-ikka, Vol. 63, No. 4, pp. 327–338.Kalimo, R. & S. Toppinen (1997): Työuupu-mus Suomen työikäisellä väestöllä. Työter-veyslaitos. Helsinki.Komiteamietintö (1996): Ikääntyvät työelä-mässä. Komiteamietintö 1996: 14. Helsinki.Komiteamietintö (1997): Oppimisen ilo.Kansallinen elinikäisen oppimisen strategia.Opetusministeriö. Komiteamietintö 1997: 14.Helsinki.Kouvonen, A. (1999): Ikäsyrjintäkokemuksettyössä ja työhönotossa. Työministeriö. Työ-poliittinen tutkimus, No. 203. Helsinki.Lilja, R., G. Standing & T. Santamäki-Vuori(1990): Unemployment and Labour MarketFlexibility: Finland. Geneva: ILO.

Parjanne, M.-L. (1997): Työmarkkinat mur-roksessa. Elinkeinoelämän TutkimuslaitosETLA. Sarja B 135. Helsinki.Prime Minster’s Office, Economic Council(1998): Labour Market Challenges and Im-proving Functioning of Labour Market. Sum-mary of the Expert Group Report. Valtioneu-voston kanslian julkaisusarja 1998/3. Helsinki.Rantahalvari, V. & K. Ropponen (1998): Ikä-rakenteen muutoksen yhteiskunnallisia vaiku-tuksia. VATT (mimeo). Helsinki.Silvennoinen, H. (1998): “Saako koulutustyöttömät liikkeelle?” In: Hyvinvointikatsaus,No. 2, pp. 33–37.Sosiaali- ja terveysministeriö (1999a): Sosiaal-iturvan suunta 1998–1999. Sosiaali- ja ter-veysministeriön julkaisuja 1998: 15. Helsinki.Sosiaali- ja terveysministeriö (1999b): Työky-kyä ylläpitävän toiminnan barometri 1998 –väliraportti. Sosiaali- ja terveysministeriönselvityksiä 1999: 1. Helsinki.Sosiaali- ja terveysministeriö (1999c): EhdotusKansallisen Ikäohjelman seurantajärjestel-mäksi. Sosiaali- ja terveysministeriön julkaisu-ja 1999: 9. Helsinki.Työministeriö (1999): Työllisyyskertomusvuodelta 1998. Työhallinnon julkaisu, No.222. Helsinki.

Sweden

Introduction

The population structure in Swedenis shifting towards a larger share ofolder people. This development isdue to a decline in the fertility ratecombined with longer life expectan-cy. The immigration flow has a some-what rejuvenating effect on the pop-ulation, but it cannot offset thisdevelopment. The population fore-cast from Statistics Sweden (1998)implies a further shift in the composi-tion of the population to higher agegroups. The proportion of the popu-lation in the age bracket 20–64 yearswill slightly increase up to the early

years of the next century. and itscomposition will change. The aver-age age of the active age group in theactive ages will rise, and around 13%of the population is predicted to be inthe age interval 55–64 years in 2010(compared to 10% in 1998).

These changes will influence thesize and composition of the labourforce. However, it is not only thechange in the age composition of thepopulation that affects labour supplybut also changes regarding the extentto which people in the various age in-tervals are active on the labour mar-ket. The general tendency in Swedenduring the last two to three decades

has been that more and more peopleare leaving the labour force beforethe general retirement age of 65. Thelabour force participation rates aresomewhat lower, both for men andwomen, in the 55–59 age group thanthe figures for 25–54 year-olds (Ta-ble 1), but the more pronounced dif-ferences in terms of lower participa-tion rates are found for men andwomen in the age group 60–64years. Nevertheless, in a EuropeanUnion context, the participationrates of older people in Sweden arestill high.

One rough measure of the “effec-tive age of retirement” is the age at

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which 50% of a given cohort remainsin the labour force. The effective ageof retirement for males has graduallydecreased from around 67 years in1965 to around 62 years in 1998. Dueto increased labour force participa-tion among women since the late1960s, the pattern for women is dif-ferent. The effective age of retirementhas risen from around 55 years in1965 to a peak of around 63 years in1991. Then, however, it started to fallslightly – to around 61 years in 1998.

In Sweden, it is (or has been) pos-sible to combine part-time work withvarious types of part-time pensions,hence facilitating a gradual with-drawal from the labour force. Thereis therefore a tendency, especiallyamong those around 60 years or old-er, to work part time to a larger ex-tent than among other age groups(except among the youngest, whowork part-time while studying). Thisdiscrepancy is most striking amongmen (Table 1).

The trend of an increased numberof full-time or part-time pensioners(with on average higher pensions)combined with lower economicgrowth cause the pension costs, as ashare of GDP, to rise markedly, andthese trends also lower the tax rev-enue from work. The developmentsketched above is one of the maindriving forces behind the rather re-cent focus on the importance of in-creasing the capacity and incentivesamong workers to remain in the la-bour force up to the ordinary retire-ment age, or maybe even longer. A

possible future shortage of labourdue to older workers leaving the la-bour force early is also a topic on thediscussion agenda, but it is usuallyconsidered to be of less importancein comparison to the financial pres-sure on the social insurance systems.


Policies concerning (statu-tory) retirement age

Since January 1999, Sweden has anew old-age pension system. In thenew pension system, an individualcan retire from 61 years of age andupwards, and, as in the old pensionsystem, there is no “statutory” re-tirement age. However, the guaran-teed pension is paid only to thoseaged 65 or older. The longer the indi-vidual works, the higher the pensionshe or he will receive when retired.The new old-age pension system isfully valid for all individuals born in1954 or later and partly valid for in-dividuals born between 1938 and1953. Individuals born before 1938are (with some exceptions) not af-fected at all by the change in regula-tions. The old pension system appliesin full to such persons.

The Employment Protection Actstates that an employee is obliged toretire at the age of 67. This law is op-tional, however, and in most collec-tive agreements (covering the vastmajority of working Swedes), thecorresponding age is set at 65.


Most of those who, partly or fully,leave the labour market before theage of 65 do so on being granted adisability pension. In 1998, morethan 420,000 individuals, of which55% were women, were in receipt ofa full or partial disability pension(Table 2). The vast majority of these(80% of the men and 72% of thewomen) were drawing a full disabili-ty pension, that is, they had left thelabour market completely.

Between 1972 and 1996, therewere special unemployment-relateddisability pensions for older workers.Exhaustion of unemployment bene-fits (after 90 weeks) gave eligibilityfor such a disability pension for peo-ple aged 60 or over.1 These pensionswere frequently used as an exit routefrom the labour market in cases oflay-offs. Thus, a large share of regis-tered unemployment among olderworkers was, in practice, a form ofearly exit from the labour market.People aged 60 who had exhaustedtheir eligibility for unemploymentcompensation went on disabilitypension because the maximum per-iod for unemployment compensationwas one year and nine months forpeople aged 55 or over; thus, thoseaged 58 years and three months whobecame unemployed could in prac-tice “retire”. This combination ofpayments from two income transfersystems was called “58.3 pensions”.The granting of these “unemploy-

Table 1: The labour market situation in 1998 by age, 16–64 years (in %)Men Women

Age Labour force Unemploy- Employment/ Part-time Labour Unemploy- Employment/ Part-timeparticipation ment rate population ratio* force partici- ment rate population ratio*

rate ratio pation rate ratio

16–19 years 25.1 13.5 21.7 55.6 28.2 10.8 25.3 74.020–24 years 66.5 12.7 58.2 16.3 58.8 10.7 52.3 44.225–34 years 87.0 7.0 80.9 6.9 78.7 7.4 72.9 33.935–44 years 89.7 6.0 84.3 5.9 89.0 5.5 81.4 38.045–54 years 89.7 5.1 85.2 5.5 86.7 4.2 83.4 60.855–59 years 83.6 6.6 78.3 7.9 78.4 4.1 75.3 39.760–64 years 54.3 7.7 50.5 24.5 45.2 6.0 42.5 51.1

* Part-time workers: 34 hours a week or less as a percentage of those employed.

Source: The Swedish Labour Force Survey.

1 63 years or over between 1972–1974.

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ment” pensions was discontinuedfrom October 1991 onwards, and thegranting of disability pensions forcombined medical and labour marketreasons was abolished from 1 Jan-uary 1997.

The system of disability pensionsis going to be separated from the old-age pension system in future. Thenew regulations are expected to becompleted by the beginning of 2001.

Another possible pathway to earlyexit that was heavily used from themid-1980s to the early 1990s wasexit with an annuity from the occu-pational injury scheme. National so-cial insurance was supplemented byoccupational insurance. The replace-ment rate was 100% until changeswere introduced in 1993, when therate was lowered to that of sicknessbenefit (80%), but additional com-pensation of up to 100% can be ob-tained from the collectively agreedinsurance schemes. More important,stricter definitions of occupationalinjuries were implemented. Thenumber of newly granted annuitiesthen fell sharply in 1994, after whichit started to rise again, albeit slowly.

Policies to increase participa-tion rates and to retain/reinte-grate older workers, also bymeans of active labour marketpolicy measures

All labour market programmes,except those targeted at young indi-viduals, are open to older people.The older unemployed are, how-ever, underrepresented in labourmarket training. The work-experi-ence scheme (Arbetslivsutvecklings-projekt – ALU) introduced in 1993has been used extensively for theplacement of older unemployed, butsince January 1999, no new place-ments in this programme are permit-ted. A new and similar programme(Arbetspraktik) in practice replacesALU from that date.

Workers of all ages are eligible forplacement in disability programmes.The two most important are shel-tered workshops owned by the gov-ernment and work with a wage subsi-

dy. Both these measures may offerlong-term placements, sometimes upto the age of 65. It is possible, for ex-ample, to combine part-time work ina sheltered workshop with a partialdisability pension. The relative im-portance of disability programmes isgrowing and, during recent years, sois the share of older workers in la-bour market programmes.

At the moment, there are no la-bour market programmes targetedexclusively at older workers, butthere have been some temporaryones. The most important was theWork Placements for those over 55years of age in the public sector (of-fentligt tillfälligt arbete – OTA). Un-employed persons aged 55 years orover who had been unemployed orin programmes for more than 24 con-secutive months had the possibilityto participate in public temporarywork for the older unemployed. Thescheme was available until the end of1998, but the programme has beenextended to 2001 in the sense that aperson who turned 62 in 1998 canbenefit from extended OTA until theage of 65. Younger participants (agedat least 55) can remain in the OTAscheme throughout 1999. In 1998,there were around 7,700 participantson average in the OTA programme.

Since January 1998, Sweden has anew unemployment benefit system.In the new system – which very muchresembles the old one, there is a flat-

rate basic insurance and a voluntaryincome-related insurance. The basicinsurance is paid to those who havefulfilled only the work requirement,while in order to obtain the income-related insurance, premiums alsohave to have been paid. The amountfrom basic insurance paid is SEK 240per working day. The amount paidfrom the income-related insurance is80% up to an earnings ceiling ofaround SEK 16,000 per month. Theperiod for which both types of insur-ance can be obtained is 300 days, butfor people aged 57 or older, the cor-responding limit is 450 days. Al-though this is more generous than foryounger people, it represents a tight-ening of the rules compared to theold system, in which the correspond-ing age limit was 55 years.

Policies promoting flexible(part-time) work and gradualretirement provisionsIn Sweden, apart from the disabilitypension system (see above), whichpermits partial disability pensions, inthe old pension system there are twotypes of partial old-age pensions forearly retirement: early old-age pen-sions and partial pensions. Neither ofthem are related to health. In the sys-tem of early old-age pensions, partialretirement (25, 50 or 75%) beforethe age of 65 (but at least from theage of 61) means that the pensiongranted is reduced proportionally.This type of pension is not very com-mon. In the system of partial pen-sions, individuals between 61 and 64years are eligible, the replacementrate is 55% and the maximum workreduction compensated for is tenhours per week since 1994. The em-ployer’s consent is needed for the re-duction in working time. This hasbeen a very extensive system, albeitnot as extensive as the disability pen-sion system, but the number of indi-viduals receiving this pension has de-creased from 1995 onwards (Table3). The inflow of new partial pen-sions has varied with the replace-ment rate (which has varied between50% and 65%) and the business cy-cle (Wadensjö, 1996).

Table 2: Individuals with disabil-ity pensions (in 1,000s)

Men Women Total

Decem-ber

1988 165 182 3471989 166 189 3551990 167 194 3611991 168 199 3671992 175 208 3831993 190 225 4151994 192 230 4221995 189 231 4201996 187 232 4191997 189 234 4231998 187 235 422

Source: National Swedish Social Insur-ance Board.

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The two pension types, early old-age pensions and partial pensions, donot exist in the new pension system,but the system of early old-age pen-sions, which provides actuarially re-duced pensions, can be said to be aninherent possibility in the new pen-sion system. Thus, the possibility ofgradual retirement is also offered bythe new system.

Development at the levelof companies and sectors

Restructuring the workforce(with or without early exit)

Restructuring, downsizing or closingdown a company often have majoreffects on the age-based staff struc-ture. Up to 1991, the so-called 58.3pensions (see above) were used fre-quently by companies and unions in(collective) agreement to induce old-er workers to retire early (see, for ex-ample, the case study in Storrie,1993). After 1991, when this possibil-ity was abolished, it became morecommon for companies to guaranteetheir older employees company-financed pensions up to the age of 65if they left their jobs (see, for exam-ple, the case study in Isaksson & Jo-hansson, 1997). These pensions aregenerally bought from a private in-surance company. Still, older em-ployees with health problems may beasked to apply for disability pensions.

Company strategies andcollective agreements withrespect to older workers(retraining, early retirement,gradual retirement)

The relatively extensive share of old-er employees combining part-timework with part-time pensions is anindication that employers are gener-ally not averse to this type of gradualexit from the labour market, since itis up to the employers to agree to thereduction of working hours. Asshown by the comprehensive use ofthe so-called 58.3 pensions and,more recently, of company-financedpensions – supported both by theemployers and the unions, this wayof laying off older employees has notbeen a matter of controversy be-tween the social partners. As men-tioned earlier, the regular retirementage of 65 years is a consequence ofcollective agreements, not of legisla-tion.

Training/manpower develop-ment

The extent to which companies’training programmes are open to old-er employees can be used as an indi-cation of company policies towardsthis group. Surveys of firms’ trainingprogrammes have been conductedby Statistics Sweden since 1986. Inthese surveys, a training programmeis defined as training partly or whollyfinanced by the employer. The statis-tics show that, overall, companytraining is very widespread. In 1997,27% and 25% of employed men andwomen, respectively, had receivedtraining on company time of at leastfive days. Those who work full timeand those with a higher level of edu-cation – groups where older workersare less common – receive moretraining than other groups of work-ers. The figures for the gender-basedage groups of 50–64 years, however,show only a slight under-representa-tion: 25% and 24% of the men andwomen, respectively, aged 50–64years had received training on com-pany time of at least five days in1997. Thus, it does seem that em-

ployed older workers have approxi-mately the same access to companytraining as workers in the other agegroups.


Unemployment risks,reemployment chances

In 1998, only around 50% of themen and somewhat more than 40%of the women in the 60–64 age groupwere employed (Table 1). Of the em-ployed in this age group, around onefourth of the men and half of thewomen worked part-time.

In this context, the relatively smalldifferences in the unemploymentrates (Table 1) do not tell the wholestory about the diminishing labourmarket attachment of people aged55–60 or more. It should be noted,though, that long-term unemploy-ment is more common among olderpeople. In 1998, 48% and 43% ofunemployed men and women, re-spectively, in the 55–59 age grouphad been unemployed for more than12 months. The corresponding fig-ures for men and women in the 60–64 age group were 39% and 40%.This should be compared to the factthat 33% and 28% of unemployedmen and women, respectively, in the25–54 age group had been unem-ployed for more than 12 months.However, some of the older unem-ployed have in practice left the la-bour force and are no longer activelysearching for a job (but are perhapswaiting for a company-financed pen-sion).

Although unemployment amongolder workers is not markedly high-er, older individuals who become un-employed usually find it harder tofind a new job than do the youngerunemployed. In companies’ job ad-vertisements, explicit age bars arenot very common, although thiswould not be illegal because there isno law against age discrimination inSweden.

Nevertheless, company policiestowards older job applicants seem to

Table 3: Individuals with partialpensions (in 1,000s)

Men Women Total

Decem-ber

1988 23 15 391989 24 15 391990 23 15 381991 22 15 371992 29 19 481993 30 19 491994 31 20 511995 23 15 381996 16 9 251997 9 5 141998 4 2 6

Source: National Swedish Social Insur-ance Board.

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have become more strict during the1990s. According to a poll study bythe Swedish National Labou MarketBoard (1998), employers are mostnegative about the group of appli-cants older than 55 years. Forty per-cent of employers were “negative”or “very negative” about hiringsomeone from this age group, while45% were neutral. Only 11% werepositive. The share with a negativeattitude towards older applicants islarger than the share with negativeattitudes towards applicants who arelong-term unemployed – the group insecond place on the negative rankinglist.

Earnings situation and pen-sion expectations, includingprivate pensions

By comparison with most othercountries, the wage structure in Swe-den is very even. This means that theage-wage profile is usually less steepin Sweden than elsewhere and,therefore, that economic incentivesto lay off older workers are weaker.In addition, a substantial proportionof workers experience a negative de-velopment in their real wages be-tween the ages of 55 and 64 (Waden-sjö, 1993a).

In the new pension system, thepension is calculated from age 16 andonwards, up to an earnings ceiling of7½ “basic rates”; in 1999, 7½ “basicrates” correspond to SEK 279,000. Asimilar earnings ceiling applied to theold pension system, but in the oldsystem the pension was calculated onthe basis of the best 15 years’ earn-ings (given that the individual’s in-come from work over 30 years ex-ceeded a yearly minimum income).In both systems, incomes above theearnings ceiling do not affect the sizeof the pensions.

In the new system, the pension istied to a new index, “the income in-dex”. The income index measuresthe development of aggregated in-come in society. In the old system,the pension was tied to a price index.

In addition to the social insurance-based old-age pension system, there

are four main collectively-agreed in-surance schemes, covering:– blue-collar workers in the private

sector,– white-collar workers in the pri-

vate sector,– employees in the public sector,

and– employees in local government

(the municipalities and counties).The four schemes, together withsome additional minor ones, in prac-tice cover the total labour force.

Whilst there are some differencesbetween the social insurance and col-lectively agreed systems, the similar-ities are more important. For old age,disability, sickness and occupationalinjury, the collectively bargainedschemes supplement compensationfrom the social insurance schemesby, in most cases, 10%. More impor-tant for the high-income groups is thefact that the occupational insuranceschemes also compensate for incomelosses above the ceiling specified bythe social insurance schemes. Thereare also some collectively bargainedinsurance schemes without any coun-terpart in the social insurance sys-tem. The most important ones arethe severance pay insuranceschemes. Company pensions are oflittle importance in Sweden. Al-though savings in private pensionfunds have increased markedly dur-ing the last 10–15 years, the numberof beneficiaries is still rather low.

Early retirement and limitedchoice

A fuller understanding of the inci-dence of early retirement is facilitat-ed if account is taken of early retire-ment as a limited choice. Most deci-sions to retire early are probably nei-ther completely voluntary nor com-pletely involuntary. A policy frame-work that includes high replacementrates and/or easy access to variouspension schemes means stronger eco-nomic incentives to retire early. Thepolicy developments that previouslyopened up or enhanced possiblepathways to early retirement, how-ever, did not arise or grow in a va-

cuum, but rather were a response toan increased downsizing of the work-force, rationalisation and the threatof rising unemployment. In addition,a degree of moral pressure from co-workers, unions and society at largemay induce older workers to acceptearly retirement on the basis that itwould lead to better employmentprospects for younger workers.

Conclusion: policy optionsThere are basically two major typesof policy option. The first concernsthe financial implications of the pen-sion scheme in connection withdemographic changes and the risingnumber of early or gradual retire-ments. The second is related to thefactual possibilities available to olderworkers who want to keep their jobsor find new jobs. These two typesmay very well overlap, making itmore costly to retire early/to lay offolder workers for the individual em-ployee or the employer gives incen-tives to stay on the job/not to lay offolder workers.

The current tendency in Sweden,as regards the first option type, is tohave lower or no subsidies for partialand early exit from the labour mar-ket. The possibility of partial or earlylabour market withdrawal is stillavailable, but at a higher cost for theindividual or firm concerned. Thereare also recent restrictions in the un-employment benefit system. For eli-gible unemployed individuals of 55–56 years of age, the duration of theunemployment benefit has beenshortened by 150 days, from 450days to 300 days.

As regards the second type of op-tion, employed older workers inSweden are quite well protected.Job-protection legislation appliesparticularly to older workers, for ex-ample through longer periods of no-tice by age: the period of notice foremployees aged 45–64 years is sixmonths. For older unemployedworkers, the situation is different.Although there are laws (recently re-inforced or introduced) against dis-crimination in working life based on

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sex, ethnic origin, sexual orientationor disabilities, there is no law againstdiscrimination on the basis of age, forexample in the case of older job ap-plicants.

The Swedish labour market is to avery large extent characterised bycentral agreements rather than legalprovisions. Today, most workingSwedes, for example, are obliged bycollective agreements to retire at theage of 65. Nevertheless, the govern-ment has recently presented a report,Höjd ålder för avgångsskyldighet till67 år Ds 1999:39, proposing changesin the Employment Protection Actsuch that stipulations in collectiveagreements prescribing a compulsoryretirement age of 65 or 66 becomeinvalid.

“Active ageing”, in the sense ofmaintaining or reintegrating olderworkers on the labour market, hasbecome an issue in Sweden only dur-ing recent years. The pressure on theold-age pension system from the age-ing population was given attentionearlier than that, but putting the con-cept of “active ageing” on the gov-ernment’s agenda is something thatcovers more than this particularissue. The deteriorating labour mar-ket prospects for older workers in thedeep economic recession that startedin the early 1990s probably contri-buted to the growing political inter-est in the concept of “active ageing”.

Anna Thoursie

Selected bibliographyAxelsson, S., A. Granholm & R. Henning(1994): Tidsmyterna – om medelålders på ar-betsmarknaden. Stockholm: SNS Förlag.Edebalk, P. G., A.-C. Ståhberg & E. Wadensjö(1998): Socialförsäkringarna. Stockholm: SNSFörlag.Forum 50+ (1995): Fakta och argument om50+ arna. Stockholm: Forum 50+.Höjd ålder för avgångsskyldighet till 67 år(1999). Bericht der schwedischen Regierungmit Änderungsvorschlägen für das Beschäfti-gungsschutzgesetz. Ds 1999:39. Stockholm:Fritzes.Isaksson, K. & G. Johansson (1997): Avtals-pension med vinst och förlust. Konsekvenserför företag och medarbetare. Stockholm:Rådet för arbetslivsforskning och Folksam.Johansson, I. (1997): Ålder och arbete. Disser-tation. Stockholm University, Department ofEducation.Kilbom, Å. (Hg.) (1998): Ageing of the Work-force. Key-note Presentations and Abstractsfrom a Workshop held in Brussels, 23–24March 1998. Arbetslivsrapport 1998: 24.Stockholm: National Institute for WorkingLife.OECD (1995a): The Transition from Work toRetirement. Social Policy Studies, No. 16.Paris: OECD.OECD (1995b): The Labour Market and Old-er Workers. Social Policy Studies, No. 17.Paris: OECD.Ståhlberg, A.-C. (1995a): Våra pensionssys-tem. Stockholm: SNS Förlag.Ståhlberg, A.-C. (1995b): “Att pensioneras iförtid.” In: FKF Fakta, I marginalen – att stäl-las utanför. Rapport från forskarseminarium iUmeå, January 1995, pp. 55–67.Statistics Sweden (1998): Sveriges framtidabefolkning 1998–2050. Stockholm: StatisticsSweden.Storrie, D. (1993): The Anatomy of a LargeSwedish Plant Closure. Dissertation, Depart-ment of Economics, Gothenburg School ofEconomics and Commercial Law. Gothen-burg.Swedish Agency for Administrative Develop-ment (1997): Offentliga tillfälliga arbeten.

OTA, Report 1997: 9. Stockholm: SwedishAgency for Administrative Development.Swedish National Labour Market Board(1995): Arbetsmarknadspolitik i förändring.2nd ed. Stockholm: Fritzes.Swedish National Labour Market Board(1998): Arbetsgivarnas attityder. Ura 1998: 9.Stockholm: Swedish National Labour MarketBoard.Wadensjö, E. (1991): “Sweden: Partial Exit.”In: M. Kohli, M. Rein, A.-M. Guillemard & H.van Gunsteren (eds.): Time for Retirement.Cambridge: Cambridge University Press,pp. 284–323.Wadensjö, E. (1993a): “Socialförsäkringssys-temets okända delar. Nya villkor för ekonomioch politik. Rapport till betänkande avEkonomikommissionen, Bilagedel 2.” In:SOU, 16, pp. 413–416. Stockholm: Fritzes.Wadensjö, E. (1993b): “Några problem inomavtalsförsäkringarna”. In: K. Eklund (ed.): En“skattereform” för socialförsäkringar. Stock-holm: Publica, pp. 76–87.Wadensjö, E. (1994): “Early Exit from theSwedish Labour Market.” In: E. Wadensjö(Hg.): Leaving the Labour Market Early in theWelfare State. The Nordic Labour Market inthe 1990s, Part 2. Amsterdam: North-Holland,pp. 117–148.Wadensjö, E. (1995): “De äldre och arbets-marknaden.” In: E. Wadensjö (ed.): 1990-talets arbetsmarknad i Norden. Nord 1995: 5.Stockholm: Nordiska Rådet, pp. 117–148.Wadensjö, E. (1996): “Gradual retirement inSweden.” In: L. Delsen & G. Reday-Mulvey(eds.): Gradual Retirement in the OECDCountries. Aldershot, pp. 25–44.Wennemo, I. (1997): “De äldre och arbets-lösheten.” In: S. Ackum Agell & J. Hassler(eds.): Tretton inlägg om arbetslöshet. Stock-holm: Arbetarrörelsens ekonomiska råd,pp. 231–246.

The following Web site addresses provide in-formation on the new pension system:

http://www.pension.gov.se/http://www.pension.nu/

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United Kingdom

Introduction

Population trends

In the UK, as in most other indus-trialised countries, the population isageing, albeit to a lesser extent thanin many other EU Member States. Itis predicted that between 1976 and2011, the population aged 16 andover in Great Britain will have in-creased by around 15%. However,the overall effect of these changes isthat, over the 35-year period, the45–64 year-old age group will havegrown from 31% to 34% of the pop-ulation. The youngest group (16–24)will have fallen from 17% to 14%.The ageing of the population duringthis period hardly affects the oldest(65+) age groups. Dramatic changesin the number and share of the popu-lation in these groups will notemerge until at least a decade later.

Workforce participation –activity rates

For men of all ages (Figure 1), thegeneral trend in activity rates isdownward. Among older workers,this reflects early retirement as wellas a tendency of older workers wholose their jobs to cease jobsearch ac-tivities, which is reinforced by thegrowing use of disability benefitsrather than unemployment-relatedbenefits among this group. Recentstudies confirm that this growth re-flects not an increase in the incidenceof ill-health but is due to peopletending to stay on these benefits forlonger, rather than moving back intowork, reflecting the increasing diffi-culty faced by older workers in re-entering the labour market (cf. Kodzet al., 1999; Rowlingson & Berthoud,1996; Dorset et al., 1998). The fe-male pattern is very different (Figure2), with economic activity rates in-creasing in all age groups other thanthe youngest.

Figure 1: Male economic activity rates by broad age group, 1984–1998:United Kingdom

Source: Labour Force Survey.

Figure 2: Female economic activity rates by broad age group, 1984–1998: United Kingdom


As far as future trends are con-cerned, labour force projections areless reliable than population projec-tions and are sensitive to assump-tions about future unemploymenttrends. With these caveats, however,recent trends are projected to con-tinue over the period to 2011. Formen, activity rates are expected todecline, with the exception of the45–54 age group. For the oldest (55–64) group, the activity rate is project-ed to increase slightly from its 1997level of 63.6%, before falling again

to 60.0% by 2011. Projections for fe-male activity rates suggest continuedgrowth, especially in the age range45–54. The net impact of thesechanging activity rates is a continuedgrowth in the share of “older work-ers” (45–59 year-old women and 45–64 year-old men) in the labour force.

Employment rates

In 1996 (Eurostat 1998), at 68.7%,the UK had the third-highest em-ployment rate in the EU among 15–

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64 year-olds (Denmark and Swedenrecorded higher rates). Employmentrates for older workers (50+) of bothsexes are much lower than those forthe middle age ranges (25–49; Fig-ures 3 and 4). Male employmentrates generally fluctuate cyclically,although among the oldest group(50–64) employment rates have beengrowing since 1993, following anearlier decline. Once again, the pat-tern for women is different, with allage groups apart from the youngestexhibiting a consistent upward trendin employment rates.

Overall, the net effect of thesechanges is that the share of olderworkers (50–59/64 year-olds) in to-tal employment exhibits a very simi-lar pattern to that for their share inoverall economic activity, with theprevious decline having halted in theearly 1990s and recent years exhibit-ing a growing share for both men andwomen. It should be stressed, how-ever, that it is unclear to what extentthis upsurge in older workers’ em-ployment is a cyclical phenomenon,or whether it represents a genuineshift in the longer-term trend.

Unemployment rates

Among men, older workers’ unem-ployment rates are close to the over-all average, lying between those ofyoung people (with the highest ratesof unemployment) and those in the35–49 age group, who have the low-est rates. For women, unemploymentrates are inversely related to age,with older women recording the low-est rates.

Although older workers are notdisproportionately affected by un-employment, it is clear that olderworkers (particularly men) have agreater propensity than their young-er counterparts to leave the labourmarket on losing their jobs, and aremore likely to be inactive becausethey are “sick” or “disabled”. Theunemployment rate for older work-ers may not, therefore, be a good in-dicator of the extent of under-utilisa-tion of the potential older work-force.

Figure 3: Male employment rates by broad age group, 1984–1998:United Kingdom


Figure 4: Female employment rates by broad age group, 1984–1998:United Kingdom


Figure 5: Male long-term unemployment (12m+) as a share of all maleunemployment by age group: United Kingdom


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It is also noteworthy (Figures 5and 6) that older unemployed aremuch more likely to be long-term un-employed than their younger coun-terparts. This is true for both menand women, and it is a pattern thatpersists over the economic cycle.

Implications of an ageingpopulation and workforce

The UK’s population is ageing lessquickly and the dependency ratio isincreasing less rapidly than in mostEU countries. Despite a popular per-ception to the contrary, the evidencesuggests that there is no imminentfunding crisis for the U.K. state pen-sion system (Whitehead, 1998; Pen-sion Provision Group, 1998; Depart-ment for Social Security, 1998). Themajor growth in the number of pen-sioners in the UK does not occur until2020 and 2030. Indeed, based on cur-rent policies, the share of GDP sup-porting pensioners will remain con-stant at around 4.4% between 2000and 2025, before falling to around3.4% by 2050, despite an increase inthe number of pensioners from 10.5to 14.3 million over the same period.This favourable funding position, rel-ative to some other countries, reflectstwo key factors in addition to thedemographic perspective: the grow-ing role of private pension provisionin the UK, and the fact that the U.K.state pension level (already low incomparative terms)1 is linked to pricechanges rather than changes in earn-ings. The counterpart of this latterpoint is growing poverty and incomeinequality among pensioners, and thisis the key factor driving pensions re-form in the UK. Without such reformit is anticipated that by 2025 well overhalf of those reaching retirement agecould have to rely on income-relatedbenefits in retirement (Department ofSocial Security, 1998).


General policy framework

The thrust of recent public policy inthe UK is to reverse the trend to-

Figure 6: Female long-term unemployment (12m+) as a share of allfemale unemployment by age group: United Kingdom


wards early retirement (the legal re-tirement age itself is to be equalisedat 65 for men and women, for equalopportunity reasons, in the period2010–2020). More widely, it aims topromote “active ageing” and dis-courage age discrimination in em-ployment. Policy implementationmostly relies on general principles,including, in particular, “voluntar-ism” (rather than anti-discriminationlegislation); the development of across-governmental approach takingageing issues into account in all areasof policy (including the role of thegovernment as employer); and theestablishment of partnerships withemployers, individuals and other or-ganisations to promote “good prac-tice” and the benefits of an age-diverse workforce.

Specific initiatives include the fol-lowing:– A cross-governmental Ministerial

Group on Older People was estab-lished in 1998 to coordinate policyon ageing issues.

– Since 1998, the “Better Govern-ment for Older People” initiativeaims to improve public servicesfor older people by better meetingtheir needs, listening to theirviews and encouraging their con-tributions. The notion of “activeageing” is a key part of this initia-tive, and consultation has takenplace on a wide range of topics af-fecting older people, including

health, income, employment,travel, crime and care services.

– Following consultation with thepublic and social partners on agediscrimination in employment, thegovernment has published a Codeof Practice (Department for Edu-cation and Employment, 1999),aiming to encourage employers tocounter age discrimination in re-cruitment, selection, promotion,training and development, redun-dancy and retirement. The impactof the Code of Practice on em-ployers is to be monitored overtime, but the lack of any legisla-tive sanction against discriminat-ing employers has been the subjectof criticism in the public debate(including criticism from some em-ployer organisations).

– The current strategy of equal op-portunities “mainstreaming” in allareas of government policy coversage-equality issues (as well as sex,race and disability).

– Education and training initiativesincreasingly incorporate the no-tion of “lifelong learning”, with afocus on including older people in

1 The basic state pension is a flat-rate pen-sion, which currently accounts for about athird of all pensioner income in the UK. Itscurrent rates are (from April 1999): GBP66.75 a week for single pensioners and GBP106.70 a week for couples (if the minimumcontribution requirements are met). Cur-rently, 86% of men and 49% of womenqualify for a full state pension.

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the education system (an exampleis the recent extension of the stu-dent loan system for higher educa-tion to cover people in their early50s). More generally, the ap-proach emphasises not just skillsand employability, but also thenon-economic benefits of learning(e.g. independence, self-esteem,health and active citizenshipamong older people).

Active labour market mea-sures, taxation and benefitchanges

Since the “Job Release Scheme” wasabolished in 1988, there has been nonational early retirement measure inthe U.K. portfolio of active labourmarket measures. Since the late1980s, the emphasis of such mea-sures as exist has been to discourageearly retirement, and recent reformsof tax and benefit systems have alsoaimed at encouraging older workersto remain in the labour market.

Relevant measures include the fol-lowing:– Removal of upper age limits on

job vacancies in Jobcentres. In1998, the Employment Service(ES) introduced a policy eliminat-ing the use of upper age limits forjobs advertised through Jobcen-tres.

– The New Deal for over-50s. Oneof the UK’s key active labour mar-ket measures, the New Deal forpeople aged 25 and over (unem-ployed for two years or more) hasrecently been extended to includeadditional support for those over50. The New Deal includes adviceand support to help get peopleback into work. It also offers themthe opportunity to study full timefor up to a year while remainingon benefit and offers a subsidy toemployers of up to GBP 75 a weekfor up to six months if they recruitfrom the target group. Early in1999, additional measures wereannounced to support those over50 years old. These include an em-ployment credit to help low-paidolder workers come off benefit.

Those moving into a job over 30hours a week (that is, full-timework) will receive a GBP 60weekly top-up for one year. Thosein part-time work will receiveGBP 40 a week. The New Dealalso offers individual support andadvice to participants and grantsof up to GBP 750 to help themgain accredited training. Pilotschemes will start in October 1999and the programme will be intro-duced nationally in 2000.

– Changes to taxation measures.During the 1980s, Inland Revenuerules for calculating pensions wererevised to facilitate older workersmoving to part-time employment.More recently, the governmenthas proposed (Department of So-cial Security, 1998) changes to taxrules on the treatment of occupa-tional pensions (provided by em-ployers) in order to increase theflexibility of transition betweenfull-time work and retirement.

– Changes to state pensions. In1989, the rules were changed toallow people over state retirementage to work without a reduction intheir state pensions. Evidence sug-gests, however, that the impact ofthe change on older workers’ la-bour supply was small (White-house, 1990).

Developments at the levelof companies and sectorsRecent research suggests that, de-spite some evidence of changing atti-tudes among U.K. employers, notonly does age discrimination remainprevalent, but age criteria continueto be used by U.K. employers in theprocess of employment restructur-ing, and there is little general evi-dence of a shift towards an approachavoiding early labour market exit.The results of a qualitative in-depthstudy of 85 U.K. employers (Taylor& Walker, 1998) illustrate both thesepoints clearly and reinforce the find-ings of earlier research on employerpractice in the UK (covering the1980s and early 1990s, in particular)and the findings reported, for exam-

ple, in Worsley (1996), who pointedout the prevalence of various formsof “voluntary” early retirement asan alternative to redundancy.

The research suggests several rea-sons for the persistence of this ap-proach, including a persistent desireamong older workers themselves(confirmed by surveys) for early re-tirement; perceptions of fairness sug-gesting that older people close to re-tirement age have “less to lose”through redundancy and job loss;and, associated with this, trade unionsupport for use of early retirement inpreference to compulsory redundan-cy.

Cost factors associated with occu-pational pensions are also important(about half of the employed work-force in the UK are currently coveredby occupational pension schemesprovided by their employers). Thisapplies particularly to final-salary-based pension schemes (the com-monest form of occupational pen-sions), to which employer contribu-tions can be considerably higher forolder than for younger workers. Em-ployers thus have a strong cost incen-tive to target restructuring on olderworkers (Campbell, 1999), and thereis clear evidence of a faster fall in em-ployment and activity rates amongthose who are members of occupa-tional schemes than among thosewho are not (Tanner, 1998).

As far as collective bargaining isconcerned, although the U.K. tradeunion movement campaigns forlegislation against age discrimina-tion, in practice there is often tensionbetween campaigning to retain olderworkers in employment and pressingfor more generous early retirementprovisions. Trade union support forthe latter reflects both a commitmentto the principle that employees whowish to retire early should be able todo so, and a practical recognitionthat in cases of employment restruc-turing, early retirement schemes of-fer the most beneficial financial com-pensation to displaced employees.While it has been common for tradeunions to cooperate in restructuringexercises using early retirement rath-

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er than redundancy, there is recentevidence of trade union resistance tosuch an approach, with unions –faced with the targeting of older staffin voluntary early retirement exer-cises – calling for the retention andretraining of older workers (Indus-trial Relations Services, 1997).

On the employer side, there alsoexist examples of strategies to man-age workforce reductions withouttargeting older workers. Worsley(1996) cited examples of organisa-tions reducing staffing levels througha range of options, including unpaidleave of absence, career breaks andtransfers to part-time work for olderworkers. Similarly, the evidence ofTaylor and Walker (1998), whilestressing that such policies are foundonly in a minority of firms, noted re-cent examples of employers intro-ducing proactive measures: to retainolder workers, to operate partial re-tirement schemes or to relax barriersimposed by the pension schemes onthe recruitment of older workers.Equally, there is emerging evidencethat firms which made heavy use ofearly retirement policies during the1980s and early 1990s have subse-quently regretted the loss of skilland experience which such strategiesentailed and are revising policies ac-cordingly (Taylor & Walker, 1998,p. 67).


Employment risks/re-employ-ment chances

We have seen that economic activityrates among older males have de-clined, while those among olderwomen have increased. For bothgroups, however, the chances ofleaving employment increase and thechances of re-entering employmentdecrease with age.

Thus, recent findings from paneldata (Campbell, 1999) suggest thatamong people aged over 45, twogroups are particularly likely to bedisplaced from work: people in thebottom quartile of the hourly wage

distribution; and people with wagesin the top half of the distribution, butwho are also members of an occupa-tional pension scheme. More gener-ally, the risk of displacement is high-er among people who are older, fe-male and/or who work in a decliningindustry.

Campbell (1999) also showed thatrelatively few people aged over 45return to work (over a six-year pe-riod, some 76% of people aged over45 and displaced from work do notre-enter employment). McKay andMiddleton (1998) confirmed withwork-history data that the chances ofmen leaving economic inactivity forpaid work decline sharply with age(and are close to zero for those over60). Similarly, older women face in-creasing difficulty in entering the la-bour market, and the likelihood of aneconomically inactive woman ob-taining work declines with age (afterthe age of 40).

Earnings situation andpension expectations

Individual earnings in the UK peak inmiddle age and then decline withage. Campbell (1999) showed that,at any given time, men around theage of 45 have the highest medianhourly wages; in part this is a cohorteffect (i.e. younger people in latercohorts have higher earnings thantheir predecessors), but taking thisinto account, the data suggest thatreal earnings for males in employ-ment increase up to the age of about50 (this varies slightly with the eco-nomic cycle) and then decline slight-ly. Further, since 1979, the averagewages of older men have not in-creased as much in real terms as theearnings of men in their mid-40s.Older men have seen both a dispro-portionate fall in employment andlower relative wages, suggesting astructural demand shift against olderworkers in the labour market.Among women, 32 year-olds havethe highest median hourly earnings,and Campbell’s analysis suggests thatthe decline in median earnings afterthat peak is mainly due to older

women having lower average educa-tional qualifications.

Looking more generally at theoverall income situation of olderpeople, we see that it depends onhousehold structure. The tendencyfor income levels to fall with agepartly reflects the fact that older peo-ple are more likely to live without apartner as well as the fact that in-comes from employment declinewith age and are only partly offset bypension incomes. The impact ofhousehold structure and the chang-ing balance of incomes from differentsources make the pattern of olderpeople’s incomes complex and diffi-cult to summarise, but the followingpoints are clear from existing evi-dence (Department for Social Securi-ty, 1998; Office for National Statis-tics, 1999):

– Equivalised net incomes (i.e. ad-justed for household structure) forolder people have increased inreal terms since 1979, but the rateof change varies by householdtype (Table 1). In particular, cou-ples in all age groups (50+) had ahigher household income in 1997than single people, and their in-come also grew more in real termsbetween 1979–1997. The differ-ence is most marked among olderpeople below the state pensionage (50–59/64), where the incomeof couple households grew by46% over the period comparedwith 33% for households contain-ing single people.

– Over the past 20 years, newly re-tired pensioners have had higherincomes than their predecessors.Average pensioner incomes haveincreased in real terms by over60%, more rapidly than for therest of the population. More peo-ple have second pensions in addi-tion to the state pension (the realvalue of which is declining overtime), especially occupationalpensions provided by employers,and in the future the share receiv-ing income from personal pensions(currently very small) will in-crease. On current policies, how-ever, whilst average income re-

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ceived by those in retirement isforecast to keep pace with earn-ings inflation (until 2025, afterwhich it will decline), increasinginequality in pensioners’ incomesis likely, with up to a third of pen-sioners in poverty by 2025 (thisunderlies current policies towardspension reform in the UK and theproposed introduction of a newsystem of “stakeholder pensions”for low income earners; Depart-ment for Social Security, 1998).


There is considerable evidencethat older workers in the UK are lesslikely to receive work-related train-ing than their younger counterparts.Kodz et al. (1999) summarised theevidence, showing that:

– Over half of private-sector em-ployers cite “lack of appropriateskills” as limiting the recruitmentand promotion of older workers,but only 16% of the same employ-ers provide training for them(Thompson, 1991).

– 40% of managerial staff aged over55 had received no training in theprevious 12 months, comparedwith 18% of those aged under 35.The research suggests that earlyretirement schemes, lower recruit-ment levels of older workers anddelayering within organisationshave reduced the training anddevelopment opportunities forolder workers (Arrowsmith & Mc-Goldrick, 1996).

– LFS data for the UK (Figure 7)confirm that the likelihood of aperson in employment receivingwork-related education or trainingdeclines markedly with age.

Choice between early retire-ment/unemployment

We have already noted the high andgrowing rates of economic inactivity,among older males in particular.There has, associated with this, beena massive increase in the numbers ofinactive older people claiming dis-

ability-related benefits in the UK,many of whom exhibit some degreeof labour market attachment (Meag-er & Evans, 1998). The evidence sug-gests that a significant proportion ofthis group would prefer to be in thelabour market if they felt that theyhad a chance of obtaining work (orwork yielding an income level signi-ficantly above their state benefit en-titlement). Thus, for example, a sur-vey of people who had left employ-ment during the major restructuringin the late 1980s (Dench & Norton,1996) found that many felt forcedout of employment, experiencedgreat difficulty in finding new workand often “gave up” and left the la-bour market after a period of unsuc-cessful jobsearch (or time spent in“poor jobs”). Consistent with thisfinding, Campbell (1999), using LFSand panel survey data, concludedthat much of the falling employment

rate among older males is “involun-tary” and reflects:

– growth in occupational pensionprovision, which provides an in-centive for employers to targetolder workers in workforce re-structuring;

– shifting labour demand away fromindustries (e.g. manufacturing) inwhich older men were concentrat-ed;

– growing numbers of older workersmoving from employment to un-employment or to long-term“sickness/disability” before enter-ing retirement;

– the fact that displaced workerstypically find that their potentialearnings in a new job are signifi-cantly lower than their previouswage. The data suggest that thisdifference is largest (up to 35%)for older workers and is a disin-

Table 1: Average net equivalised household income: by type of familyunit and age of head (50+), 1979-1997: UK (GBP per week*)

1979 1990–91 1995–97

Couples with head under retirement age 245 332 358

Single people under retirement age 224 264 297

Recently retired couples 186 264 300

Recently retired single people 179 255 276

Couples over retirement age 156 236 243

Single people over retirement age 157 215 232

* April 1998 prices.

Source: Office for National Statistics (1999, p. 52).

Figure 7: Employed people: whether received training in last 13 weeks,by age and sex, 1998: Great Britain

Source: Labour Force Survey, Spring 1998.

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centive for such displaced workersto re-enter the labour market.

Conclusion: policyoptionsThe implications of an ageing popu-lation and workforce are of growingsignificance in the policy debate inthe UK, and the concept of “activeageing” is now increasingly evidentin a wide range of policy areas, al-though age has yet to achieve theprominence, as an issue of equal op-portunities policy, that is given toissues of discrimination on groundsof sex, race or disability.

It is clear, however, that the de-bate can only intensify as the propor-tion of older people continues to in-crease (albeit less sharply in the com-ing decades than in many MemberStates). Key policy questions emerg-ing from the analysis presentedabove include the following:

– To what extent can persistent agediscrimination in employmentadequately be tackled through avoluntarist approach, based on thedissemination of good practice,rather than through an approachbased on anti-discrimination legis-lation?

– To what extent will the proposedreforms to the pension system andthe introduction of new “second-tier” pensions address the growingproblem of income inequality and

poverty among pensioners de-pendent on low levels of state pen-sions?

– What options exist to reduce theincentives (e.g. cost savings fromoccupational pension contribu-tions) for employers to target old-er workers for workforce restruc-turing; and, similarly, the incen-tives (e.g. low re-entry wages, in-adequate skills) for displaced old-er workers not to re-enter employ-ment?

– Are existing training and lifelonglearning initiatives sufficient totackle the persistent disadvantagefaced by older workers in their ac-cess to training and education?

Nigel Meager & Sally Dench

Selected bibliographyArrowsmith, J. & A. McGoldrick (1996):Breaking the Barriers – A Survey of Manag-ers’ Attitudes to Age and Employment. Lon-don: Institute of Management.Campbell, N. (1999): The Decline of Employ-ment among Older People in Britain. CASE-paper, No. 19. London: London School of Eco-nomics, Centre for Analysis of Social Exclu-sion (CASE).Dench, S. & R. Norton (1996): Leaving Em-ployment Early. IES Report, No. 322. Bright-on: Institute for Employment Studies.Department for Education and Employment(1999): Age Diversity in Employment: A Codeof Practice. London: DfEE.Department for Social Security (1998): A NewContract for Welfare: Partnership in Pensions.Cm 4179. London: The Stationery Office.Dorset, R. et al. (1998): Leaving IncapacityBenefit. Department for Social Security. Re-search Report No. 86. London: The StationeryOffice.

Eurostat (1998): Social Portrait of Europe.Luxembourg, September.Industrial Relations Services (1997): IRS Em-ployment Trends, No. 626, p. 5.Kodz, J., B. Kersley & P. Bates (1999): TheFifties Revival. IES Report, No. 359. Brighton:Institute for Employment Studies.Meager, N. & C. Evans (1998): “Underem-ployment Trends in the UK.” In: TRENDS,No. 30, pp. 89–95.McKay, S. & S. Middleton (1998): Character-istics of Older Workers. DfEE Research Re-port, No. RR45. London: Department for Edu-cation and Employment.Office for National Statistics (1999): Social Fo-cus on Older People. London: The StationeryOffice.Pension Provision Group (1998): We All NeedPensions – The Prospects for Pension Provi-sion. London: DSS/Stationery Office.Rowlingson, K. & R. Berthoud (1996): Disabil-ity, Benefits and Employment. Departmentfor Social Security Research Report, No. 54.London: The Stationery Office.Tanner, S. (1998): “The Dynamics of Male Re-tirement Behaviour.” In: Fiscal Studies, Vol.19, No. 2, pp. 175–196.Taylor, P. & A. Walker (1997): Age Discrimi-nation in Employment: A Survey of Opinion-formers in the United Kingdom.Taylor, P. & A. Walker (1998): “Policies andPractices towards Older Workers: A Frame-work for Comparative Research.” In: HumanResource Management Journal, Vol. 8, No. 3,pp. 61–76.Thompson, M. (1991): Last in the Queue?Corporate Employment Policies and the Old-er Worker. IMS Report, No. 129. Brighton: In-stitute for Manpower Studies.Whitehead, M. (1998): “Define Providence.”In: People Management, 9 July 1998, pp. 30–35.Whitehouse, E. (1990): “The Abolition of thePensions Earnings Rule.” In: Fiscal Studies,Vol. 11, No. 3, pp. 55–70.Worsley, R. (1996): Age and Employment:Why Employers Should Think again aboutOlder Workers. London: Age Concern Eng-land.

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