Work | State of Ageing in 2020

The employment gap between people over and under 50 years old has been steadily narrowing over the last 20 years. Nevertheless, in 2019, there were around 800,000 people aged 50 to State Pension Age who were not in work but wanted to be. Since October 2020, both men and women are only able to claim their state pensions after their 66th birthday. Yet by the time they are 65, the majority of people are out of work.

The Coronavirus pandemic risks halting – or even reversing – the gains which have been made in the employment of over 50s in the last 20 years, and deepening the struggles of those already out of work. The youngest and oldest workers were the most likely to be furloughed, and are thus the most at risk of losing their jobs now the Coronavirus Job Retention Scheme has wound down.

Historical evidence – from both the last recession, and pre-COVID-19 – gives us an indication of what comes next. Younger workers are likely to be the hardest hit in terms of job losses, but people aged 50 and over who do lose their job will struggle the most to return to work, and are at greater risk of becoming long-term unemployed. It is vital that the government provides targeted and personalised support needed by people in their 50s and 60s to stay, and thrive, in work.

• The workforce is ageing: a third of all workers are now aged 50 or over.
• But the majority of people are out of work by the time they hit State Pension Age: as of September last year, only 40% of men and 30% of women were still working at 65.
• We are facing a long-term unemployment crisis for older workers. There are 2.7 million workers aged 50 or older who have been furloughed. This means that an estimated 400,000 people in this age group are at risk of redundancy as the government’s support for shut-down sectors unwinds.

This long-term shrinking of the employment gap has been driven by a number of factors. There are structural factors, such as improvements in health at older ages. Deliberate policy changes have also played a role: the removal of the Default Retirement Age in 2011, and the increases in the State Pension Age which have been taking place since 2010. Overall, it is women’s employment which has seen the greatest gains.

The increase in labour market participation among older women has been key to driving the overall increase in the  employment rate of people aged 50 and over. This is partly the result of the rapid increase in the women’s State Pension Age since 2011 – when the planned increase from 60 to 65 was brought forward from 2020 to 2018. But there are also longer-term changes at play: women born and raised post-war were more likely to work throughout their lives than the generation before them.

And yet, although the age for which both men and women are eligible for the state pension will have converged by the end of 2020, women are still less likely than men in this age group to be in work.

While rising employment rates for women in mid-life seem to indicate that more will be able to save for their later lives (which will, on average, be several years longer than men’s), the gender pay gap explored later in this chapter means that many women are still at risk of financial insecurity in retirement.

For many, the decision to leave work before 66 is a positive choice: they will have sufficient funds from a private pension, and rich enough social connections, to enjoy a comfortable and fulfilling retirement. But for others, falling out of the labour market is a cause of financial hardship and a risk to wellbeing.

Employment rates alone do not tell the full story of people’s working lives in their 50s and 60s. For example, people approaching retirement age (particularly women) are more likely to work part-time than at younger ages. The move towards part-time work can be driven by health issues, or by the need to fit work around caring responsibilities – the latter particularly prevalent among women, who are also more likely than men to say they would prefer a full-time job. Indeed, we should not see this move to part-time working as an inevitably negative choice: older part-time workers also say that they are driven by the desire to spend time with their families and relax.

Working part-time might give people the chance to fit work around their lives, but it is the primary driver of disparity between men and women’s pension pots, with pro-rated wages also being significantly lower than that of a full-time employee, hindering individual saving.

Older workers are significantly over-represented amongst self-employed workers, with one in five people aged 50-64 working for themselves. Just as with a move to part-time work in later life, the reasons behind this are complex: for some, self-employment offers the independence and flexibility which meets their needs or desires in later life, while others will feel driven towards it by a rigid jobs market and ageist employers.

Whatever the reason, moving into self-employment does often come with negative financial implications. Nearly a third (30%) of people over 55 who are self-employed have no pension wealth, double the figure for employees aged over 55 (14%). The majority of people who are self-employed earn less than those who are in employment. The median weekly earnings of someone who is self-employed when they are aged 55-64 is £200 lower than the median weekly earnings of an employee of the same age.

This means that, as well as missing out on employer benefits such as sick pay and pension contributions, people who are self-employed are often less able to withstand income shocks. This has become an acute issue for many in the wake of Coronavirus. One in four claimants to the Self-Employment Income Support Scheme were aged 55 or older.

The benefits of longer working lives – better individual finances, social connections, economic growth – will not be felt if the work we do as we approach later life is poor-quality work. Good-quality work is also key to retaining people in any jobs for longer. Pay is a key part of this (discussed below), but it is not the only factor.

Our research shows that we want the same things from work in our 50s and 60s as at any age: to be appreciated and rewarded, and to have some autonomy. So, while it is concerning that one in ten workers aged 50 to 69 report low job satisfaction, it is even more so that one in three report a lack of control at work. An even larger proportion report an imbalanced ratio of the effort they put into the rewards they gain, a key indicator of wellbeing at work. Our guide, ‘Becoming an age-friendly employer’, offers five key actions for employers to attract and retain this group of workers. But this data also reminds us that a key part of promoting extended working lives will be to focus on improving the basic quality of work for all.

Job-related training offers an opportunity to improve our earnings, our productivity and our satisfaction. As well as ensuring workers are gaining new skills, job-related training improves future employment prospects. It is therefore deeply troubling that older workers are substantially less likely to receive ‘off the job’ training than younger workers, impacting their ability to keep up to date with new skills and gain further employment. Improving the training and retraining offer to people in their 50s and 60s, particularly to those in shut-down sectors of the economy, will be crucial if we want to avoid a long-term unemployment crisis for this group in the wake of COVID-19.

As well as being less likely than younger workers to receive off-the-job training, older workers are also less likely to move jobs than their younger colleagues. While this can mean that those older workers will have more industry-specific knowledge, it can also impact on wage progression, as moving jobs is the main way to secure a pay rise.

The true impact of COVID-19 on employment is not yet clear. But the latest data shows it is the youngest and oldest workers who are most likely to be furloughed, and so have the greatest risk of unemployment as the Coronavirus Job Retention Scheme ends. But it is the oldest workers who are at greatest risk of long-term unemployment if they do lose their job.

Put together, these numbers suggest we could have a long-term unemployment crisis for older workers on our hands, as the COVID-19 recession unfolds. It is vital that older workers are given effective support to return to work – and to retrain if necessary.

Right now, we know that people over 50 also tend to have the worst outcomes from employment support programmes. For example, on the government’s Work Programme, which ran from 2011 to 2017, just 21.6% of the over 50s gained a job – the worst result of any group. The government’s new back-to-work schemes must not repeat these failures.

We need a clear message to be sent to employers, work coaches, and jobseekers themselves, that people aged over 50 are just as entitled to support as younger workers. We need targeted, individualised back-to-work support for people in this age group. And we need robust standards of scrutiny to ensure that they are receiving adequate support.

These numbers are a clear indication of where the biggest opportunities to increase employment for those aged 50 and over might lie. There are as many people aged 50-64 who say they would like to be in work, but are not in work due to health reasons, as there are active jobseekers in this age group. Better support for people with disabilities and long-term conditions could unlock a large section of worklessness for those aged 50 and over – and can often require just small adjustments on the part of employers. Working to tackle the disability employment gap will be key to closing the age employment gap.

This cross-sectional picture does not necessarily represent a fall in wages for individuals as they age. There is partly a cohort effect, with the younger generations (at least, in mid-life) tending to have earned more than the generation before. In some cases, the move to lower-paid work may be a positive choice. The increase in self-employment plays a role. There are also the limitations which face people who do fall out of work in their 50s and 60s: those who fall out of work at this age face, on average, longer spells in unemployment, and may find themselves accepting lower paid work than they were in previously.

The overall gender pay gap for people aged 50 and over is largely driven by higher levels of part-time working among women in this age group – but not entirely, as the above chart shows. Even comparing full-time workers, the pay gap remains. This is at least partly due to the greater likelihood of women taking at least some period of time during their life in either part-time work, or taking a break from work. Part-time wage growth is lower than full-time wage growth, putting those women at a disadvantage, even if they re-enter full-time work. But this is not the whole reason – differences in wage-bargaining behaviours, and the kinds of places women choose to work, may also be contributing factors.

We care about the wages earned by people in their 50s and 60s, because we want people to be able to enjoy financial security at that age. But we also care about it because of how it feeds through into the amount of money we have at later ages, when we are no longer able to work. Being able to save for our retirement is becoming increasingly important. With retirement expected to last longer than it has in the past, and the value of the state pension still relatively low in comparison to earnings, most people will have to supplement their state pension with private pension savings in order to avoid a drastic reduction in income when they retire.

Since 2012, all employees over the age of 22 who are earning over £10,000 a year must be automatically enrolled in a pension scheme by their employer. This has led to an increase across the board in the proportion of people enrolled in a private pension – but the key success has been the jump in the number of savers among lower earners. The proportion of workers earning between £10,000 and £20,000 a year who are contributing to a pension has more than doubled in the last decade.

Auto-enrolment will be a core pillar of maintaining the financial wellbeing of lower earners into later life. But it cannot be relied upon. Ultimately, our financial wellbeing in later life rests on our financial wellbeing throughout life. We all need access to good work, and proper progression, that extends into our 50s and beyond, if we are to live comfortably in later life.

¹ Pensions Policy Institute and Now Pensions (2020), ‘Underpensioned Index’, in publication