Whatever the reasons driving older workers from the labour market; the solutions are at hand

The large-scale exodus of older workers from the labour market is a new problem; but the challenges underpinning it are the same as ever. Our labour market is not currently well set up to support us to stay in work as we age.

The major change that the pandemic has wrought to the UK labour market is not mass unemployment – as initially predicted – but rise in people leaving the workforce altogether. There are now an extra 340,000 50-64s out of the workforce compared to the start of 2020, and the employment rate for this group is 2 percentage points lower.

Initial analysis suggested that worsening health lay behind this change: the number of people giving ‘health’ as the reason for their economic inactivity has grown more than any other since the start of the pandemic. Long Covid, challenges accessing NHS services, and lockdown-induced health deterioration are all plausible explanations why this would be the case.

But recent analysis from our colleagues at the Institute for Fiscal Studies (IFS) shed new light on this picture – showing that the flow of older workers out of employment has been largely driven by people retiring. It is those who were already out of work who are increasingly citing ill-health.

It makes sense for labour market economists – and the government – to try to pinpoint the precise reason for the recent change in the labour market, to guide their policy response.

If NHS waiting lists are the cause, then we should try to solve the labour market crisis by giving emergency funding to the NHS. If chronic conditions deteriorating during lockdown are the cause, we need easier access to flexible work and occupational health support so that people can find and do work which they are able to.

If fit and healthy workers have simply had enough, then employers need to look in the round at the quality of work they are offering to their staff – and make sure that ageism isn’t colouring their employees’ experience of the workplace.

However, we would be wrong to respond purely to this issue as a one-off crisis. The pandemic has merely highlighted existing weaknesses in our labour market. Pre-pandemic, there was still a large age gap in our employment rate (72% of 50-64s in employment, compared to 86% of 35-49s) and around 800,000 people aged 50-64 out of work who wanted to be in work.

Research commissioned by Ageing Better from the IFS published earlier this year, highlighted starkly what the consequences of this gap can be. The increase in the state pension age from 65 to 66 led to a significant jump in the employment rate of 65-year-olds, but also led to a doubling in the absolute poverty rate at this age. Those who were already in work could stay working and earning, but those who were out of work could not simply jump back in.

Health and retirement were the main reasons for people in this age group to be out of work pre-pandemic, just as they are now – along with caring responsibilities, and being unable to find a suitable job, with an employer who understands the value older workers bring.

We know what we need to do to solve these issues – at Ageing Better, we have been gathering the evidence on this for many years. The case for employment support that is available to people outside of existing DWP programmes for the unemployed is now stronger than ever – but it has always been there. Our co-design work in Greater Manchester shows clearly what this could and should look like.

Our research shows what employers can do – and at the end of this month, we will be launching a new initiative that will provide guidance and motivation for employers who want to make the most of what older workers have to offer.

The employers who are spurred on by this crisis to do more to attract, engage and retain older workers will be setting themselves up for a future in which the older workforce is the workforce. Now more than ever.