Age management and employment policies in the European Union

Age is both a consideration in the implementation of social policies and a socially constructed data point, with society defining, through its policies and institutions, how the key periods in our lives (education, work, retirement) are set out over the course of our lifetimes and the role that each generation plays in the production of wealth and in the systems regulating flows of resources. Faced with a common trend towards population aging, which destabilizes the age-based social structures established during the 20th century, European countries have set themselves the task of getting greater numbers of older people into work.

Despite circumstances varying greatly from country to country, they all use similar tools and encounter similar challenges. The differences in how policies are implemented and national contexts point to several successful models for the employment of older workers. They allow us to identify the features of an active age management policy and its limitations, both with respect to the fundamental considerations involved in employing older people and the method used to achieve this.

1. European countries’ decision to increase the rate of employment among older people marks a departure from practices that have been in place for several decades. Europe’s struggle to cope with aging: a potentially significant impact on the various areas of social policy.

The countries of the European Union will have to contend with major demographic changes over the next fifty years. It is expected that the total population of the European Union will fall (from 376 million people in 2000 to 364 million people in 2050) and that the average age will increase, resulting in a change in population structure. The drop in the number of people of working age and the increase in the percentage of people over 65 is expected to cause the demographic dependency ratio to double (from 28% in 2000 to 50% in 2050).

This aging of the population brings with it significant risks for the European social model. Firstly, it could considerably diminish the Union's potential for growth, as, assuming levels of productivity and employment remain unchanged, this would result in a 40% drop in the economy's potential growth rate. In addition to jeopardizing the level of potential growth, this aging of the population poses a significant risk to the financing of social protection: subject to a few exceptions, age-related expenditure could increase by 3 to 5 percent of GDP depending on the country in question, while the number of people working to finance it would decrease. Faced with these potential consequences, since 2000 the EU has focused on increasing employment rates by targeting women, immigrants and older workers in particular.

Europe’s strategy for getting older workers into employment is a marked departure from earlier social models and practices.

The introduction of “active aging” represents a major shift away from the long-term trend that has seen the age of retirement reduced. The progressive development of pension systems offering the right to compensated rest over the course of the 20th century was a great leap forward for society, as this severed the link between old age, and illness and poverty. The emergence of an institutionalized period beyond the end of our working lives in the form of retirement has allowed the age at which people stop working to be gradually reduced over the course of the century. However, in the last 30 years, this has been accompanied by an increase in early retirement: in order to address the employment crisis and the rise in unemployment among young people, most European countries have developed retirement policies, allowing the restructuring of industries in difficulty to be reconciled with recognizing the arduous nature of certain activities and the goal of helping younger workers find employment.

It was not until the early 1990s that awareness of the potential consequences of aging led to a reversal of public policy priorities: “active aging”, the objective currently being pursued by international organizations, emphasizes the need to prolong people’s working lives in order to cope with the increase in life expectancy. Since its summit meeting in Stockholm in 2001, the European Union has therefore made the employment of older people the focus of its European employment strategy by defining quantified targets regarding the employment rate for those aged 55-64 and the age of retirement. This decision to encourage employment among older people marks a shift away from earlier social models. In particular, this goes against the attitudes and expectations of many employers and employees, who belong to a real “culture” of early retirement.

The definition of European objectives has resulted in a single target being set for all European countries, despite the underlying circumstances varying greatly from country to country. 
The Union does not have the power to set out employment and pension policies, for which an open method of coordination has been adopted.

This explains the lack of a specific target for each country, despite the drawbacks and potential risks of this approach. While setting a single target for the 15 countries allows for a high level of political mobilization based on a clear indicator, it does not take into account the countries’ widely varying starting positions (the difference in the employment rate of those aged 55-64 in 1997 might be as great as 40 percent). Analysis of the situation and trends in the employment of older workers between 1997 and 2002 shows that countries fall into one of three categories:

• countries that have met the Stockholm target: these include Sweden, Denmark, Portugal and the United Kingdom. The increase in the employment rate of older workers over the period in question has been particularly large in Denmark;
• countries that have not met the Stockholm target, but are above the European average and have seen a large increase in the employment of older workers: these are Finland, the Netherlands and Ireland;
• finally, three further sub-groups can be identified among the countries that remain below the European average: those that have seen an above-average increase in the employment rate for those aged 55-64 (mainly France and Spain), those that have not seen any significant increase (Italy, Austria) and those that have experienced stagnation (Germany) or even a drop (Greece) in their performance; the situation in Belgium and Luxembourg seems rather unusual: while these countries remain in last place in terms of absolute performance, they have experienced above-average growth over the past five years.

2. In Europe, public policies designed to promote employment of older workers use identical, varied tools.

These measures, which have been adopted by all European countries in a bid to achieve the targets set by the Stockholm and Barcelona Councils for the employment of older workers can be grouped into four main types of intervention, which have been implemented in all countries to varying degrees.

Pension reforms are a key aspect of policies designed to keep older people in employment
The employment policies for older workers that have been implemented in the European Union mostly use pensions reforms to delay workers’ early exit from the labor market: these are “defensive” policies first and foremost, intended to keep people in employment.
Public policies concerning the employment of older workers have been primarily implemented through the highly generalized measure of changing the parameters or paradigms of statutory or supplementary pension schemes. The aim is to keep workers in employment until the legal age of retirement by financially penalizing their early exit from the labor market through early retirement. This is primarily achieved by pushing back the normal age of retirement for statutory and supplementary schemes (by increasing the normal age or the number of years for which contributions must be paid), but also by putting in place more stringent conditions for entitlement to early retirement (pre-retirement, special retirement due to disability or unemployment).

But these efforts to prolong people’s working lives have also prompted the development of flexible or phased retirement schemes to encourage people to keep working, even in a reduced capacity, and to ensure a more flexible transition from employment to retirement. The final element of reform, which involves imposing more stringent conditions on early retirement schemes, not only affects straightforward early retirement schemes, but also schemes that use unemployment or disability benefit systems as a “bridge” between employment and retirement.
Public incentives relating to training and the organization of working hours and working conditions in a way that benefits everyone have been put in place to help keep older employees’ skills within companies

However, the methods used to keep older workers in employment are more “pro-active” than dissuasive with regard to companies. “Training, working hours, organization of work and working conditions”, the four key elements that make it possible to keep people in employment for longer, are largely the responsibility of employers or are a matter for negotiation between social partners. Interventions in this area by the public authorities are less focused on direct regulation. The lessons to be learned in the sphere of public policy relate more to the methods used.

In many countries, the use of arrangements regarding working hours seems to be a way of facilitating the transition from full-time employment to retirement. These may concern the widespread practice of part-time work for those of all ages (Netherlands, United Kingdom) or specific phased retirement arrangements for older employees. While it is often social partners who negotiate these measures, the public authorities can encourage workers and companies to adopt such practices by offering partial compensation for the loss of income (as is the case in Belgium and Germany).

Ensuring people’s continued capacity to work also requires working conditions to be improved. Two different approaches are emerging in Europe:
financial “incentives” for employers to keep their employees in good health (Sweden, Netherlands) and awareness-raising through national programs designed to provide information and advice (Finland, Germany), which may be accompanied by targeted funding (Belgium).
Finally, staying in or returning to employment requires people to maintain a certain level of expertise throughout their working life. The degree of success achieved in employing older workers is largely determined by the level of initial training they receive and their access to further training. Although specific training programs or schemes for older workers are rare (with the exception of Germany), the most successful countries are often those that help employees and employers to access training (Sweden, Netherlands, Finland).

Policies to get older people back into work are a typically non-distinct element of labor market activation strategies

Employment policies in Europe during the economic crisis were largely characterized by the calculated “removal” of older people from the labor market. The status of older unemployed persons, who are paid but exempt from looking for work, was often considered a “lesser evil” at a time when jobs were scarce and primarily intended for young people. National policies are still very much characterized by these practices of leaving older unemployed persons in limbo or even abandoning them entirely. In a few countries, however, older workers are now affected by the activation policies being introduced for all unemployed persons. In some countries, this policy is being expanded to include those receiving a partial disability pension. However, this introduction of more stringent conditions is counterbalanced by the provision of a proactive, diversified and personalized public employment service.

In most countries, older workers are not the focus of specific programs or targeted measures – unlike ethnic minorities, young people or women – as the countries in question believe that the level of personalized support given to all those who are unemployed equally meets the needs of older unemployed people. However, some countries (United Kingdom) have put specific programs in place and many of them help the employment services to get people back into work by offering subsidies or tax deductions to the employer or employee.

Finally, some countries are gradually expanding this activation policy to include recipients of long-term illness or disability benefits. However, the provision of a personalized service to help people return to work takes precedence over the imposition of conditions.

Communication initiatives and legislative measures are attempting to change society’s negative perceptions of older workers

Despite what they may publicly claim, companies throughout Europe still view older workers in a negative light. In addition, during the economic crisis, early departure from the labor market, having been authorized and approved by the public authorities, cemented the idea among employees that early retirement was the norm. Finally, this unspoken agreement between the generations has resulted in trade unions backing early retirement for “seniors” in order to protect the jobs of younger workers. In most European countries, the need to work for longer is an objective that is not shared by the trade unions, the employers or the employees themselves.
In order to break down society’s stereotypes and improve people’s awareness regarding the issue of aging workers, the public authorities have sought to adopt information and communication strategies that can reverse this trend.

Committees made up of various experts, consultations with social partners, national research programs, communication campaigns, both targeted and aimed at the general public... these are all tools that have been used to try to change perceptions of older people. While the United Kingdom is characterized by its focus on raising awareness among employers and promoting good practices, it also illustrates the limited extent to which communication impacts company practices in the absence of any binding provisions.

Against this backdrop, transposing the European directive against discrimination at work into national legislation seems to be another way to raise public awareness surrounding the issue of aging. However, most European countries do not seem in any great rush to do so and had not transposed the directive by the December 2003 deadline. Aside from general reluctance and specific difficulties which have been encountered by some countries, all countries must contend with the potential contradiction between specific measures designed to increase employment among older workers and the principle of non-discrimination on the basis of age.

3. While countries’ good performance cannot be explained by unique social “models”, there are similarities in the difficulties they have encountered.

Analysis of successes in the employment of older people reveals that there are numerous different ways for countries to improve employment among older people, even where they share things in common

The four countries (Sweden, Denmark, United Kingdom and Portugal) that succeeded in ensuring that 50% of those aged 55-64 were in employment in 2002 differ significantly in terms of their social security systems, the way in which their labor market operates and is regulated, and their social regulation models. Their diversity shows that there is more than just one successful model for getting older people into work. On the other hand, these countries do have a number of things in common, features which might appear to favor employment of older people: besides pension systems that do not put those who continue working at a disadvantage, despite all countries having schemes in place that enable early retirement from the labor market, these countries are characterized by three striking features: well above-average labor market performance, generally within a favorable macroeconomic environment; a proactive labor market policy in which employment plays a central role; and high part-time employment rates, both for the population as a whole and for older workers. Finally, we note that among the latter, it is predominantly men, and those in the 55-59-year-old age bracket who benefit from employment.

On the other hand, analysis of the difficulties encountered by certain countries highlights the precarious situation in which the countries of continental Europe find themselves, where factors that make retiring to fall back on the social protection system seem more appealing are coupled with factors encouraging withdrawal from the labor market.

Although these difficulties persist even in some countries that have implemented major reforms to increase employment among older people (Germany, Belgium), an examination of the situation in Finland and the Netherlands reveals that they can be overcome if a real paradigm shift takes place. The large increases in the employment rates for older people in these two countries (an increase of more than 30% between 1997 and 2002) were made possible thanks to a complete reversal of the culture of early retirement that characterized the countries of continental Europe. Each country has undertaken its own comprehensive, coordinated reform of its social protection systems, employment policies, healthcare and working conditions, and the perceptions of the various parties involved.

4. The elements of an active age management policy.

Although examining the methods used to employ older people in several European countries does not point to a “magic formula” for success and illustrates how several social models can successfully promote active aging, it does, however, allow us to identify some prerequisites for setting out an active age management policy. Three elements seem key to the development of such a policy: recognizing that there are limitations to efforts to increase the employment rate among older people, ensuring that certain fundamental elements are in place, “essential steps” so to speak, to help keep older workers in employment and get them back into work, and finally, setting out an integrated active aging strategy.
Taking into account the limitations to efforts to increase the employment rate – a rise in the employment rate means that there is a risk that the costs of early retirement will be transferred to systems other than those currently used.

In most European countries, the increase in the employment rate among older people has so far resulted in the costs of early retirement systems being passed on to other modes of early retirement as more stringent conditions regulating access to the former have been put in place. The first type of transfer of costs concerns internal transfers between the different systems that allow for early retirement: pre-retirement or early retirement, unemployment benefits accompanied by an exemption from having to look for work, pensions for disability, inability to work or (long-term) illness. The second type of transfer concerns the healthcare system: the reduction in the number of years that people have to work is partly responsible for the improvement in the general health of the population. A reversal of this trend that would see the number of years increased would have consequences for workers’ health, consequences that can only be partially mitigated by improvements in health at work. Ultimately, active aging, while it may appear desirable for all, is simply not an option for everyone: the requirements for prolonging our working lives will have to take into account the fact that different professions involve varying degrees of arduous work.

• the increase in the employment rate remains an intermediate goal. It is important not to forget that the ultimate goal is to maintain people’s standard of living and the social safeguards that are in place. It is crucial that the issues concerning the sustainability of social finances do not cause us to lose sight of this. Achievement of this primary goal must not be confused with achievement of an intermediate goal (the employment of older people) and even less so with compliance with a simple quantitative indicator. Confusing these goals would mean having to face the same challenges as before due to the focus on intermediate indicators and short-term objectives: this is in fact what occurred to some extent in the past when early retirement was being promoted.
• the quality of the jobs given to older workers is just as important as their employment rate

The widespread nature of part-time and non-permanent employment in some of the countries that have performed well in terms of getting older people into work indicates that an increase in the employment of older workers brings with it the risk of less secure forms of employment. Therefore, if the increase in the employment rate of older people follows the trend observed in the countries that have made the most progress in this area, this will change the choice these people have with regard to employment: this could be approached in a positive way by taking greater account of employees’ individuals decisions as to whether or not they wish to take up employment. However, this could eventually prompt discussion regarding constraints on standards of living and life choices. Ultimately, while the goal of increasing employment among older people is sure to meet with a general consensus in Europe, the limitations of focusing on increasing the employment rate and effective retirement age, and the costs that come with this, should be kept in mind. The result of limiting ourselves to pursuit of these intermediate goals without putting in place a real active age management policy would be to condemn older workers to having to choose between working in precarious employment for longer or drastically reducing their pension levels.

Bringing together the fundamental elements of employing older people

Faced with the strength of the collective perceptions and attitudes of actors who favor early exit from the labor market, the response in terms of policymaking must address the many different aspects of the phenomenon of underemployment among older people: as we have seen, the term “culture of early retirement” describes a complex phenomenon to which there are several dimensions, which emerges at the intersection between different social policies (employment, training, social protection and influence on individual behavior, intergenerational equity, health and working conditions).
To increase employment among older people, all aspects of the issue must be taken into account.

• having fiscal and social incentives that are generally designed to keep people in employment An essential step in increasing employment among older people is to shift the focus of all fiscal and social incentives to ensure that they promote employment. The difficulty here lies in first identifying any disincentivizing effects – some schemes only becoming disincentivizing following the reform or phasing out of others. Many countries (Sweden, Germany, the Netherlands, Belgium, Austria, Finland, Denmark), have therefore favored an approach aimed at reforming the various disincentivizing aspects of several types of schemes (pensions and pre-retirement or early retirement, unemployment benefits, disability, incapacity or sick leave). In some countries, this has been accompanied by the introduction of phased retirement (Austria, Belgium, Denmark, Finland, the Netherlands, Germany).

But for all of these countries, the difficulty in making changes to the system of incentives created by social protection schemes lies in striking a balance between the desire to encourage employment and imposing more stringent conditions for certain forms of assistance with a view to getting people into work. The solution most commonly adopted (Germany, United Kingdom, Sweden, Belgium, Netherlands) is to proceed gradually by reforming or phasing out the various pre-retirement or early retirement schemes one by one. For different reasons, two types of scheme continue to exist in their current form in many countries that have nevertheless implemented ambitious reforms. These are schemes that exempt older unemployed people from having to look for work, which continue to provide some degree of flexibility for public employment policies in the face of unemployment rates that have been on the rise in Europe since 2001. The same applies to schemes for those who have a disability or are unable to work, even if some are trying to make these schemes subject to more stringent conditions – due to the difficulties involved in keeping older workers with a reduced earning capacity in employment or getting them back into work.

• a policy that encourages a change in attitudes

As illustrated by the countries that have been successful in getting older people into employment, adapting the incentives offered by social systems is not usually enough. In recognition of both the economic rationality of the various actors and a general attitude of what can sometimes appear to be age-based discrimination, great efforts must be made to raise awareness of the “culture of early retirement” among the main stakeholders (companies, employees).
This is why, in order to address these societal attitudes, a certain number of countries have implemented real communication strategies designed to raise awareness of the issue of employment of older workers among both companies and the general public.

• an employment and training policy that invests in people of all ages

One discriminating factor with respect to the employment of older workers is their level of training, but also the lengths to which the public employment services (PES) are willing to go to help older workers find a job.

For many continental European countries, this mean that training efforts, which currently focus on younger workers, must undergo a radical overhaul. For the PES, it also means creating an offer of tailored services (as is offered in the United Kingdom and Germany), taking into account the specific challenges associated with this particular group of people (loss of self-confidence, the need for an intermediary and help with choosing a second career if necessary, specific psychological or physical problems). For training policies, this requires a shift away from professional training that is still very much geared towards the transfer of theoretical skills to training that is adapted to the specific learning methods of people who are often no longer used to learning or who learn at a different pace.

Although making targeted efforts and putting in place a specific policy for those over the age of 50 seems necessary in the short term as part of an approach designed to help put the generations now aged between 50 and 60 years on an equal footing, in the longer term, this must give way to preventive measures targeted at all age groups (promoting professional mobility and lifelong learning), both with respect to training and returning to work, as demonstrated by Sweden and Denmark.

• taking into account the impact of working conditions on the issue of age One of the key factors in improving employment rates, once any schemes that have a disruptive effect on employment patterns have been phased out (early retirement, financial incentives), relates to how employees' health changes with age. In this regard, working conditions play a decisive role, with those who do physically demanding jobs generally feeling the effects of this from the age of 45-50 at the latest.

Although most countries (France, Germany, the United Kingdom, the Netherlands or Sweden, in particular) adopt a “curative” approach in the short term, in an attempt to resolve some older employees’ incapacity to work as the result of their exposure to harsh working conditions by putting in place special arrangements, their long-term approach must involve efforts to prevent people being exposed to harsh working conditions at all stages of their working lives. It is with this aim in mind that Finland’s program seeks to further strengthen the preventive aspects of occupational health policy.

Defining an integrated active aging policy

Analyzing the policies of France's main European partners has allowed us to identify the ways in which we can successfully bring an end to the culture of early retirement, as well as identify the limitations involved in working to increase employment among older people.
In addition to the policies and tools that represent the “fundamentals” of getting older people into employment, the success of any “paradigm shift” is also determined by a number of methodological aspects. Setting out an integrated active aging policy demands coordination between different areas of public policy, and it requires the involvement and coordination of all stakeholders and the use of various policy tools. Finally, decisions must be made regarding whether targeted or more general measures are to be taken, which depends on the timescale to which the public authorities are working.

• an overall strategy coordinating the different aspects of active aging

Analyzing both the successes and the challenges encountered by European countries in their efforts to improve the employment situation of older people highlights the importance of defining a comprehensive, integrated active aging strategy.
It is the failings of policies centered around a single aspect of public action that have made clear the need for a comprehensive strategy. The focus on developing an integrated strategy underlines the importance of adopting a coherent, coordinated approach to the various measures, as there are likely to be limitations to simply carrying out a number of ad hoc reforms, particularly due to the ways in which the various actors behave.

Therefore, simply placing restrictions on pension and pre-retirement systems cannot improve the situation of older workers, as demonstrated by the German and Italian examples. On the contrary, it is the coordination of different aspects of active aging that seems to be the key to success in keeping older people in employment. The biggest factor seems to be the effectiveness of employment and training policies. However, in order to be effective, employment policies also need to ensure that people’s ability to continue working is maintained throughout their lives, particularly by providing access to training and improved working conditions. Well-organized coordination between these different aspects of public policy is also crucial, as shown by the multi-year strategy implemented in Finland. Lastly, effectiveness is also dependent on the use of a wide range of policy tools (incentives, regulations, communication).

• involving all stakeholders to ensure a coordinated strategy

While public policies play a key role in helping to increase the employment rate of older workers through the powerful levers that they control (pensions, early retirement schemes, employment policies), other stakeholders (companies, industrial relations partners, employees) need to be involved if we are to avoid strategies that fail to get to the root of the issue and improve training, working hours, the way in which work is organized and working conditions, which largely depend on social partners.

• the matter of targeting and timescales

An essential consideration when setting out policies designed to increase employment of a specific category of people, the matter of targeted policies takes on special significance when it comes to older workers. Firstly, because little can be done to reverse the effects of aging (health issues, lower levels of initial training than those of younger people). Secondly, because of its “universal” nature: it is generally the case that each of us will grow old and one day be classed as an “older worker”. These two characteristics call for different approaches for different generations.

Analysis of successes in the employment of older people highlights the effectiveness of “generalist” policies with respect to employment, training, health at work and organization of work. However, the effectiveness of policies covering the entire working life cycle should not preclude the adoption of policies targeted at today's older workers. In fact, the effects of all the areas of intervention and actions taken to increase employment among older people which were identified in the countries of the European Union can take a long time to become apparent. The Finnish and Dutch examples illustrate this phenomenon well: it takes between 5 and 10 years for the programs to start taking effect. Those currently between 55 and 65 years of age find themselves in a rather unique situation: a relatively low level of initial training, an early start to their working lives, often difficult working patterns and conditions, and a large number of them having now exited the labor market.

The challenge in increasing employment among older workers certainly lies in being able to coordinate actions targeted at the current generation of older workers, for whom targeted policies may seem necessary, and in setting out a medium-term policy designed to prevent people being shut out of the labor market or the deterioration in employment conditions that we are experiencing today, which will no longer be based on targeted action in response to developments, but on intervention early on in the employment cycle. In addition to this, consideration also needs to be given to how public policies impact the actions of the various stakeholders, whereby a balance needs to be found between ensuring treatment that takes into account the compounded difficulties faced by this generation’s most disadvantaged employees, and implementing a medium-term strategy designed to influence subsequent generations in a different way. This risk of potential conflict between these two timeframes is compounded by the challenge of launching reforms at the right time based on cyclical developments in the labor market.