Labour shortages and ageing population prompt review of early retirement

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In December 1999, employer and employee representatives in the Dutch Social and Economic Council advised the government to abolish the financial advantages for companies contained in existing early retirement provisions, and suggested a more flexible pre-pension system. The proposals follow various government initiatives to keep older employees working longer, and a recently submitted Act on age discrimination intended to promote their participation in the labour market. Tensions surrounding labour shortages and the costs of an ageing population are thus now focusing attention on the position of older workers, following recent initiatives to boost the labour market participation of mainly female benefit recipients with children and of migrants.

Employer and employee representatives in the Social and Economic Council (Sociaal Economische Raad, SER) are advising the government to abolish the financial advantages for companies contained in existing early retirement provisions. This draft proposal, issued in December 1999, also includes the SER's recommendation to abolish existing benefit supplements to employees made redundant following company reorganisations, on the grounds that the money would be better spent on training and finding suitable new employment. At the same time, the Council's unanimous draft proposal also includes an initiative to offer tax incentives to companies in order to lower the labour costs for older employees. Finally, the SER wants to reinstate mandatory job-seeking for unemployed people aged over 57.5 years, a point which the trade unions agreed to on condition that the government conduct a survey to determine whether older job-seekers actually have a chance of finding employment. Employers see no need for such an investigation, citing the present labour shortages as a reason for directly reinforcing mandatory job-seeking for older people.

Keeping older people working longer

A majority in the Lower House of parliament has already voiced support for the SER proposal concerning early retirement, in the hope that the measure will enable older employees to continue working longer. In the short term, the proposal will help combat the shortages on the labour market, and in the long term it will help cover the costs associated with the ageing population. The number of individuals aged between 40 and 65 in the economically active population will increase by 50% between now and 2015. The SER aims to increase the degree of labour market participation among employees aged over 55 from the current level of 25%-30% to over 50% by 2030. In summer 1999, Minister of Social Affairs Klaas de Vries took measures to offer employees older than 55 years who were either demoted or changed jobs to a lower-paying position benefits based on their old salary in the event of redundancy or disability.

Minister De Vries intends to triple the number of older employees in the labour market, with his attention primarily on the 171,000 individuals who are, in principle, perfectly healthy despite having taken early retirement. In the 1980s, early retirement became widespread in order to make way for younger employees and advance painless corporate reorganisations. Early retirement provisions allow employees to stop working from the age of 55 and receive 60%-80% of their last-earned salary until reaching the age at which pension benefits commence. All employers pay premia for this provision, and employees who have taken early retirement and return to work receive reduced benefits. The SER proposal will transform this into a flexible "pre-pension" structure, enabling employees to determine the date of retirement, although they must bear the costs of early retirement. A retired employee may also continue working part-time without affecting the level of benefits. Along with the minister, VNO-NCW, the largest employers' association, has also taken up on the early retirement issue, announcing plans to re-examine provisions"" in existing collective agreements (NL9808194F). The initial reaction of the trade unions was one of utter disbelief.

Labour market shortages

The timing of the SER draft proposal announcement was impeccable. The current tight labour market paves the way for completely different policy options than those based on a high level of unemployment, which plagued the Netherlands up until a few years ago. Closures and reorganisations in the 1970s and 1980s led to more or less attractive redundancy payment schemes for older employees. Employer and employee representatives have since been sharply criticised for allowing this age-group to disappear from the labour market to collect disability and early retirement benefits with such ease (NL9708125F). In 1975, three-quarters of the male population over the age of 55 was active on the Dutch labour market, but compared with other European countries, the Netherlands' current rate of employed individuals aged over 55 is low: 33% as opposed to the rate of around 50% found in Denmark and the UK (according to the 1998 OECD Employment Outlook). Since the economic tide has turned, arguments that previously carried no weight are now beginning to make sense. For example, it is now thought that older employees' experience should be seen as a benefit to companies, whereas this was discounted as outdated not so long ago. The employment potential of migrants is also suddenly being seen in a different light (NL9909163N), while an employment obligation for mainly female benefit recipients with children has also been placed on the government's agenda (NL9911172F).

The cabinet has contributed to the shifting of boundaries with the proposal of a new age discrimination Act. The government proposes to eliminate the requirement to retire at 65, while retired employees who wish to continue working part-time may do so, without jeopardising their pension rights as a result. The Act will prohibit age discrimination not only in recruitment, but also in education and promotion. The Act will ban direct and indirect discrimination, which means that job advertisements may specify age restrictions only in special cases. Including education/training and promotion in the Act's scope is intended to keep older individuals active in the labour market longer.

Commentary

Measures such as no longer upholding 65 years as the authorised age to retire, along with implementing flexible part-time retirement provisions, reflect society's wish to transform the uniformity which has traditionally characterised the span of the average person's working life. The impetus of the various cabinet proposals on increasing labour market participation is clear: making a full-scale effort to handle the consequences of economic growth, fight excessive wage growth and make economies (by changing the early retirement provisions). The proposed age discrimination Act also fits into this framework, in that it seeks to counteract the frequently marginal position of employees of 55 years and older. Now that the economic tide has turned, there is room to identify existing discrimination against the older segment of the population and follow through with resolutions concerning their situation. (Marianne Grünell, HSI)

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