Employment rates of older workers on the rise

In recent years, employment has risen considerably among older workers in Finland. While in 1999, less than 40% of those aged 55 years were employed, this had increased to 55% by 2006. The growth is due on the one hand to the various national programmes launched since the end of the 1990s to attract people into work, and to the pension policy reforms of 2005 on the other. According to the Finnish Quality of Work Life Survey, higher education levels among older workers have also had a positive impact on employment.

According to the European Labour Force Surveys, employment rates among older workers have increased faster in Finland than elsewhere (Figure 1). In Finland, the rapid rise in employment rates applies to both sexes. In other European countries, growth in employment rates has been higher among women, where employment rates have traditionally been much lower than in Finland. At present, Finnish women’s longer work experience accounts for this difference. In 2006, the employment rate among women aged 55–64 years amounted to 54% in Finland, 35% in the EU25, 37% among the EU15 and 25% in the 10 new Member States (NMS).

Figure 1: Employment rates of people aged 55–64 years in Finland and the EU (%)

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Source: EU Labour Force Survey, Eurostat

The Finnish Centre for Pensions (Eläketurvakeskus, ETK) recently issued a news bulletin about a positive trend in the effective retirement age, which has been stronger than expected in recent years. In 2004–2005, the expected effective retirement age for persons aged 25 years was 59.1 years, but increased by 0.4 years to 59.5 years in 2006. The expected effective retirement age calculated for 50-year-olds also rose by 0.4 years to 61.5 years in 2006. Since 2000, this increase has altogether amounted to almost one year.

Positive start to pension reform

The pension reform took effect at the beginning of 2005. The new flexible retirement age means that the old-age pension can be taken gradually between the ages of 63 and 68 years. One of the main aims of the reform is to increase the effective retirement age by two to three years in the long term. This would secure the sustainability of the earnings-related pension scheme.

However, meeting this aim is linked to developments in society and the economy as a whole. Individual choices also play a role. If they wish, persons who reach the age of 63 years may apply for an earnings-related pension and retire at the beginning of the following month.

Reasons behind postponement of retirement

As reasons for the postponement of retirement among older workers, ETK cites the pension reform and a favourable cyclical trend. These are, of course, important contributors to the change in employment levels, particularly due to the fact that the entitlement criteria relating to pre-retirement pensions have been tightened.

However, the results of the 2003 Quality of Work Life Survey (FI0410SR01) also suggest another reason. The educational level of an employee has a major influence over their wish to retire. In general, highly educated employees consider their work to be interesting and want to continue working for as long as possible. Their work has also been less demanding on their physical health than that of employees in lower educational groups.

A special EU study (178Kb PDF) also refers to the level of education as a relevant factor in relation to the employability of older workers. Both men and women with the highest level of education, usually university level, are more often employed than those with lower qualifications. In 2005, in the EU25, the employment rate in the oldest group of workers, namely those aged 55–64 years, was 31% among persons with the lowest level of education, but amounted to 62% among persons with the highest educational level. In this respect, figures for Finland represent the EU average, at 32% and 60%, respectively, for both educational groups.

The difference between the EU and Finland in relation to the rise of employment among older workers is due to the fact that the overall level of education has increased significantly and quite rapidly in Finland. This trend also applies to the older age groups (Figure 2).

Figure 2: Level of education among workers aged 55–64 years (% of workers)

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Source: Finnish Labour Force Surveys 1995–2005

Commentary

When the forecasts related to retirement age were made some 10–15 years ago, nobody predicted the current rapid rise in the employment rate of older workers. Few of the analysts took into account the change in the educational and occupational structure which is clearly a deciding factor behind the postponement of retirement.

Anna-Maija Lehto, Statistics Finland

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