An employment pact for older workers?

The threshold at which age becomes an obstacle for re-employment in Austria is now as low as 35 for some groups, while the number of unemployed people aged over 50 has been rising dramatically. In February 1999, the social partners therefore devised a pact containing a series of proposals designed to reverse these trends. However, disagreements remain over how to turn the proposals into workable measures and how to finance them.

The participation rate of the over-50 age group in the labour market is low in Austria by European standards, and the unemployment rate amongst this group is high. This is true regardless of qualifications and includes managers over 50. Experts agree that the transition into the age-determined "problem group" for women takes place between 35 and 38, and for men between 40 and 45. At the end of the 1980s, an unemployed person aged 40 needed on average four weeks to find a new job, while 10 years later it takes between three and nine months.

The Austrian government and representatives of employers and employees, within the context of the country's National Action Plan for employment (AT9802164F) in response to the EU Employment Guidelines, are devising a set of measures designed to remedy this situation. Dubbed the employment pact for older workers (Pakt für Ältere), it aims on the one hand to provide incentives for employers to retain workers aged over 50 and, on the other, to ease their return to employment if they become unemployed.

Employment preservation

Existing measures to encourage employers to retain older workers include a penalty of ATS 25,000 payable to the unemployment insurance office when a company makes redundant a worker aged over 50 after at least 10 years of employment with the company. There were 7,400 such cases in 1998. A second measure, in force since 1993 and revised in 1997, makes flexible retirement possible. Employees from the age of 55 may gradually reduce their working time and simultaneously increase their pension. However, at the end of 1998 there were only 1,058 participants in the scheme. Less than 1% of new pensions are flexible. Third, there is a substantial degree of employment protection specifically for workers over 50. Other preventive measures that are not specifically aimed at older workers include short-time work benefits and retraining of employed workers (under European Social Fund objective 4).

The new measures proposed in the older workers' pact include a review of the penalty for making redundant long-serving workers aged over 50 and a review of severance pay regulations (AT9811109F). In both cases, it is unclear how much the existing regulations contribute to employment protection, if at all. They will not be abolished but they may be revised. The flexible pension scheme is to be promoted more actively and the conditions attached to it may be loosened somewhat. The proposals also include tax breaks and reduced contributions to social security in return for employment preservation, and tax deductibility of training for older workers.

Further, the social partners wish to adapt and develop working time models that can serve to preserve employment. Training leave (AT9710139N) and the "solidarity premium" model (AT9711146N) will, it is planned, be made more popular and more focused on the over-40 age group through promotional activities, and perhaps through more relaxed conditions for employees over 40. The latter may include a minimum duration of leave which is less than the current six months, and counting training leave towards pension entitlements. The social partners are also contemplating a limited-duration part-time scheme for older workers in which the employee would be partly compensated for income loss with unemployment benefits - without an impact on subsequent severance pay and pension entitlements - while the employer's contributions to social security would be reduced. There is also the option of transferring earlier overtime hours to later employment.

Other elements include more targeted training, a campaign against age limits in job advertisements, an improved system of early warning for redundancies with a more age-specific reaction to such warnings, and improved healthcare.

Return to employment

Existing measures to help older unemployed people find work include a reduced employer contribution to the unemployment insurance scheme of only 1.5% of the gross wage of a newly recruited worker aged between 50 and 54 - instead of 3% - and no contribution at all when the newly recruited worker is 55 or older. There were 15,800 employees to whom this applied in 1998. Second, there are three different kinds of subsidy to employers for hiring a long-term unemployed person or a person threatened with becoming long-term unemployed. The subsidy can be as high as two-thirds of the wage and last for up to two years. Nearly one-third of the beneficiaries are over 45 years old but only 12% are over 50. Third, because unemployment benefits depend on previous income there is a scheme whereby men over 50 and women over 45 remain entitled to the benefits based on earlier employment, even if they accept more lowly paid employment. These national schemes are complemented at other levels. In the province of Lower Austria, surrounding Vienna, a group has had some success at, as it were, "marketing" unemployed people aged over 50 to companies willing to recruit. There are a series of other measures aimed at long-term unemployed people in general, though not at the older unemployed in particular. These include support and subsidies for those unemployed people willing to become self-employed, for organisations retraining and hiring unemployed people for personal care occupations, and the well publicised Work Foundations (Arbeitsstiftungen).

The social security rebate is to be reviewed under the new pact. Employer contributions may be abolished altogether for any newly recruited worker aged 50 or over. Measures for employment in the personal care sector may be refocused towards older workers (if they are continued at all, which will be decided in autumn 1999). Employment subsidies may be made available for temporary agency work and combined with forming "qualification pools" of older, well-qualified workers in order to make them available to firms looking for qualified temporary personnel. Special subsidies for recruiting older unemployed people may be made available for those who have recently become self-employed. In general, the existing employment subsidy schemes may be refocused towards older workers. The unemployment benefit protection scheme may be made accessible to women over 40 and to men over 45.

New measures envisaged by the pact include a concerted effort to bring forward investment by personal care organisations planned for the medium and longer term. Furthermore, the introduction of "job coaching" for older unemployed people is being considered. Professional consultants would be hired to design and implement measures that would enhance the chances of the older unemployed to find a job. The social partners want to promote jointly the worth of older workers for the employer. The Public Employment Service (Arbeitsmarktservice, AMS) is to address prejudices more directly and to promote older workers more actively. Independently of the pact, there will be an entitlement to a job in an employment project for women over 55 and men over 60 from the year 2000 (AT9711149N).

There are further initiatives at levels other than the national, plus unilateral activities. A scheme run by the Junge Wirtschaft, the youth organisation of the Austrian Chamber of the Economy (Wirtschaftskammer Österreich, WKÖ), that was intended to connect companies with retired managers in order to benefit from their expertise, may start branching out to cover managers who are not yet retired but unemployed.


The social partners' proposals are vague and most notably make no reference at all to their financing. They are obviously only a beginning, but they indicate the difficulty that employers and trade unions are having in finding common ground. The proposals were made in late February 1999, and have been overtaken by other issues in the meantime. When the social partners return to the negotiating table they will have to face the task of designing concrete measures.

However, some commentators are predicting that the pact is unlikely to make the transition very successfully from vague suggestions to specified measures that can be implemented. This is because they recall that: agreement between the partners on tax reform was possible only because the government is up for re-election in six months' time (AT9903137N); the agreement on legislation to combat undeclared work announced in January 1999 (AT9901127N) has since been revealed as wishful thinking; agreement on even minor amendments to the Labour Constitution Act has proved elusive (AT9903134F); and the same is true of the proposed Labour Contracts Act (AT9903138N). (August Gächter, IHS)

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