Fostering the employment of older workers in the future

The Institute for Employment Research recently published its latest findings on the situation of older employees in the workplace. The study reveals that employees aged over 50 years represented only a small proportion of new recruits in 2006. Moreover, the number of establishments that implemented policies to foster the employment of older workers decreased between 2002 and 2006.

Forecasts indicate that the size of Germany’s total population will shrink drastically after 2020. This development, in turn, is expected to affect the supply of labour in the long run. A recent study on demographic changes (in German, 966Kb PDF) by the Institute for Employment Research (Institut für Arbeitsmarkt- und Berufsforschung, IAB) analyses the effects that a slowly shrinking and ageing population will have on the labour supply in the future. The analysis is based on data from the 2006 IAB Establishment Panel (Betriebspanel 2006), which offers a greater insight into the current situation of older employees in the workplace. The Establishment Panel (in German) survey is regularly conducted by IAB and covers 16,000 establishments in all economic sectors.

Measures for older employees at workplace level

The IAB research estimates that, by 2020, the number of persons in Germany aged between 55 and 64 years will have increased by about 40%. At the same time, IAB assumes that the labour force participation rate of older workers will rise over the coming years. This, in turn, will lead to a greater supply of labour – even if it is presumed that the overall size of the population will decline slightly over the next decade. If both assumptions are taken into account, older employees will presumably represent an increasing share of the entire workforce. Therefore, the ageing of the population represents the main challenge for the future labour market in Germany.

In this context, establishments would be well advised to adopt measures that either enhance or, at least, maintain the employability of their ageing workers. Such schemes for older employees could, for example, include continuous training, healthcare programmes, opportunities to work part time, adapting the workplace to suit the needs of these workers, lower job requirements or working in teams that integrate people of different age groups.

Decreasing initiatives at establishment level

In 2006, 42% of the establishments employing 500 or more employees offered continuous training to their older employees, while 34% of establishments with 500 or more workers set up work teams comprising employees of different ages.

However, when comparing these findings with those of previous panel surveys, the ratio of establishments offering schemes targeted at older workers aged over 50 years declined from 19% in 2002 to 17% in 2006. Establishments indicating that they did provide such measures most often mentioned the possibilities for older employees to work part time. Nevertheless, the authors of the study emphasised that part-time working arrangements often facilitated early retirement rather than supporting a longer working life.

Finally, the study revealed that employees aged 50 years or over were underrepresented among new recruits in the first six months of 2006. In western Germany, only 8% of all newly recruited workers were over 50 years of age; in eastern Germany, the respective figure amounted to 18%.

Views of social partners

The Confederation of German Trade Unions (Deutscher Gewerkschaftsbund, DGB) highlights in a brochure on demographic change (in German, 1.82Mb PDF) the challenges that an ageing population creates for the future. DGB underlines that the current debate on prolonging working lives, such as last year’s extension of the statutory retirement age from 65 to 67 years, has focused too much on relieving the burden on the social security system. DGB is not in favour of the rise in the retirement age to 67 years, given the fact that older members of the population face higher unemployment rates (DE0612039I, DE0612039I).

Overall, DGB suggests that new strategies should be developed to ensure the employability of older workers. In this regard, human resource managers and works councils should create a working environment that motivates employees to remain an active part of the workforce for a longer period of time. Such measures should, above all, comprise steps to prevent health problems and programmes that provide continuous training for older employees.

The Confederation of German Employers’ Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA) believes that certain occupations already face an imminent shortage of skilled labour. Against the backdrop of a shrinking population, BDA highlights in an article on older workers (in German) that German establishments will be dependent on the knowledge and professional skills of these employees in the future.

To foster the employment of older workers, BDA supports the implementation of the new retirement age at 67 years and a reduction in the number of provisions through which employees can take early retirement. These latter mechanisms include the promotion of part-time work for older employees, as well as easier access to unemployment benefits for unemployed persons aged 58 years or over. BDA emphasises that it is more important for older workers to exit unemployment faster than to provide incentives encouraging longer periods of unemployment.

Sandra Vogel, Cologne Institute for Economic Research (IW Köln)

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