Older workers still face labour market difficulties

There is widespread consensus in Denmark that older workers should remain longer on the labour market, in order to maintain the current welfare state in future in the light of demographic change. However, reports published by the social partners in May 2003 highlight the fact that many unemployed people over the age of 50 find it very hard to obtain a new job. Trade unions attribute considerable blame to employers' prejudices against older workers, while employers stress the role of early retirement and unemployment benefit provisions in low activity rates.

Although the Danish social partners have for many years sought to present older workers as a vital resource for the labour market, describing them as 'the grey gold' (Det grå guld), new studies from the Confederation of Danish Trade Unions (Landsorganisationen i Danmark, LO) and Danish Employers’ Confederation (Dansk Arbejdsgiverforening, DA) show that the older people are when they become unemployed, the less is their likelihood of getting back into employment. As many as 16.2% of people in the 53-57 age group who lost their job before the end of 2000 were still unemployed two years later, while the corresponding figure for the 30-39 age group was only 5.4%. While it becomes increasingly difficult for all age groups to return to employment the longer they are unemployed, the chance of finding a new job is much smaller for peopled aged over 53 than for younger groups. Each time an unemployed person aged 53 years or over celebrates his or her birthday, the risk of ending up long-term unemployed increases by up to 50%. These figures come from an LO report entitled Focusing on employment ([Øje på beskæftigelsen](http://topmoede.dk/smmedia/OPB maj 2003 i PDF-format.PDF.PDF?mb_GUID=5B07F632-6EFD-41BA-A381-DB801D66A851.PDF)) which was published in May 2003 and are based on figures from the Ministry of Employment.

Negative myths about older workers

LO states in its report that the high risk of long-term unemployment for older worker is due to the fact that there are numerous myths about such workers on the labour market. Employers prefer young employees rather than older ones and workers are often considered to be 'old' as early as their late 40s. There is a major need to change these attitudes in enterprises if it is genuinely believed that older employees possess valuable resources, and that retaining older people on the labour market for a longer time is a precondition for preserving the fundamental values of the welfare state. Poul Hansen, the president of the older workers' section of the Union of Commercial and Clerical Employees (Handels- og kontorfunktionærernes forbund, HK), recently stated in A4, LO's newsletter, that 'there is a clear trend that employers value the young and fit more than experienced employees'.

Institutional causes of long-term unemployment

Also in May 2003, DA published a report on Older people and the labour market (Seniorer på arbejdsmarkedet). DA agrees with LO that the high rate of unemployment among older workers is partly due to negative myths, but believes that the main reasons are to be found in the early retirement scheme and the special rules in the unemployment benefit system which protect older unemployed people. People aged 55 years and over do not – unlike younger age groups do – lose their entitlement to unemployment benefits after four years. It is thus possible for people become unemployed at the age of 51 years to receive unemployment benefits for up to nine years. DA believes that this rule in the benefit system acts as a disincentive to getting back into employment. Furthermore, the analysis carried out by DA indicates that many unemployed 58- and 59-year-olds are exempted from the otherwise compulsory duty to participate in 'activation' measures and are allowed to remain passively on benefits until they take early retirement at the age of 60. The current unemployment benefit system thus makes it possible to retire from the labour market at an early age and resembles the 'transitional allowance', which was offered during the period 1992-6 to older long-term unemployed people in order to create openings for younger people on the labour market. AGENDA, DA's newsletter points out the unemployment rate among the 50-59 year-olds dropped when the transitional scheme was abolished and that the activity rate increased. A similar positive development could be expected if the present rules were changed.

According to DA, the voluntary early retirement scheme is another important factor which contributes to withdrawal from the labour market at an early age. Among the 55-59 age group, 20% are outside the labour force compared with 70% of the 60-66 age group. This means that many leave the labour market before they reach the normal retirement age at 67 years. The majority of these take early retirement. Two out of three people on early retirement have – according to their own statements – good health and as many as 80% have taken early retirement of their own free will. On the basis of these figures, DA concludes that the voluntary early retirement scheme has become a welfare benefit, which can be considered as an early pension scheme. Jørn Neergaard Larsen, the DA managing director, has on previous occasions stated that the early retirement scheme is one of the reasons why enterprises are reluctant to recruit people in their late 50s. The rules of both the voluntary early retirement scheme and the unemployment benefit scheme should thus be changed in order to keep older people on the labour market.

These statements worry Bjarne Hastrup, director of an interest organisation for older people, Ældre Sagen. If these protective measures for unemployed older people are removed, they will be able to receive only social assistance, while the high rate of unemployment shows that there is a need for special rules for older workers, he state in LO’s A4 newsletter. However, at the same time, he believes that the older workers' possibilities of continuing in the labour market at a lower pace are too limited. Part of the problem is that there are no longer many managers over the age of 50 in enterprises and that young managers have no understanding of how much the older employees can cope with, he claims. Mr Hastrup calls for better treatment of older workers the enterprises.

The experiences of the Union of Danish Metal Workers (Dansk Metal) also point in another direction than the conclusions drawn by DA. Torben Poulsen, the union's treasurer, stated to the Berlingske Tidende newspaper, that unemployed people in the 50-59 age group most often take early retirement because they cannot find a job in spite of the alleged shortage of older labour. Nevertheless, a survey of unemployment rates published in the Jyllandsposten newspaper on 15 July indicates that it is, in particular, young people who are hit by the current increase in unemployment. Of course, this does not mean that unemployment does not hit the older employees harder when it occurs. This is confirmed by a recent opinion poll carried out by PLS Rambøl for Jyllandsposten which finds that many people aged over 46 state that they have a great fear of losing their jobs.

Commentary

Since the end of the 20th century, the tendency for Denmark's labour force to increase constantly has turned around, and there are now more people leaving the labour market than entering it. At the same time, the activity rate among older people has been falling. The 25-59 age group is relatively large, which means that there will in the future be a growth in the group aged 60 and above. As life expectancy is, at the same time, increasing and the normal retirement age will fall from 67 to 65 years with effect from 2004, this may have negative consequences for the welfare state in the future. In order to avoid this, withdrawal from the labour market must be postponed. The reform of the voluntary early retirement scheme in 1999 (DK9902111N) was one attempt to achieve this, but many economists believe that this has not sufficiently solved the future problems of providing for the elderly. According to DA, more than 50% of enterprises which employ older employees have introduced a 'senior policy' and there are now more people on the labour market in the 50-59 age group than there was nine years ago. The question is whether this is enough or whether other initiatives should be taken to retain more older employees on the labour market. The voluntary early retirement system has for a long time been one of most debated issues in the Danish labour market (DK9812197F) and there are only few politicians who dare to proposes changes to this scheme. However, a major part of the problem probably stems from the other side of the equation - ie employers. It seems that in some enterprises there is a lack of will to recruit older people and a lack of understanding of the fact that they may constitute substantial resources for enterprises for many years ahead. (Mikkel Møller Johansen, FAOS)