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Reuters/Juan Carlos Ulate
Never too old.
THE TIDES HAVE TURNED

The “silver tsunami” is the workforce the world needs right now

Andrew Scott
By Andrew Scott

Professor of economics, London Business School

It used to be said you knew you were getting older when the police looked like they were getting younger. It would be interesting to know whether this crossed the mind of 29-year-old Paul Tait after he was arrested in Benfleet, Essex earlier this month after a car chase and then pursuit on foot. His pursuer was special constable Ken Smith—who was 74 years of age. While Ken Smith may be an extreme example, the UK police force is getting older: for the first time around half of the force is now over 40.

For decades there have been fears of a “silver tsunami” of older citizens leaving the workforce and creating an enormous drain on public finances through their impact on pensions and health care. A more optimistic version of this demographic wave is claims around the rising power of the “silver dollar”: The AARP estimates that in the US, the over-50s account for nearly $8 trillion of consumer demand—bigger than the combined GDP of France and Germany.

However, a silver tsunami has already arrived, but with much less fanfare. It has shown itself not in the number of pensioners, not in the number of consumers, but in the number of employees.

Since 1998, the US has seen employment rise by 22 million to reach historical highs. The main cause of this increase isn’t the dynamism of Silicon Valley or the entrepreneurial energy of Brooklyn hipsters. The vast majority (90%) of this increase is due to higher employment for workers aged 55 and above.

During this time period, US employment has increased by 14 million for those aged 55-64, and 6 million for those aged over 65. In Germany, where employment has risen by more than 5 million over the same interval, 70% of the jobs are in the age group 55-64 and 16% from those aged over 65. In the UK, out of nearly 6 million jobs created, around 3 million are from the over 55 category. In Japan, employment would have fallen over this time period were it not for the increase in people aged over 55 who were working.

This increase in the number of older workers is not simply a consequence of there being more older people. The bigger change has come in behavior—a higher proportion of older individuals are now remaining in the workforce, and it is this which has been the main driver behind the rising number of older workers.

Since 1998, the US has seen a shift in over 65 year olds wanting to work from one in eight to one in five. In the UK, the participation rate for this age group has doubled over the same time, and it has tripled in Germany. The shift has been particularly striking among women. In Germany, the number of working women aged 55-64 has increased since 1998 from around one in four to two in three.

Certainly, there is a long policy agenda of issues that need tackling. Not everyone working for longer wants to work, and not all are in good health. Many are having to stay in employment for financial reasons due to insufficient savings and high levels of debt, including student loans.

The nature of post-retirement work also differs substantially by education. Those with a degree are more than twice as likely to be participating in the senior workforce compared to those with less than high school education. The more educated individuals are also more likely to have better and more fulfilling jobs while others work precariously in the freelance and gig economy.

Other problems include struggling with caring commitments for family members and spouses, their own health, and dealing with out-of-date skills. While these are acute issues among older workers, the striking feature is how many are problems shared at all ages. These are not unique difficulties affecting only older workers. The challenge for governments is not to invent new policies to tackle problems of older workers but to extend existing policy frameworks so as to help this group.

One specific barrier to older employment that receives much attention is corporate age discrimination. Older workers report frequent prejudice in terms of pay, promotion, training and recruitment. As the research of David Neumark of University California Irvine shows, workers over 60 who put their age on their CV halve their probability of being called for interview.

It is undeniable this corporate prejudice exists, and tackling it is an important agenda. Luckily, the past 20 years show grounds for optimism. Since 1998 across Germany, Japan, the UK, and the US, the labor market has quietly responded to older workers wanting to work for longer by creating 29 million jobs for this group out of a total employment gain of 33 million. A process of adjustment to longer lives is already well underway. With more determined policy focus and corporate action, considerable further progress can be achieved.

Such further increases should be welcomed by governments. Given current low rates of productivity growth and unemployment, any boost to GDP growth will be heavily dependent on further encouragement of this silver tsunami.

Two decades ago, the political leaders in Germany, Japan, UK, and US respectively were Gerhard Schroeder (54 years old), Ryutaro Hashimoto (61), Tony Blair (45), and Bill Clinton (52). Today it is Angela Merkel (65), Shinzo Abe (65), Theresa May (63), and Donald Trump (72)—an average increase of 13 years. Given the increasing age of the electorate, if these leaders want to continue working for longer, they need to be encouraging the policies that support many others to do the same.