Active Ageing: a core policy priority for the European Union

3. The prospect of an ageing and shrinking workforce

The economic and social impact of the ageing of Europe’s population will be particularly pronounced in the next decades, as the longevity growth and lower fertility levels of the last decades combine with the retirement of the ‘baby boomers’ to cause a sudden worsening of old age dependency rates. The European Union is faced with the prospect of an ageing and shrinking workforce. Over the next two decades, the number of people in the 20-29 age band will fall by 20%, while the number in the 50-64 age group will increase by 25%. If current early retirement practices continue among this latter group, participation rates may drop to just 1/3 of those of prime age workers. This will have a strong negative effect on overall labour supply and result in skill and labour shortages followed by wage drift and inflation. Obviously, it will also put an extra burden on social protection systems. To avoid such a scenario, Europe must adjust working practices to an ageing workforce and invest in its continued employability and productivity. It is imperative to enable and motivate the baby-boomers to remain in work for several years longer than present cohorts of older workers.

4. The active ageing agenda

As people enjoy healthier and longer lives, and in the broader context of population ageing it is both possible and necessary to raise the activity and employment rates of older workers and postpone the age at which people stop working and retire with a pension. Increasing the employment rate of older workers is possible and consistent with the increase in life expectancy and improvement of the health condition of the workforce. It is furthermore necessary in order to contain the ageing generated growth in transfers from the active to the retired population and counteract contractions in labour supply. This calls for an integrated package of policy responses aimed at setting up a virtuous circle ensuring equity and life opportunities as well as labour supply and financial sustainability of social protection.

5. The active ageing instruments at Europe’s disposal

Europe’s instruments to support Member States in their efforts to address older worker issues presently include the Employment process, the European Social Fund (ESF), EU Social Dialogue, the strategy for Health and Safety at Work, Corporate Social Responsibility, the Open Method of Coordination on Adequate and Sustainable Pensions, European legislation outlawing discrimination in employment including on grounds of age and an action programme on anti-discrimination.
Of these the employment process and the ESF are by far the most important ones. The European Employment Strategy is an integrated part of the EU strategy of mutually reinforcing policies for growth, more and better jobs and adequate and sustainable social protection. Background conditions of steady growth and employment friendly social protection are meant to facilitate the success of interventions in support of specific employment goals such as with older workers. The sizeable ESF funds support the implementation of the employment strategy in Member States.

6. Recent developments in EU policies on age and employment

6.1 Older workers issues and the EU agenda

Although the European Commission became interested in the challenges of future ageing from the late 1980s, it took quite some time before labour force issues took centre stage. Along with international debates, attention had focused largely on the consequences for pensions, and health and long term care. It was not until 1999 that older worker issues began to be addressed in the European Employment Strategy. Developments followed swiftly, however. The May 1999 Communication, “Towards a Europe for All Ages” located higher employment of older workers as one of the pivots of a successful policy response to the ageing challenge. “Active strategies for an ageing workforce” was a major theme during the Finnish Presidency in 1999 and the employment package adopted at the Helsinki Summit gave considerable attention to the age gap in Europe’s employment performance4. The European Commission’s first recommendations to Member States emphasized the need to change tax/benefit structures that facilitated early exit and penalized those people who worked longer. Towards the end of 1999 the European Commission also presented a proposal for a directive to outlaw discrimination in employment, including on grounds of age. Encouragingly, this was adopted by the Council within less than a year.
Yet, more than anything, it was the launching of the ten-year strategy to make Europe “the most competitive and dynamic knowledge based economy in the world” at the Lisbon European Council in March 2000 that set the ball rolling. The Strategy committed the European Union to full employment by 2010 and to enabling social protection systems to weather the impact of demographic ageing. Since then, extending working life by improving the incentives and opportunities for older workers has become a major priority in European strategies for employment and for adequate and sustainable pensions.
As the issue slowly worked its way up the EU agenda, the approach matured considerably. The resolution on older workers adopted in 1995 called on Member States to “adapt to the needs and prevent the social exclusion” of older workers. When the issue was first mentioned in the employment guidelines, the emphasis was on securing equal opportunities for older workers. However, since the introduction of the separate guideline on active ageing and the Stockholm target on increasing the employment rate in 2001, older workers have primarily been portrayed as a “resource to be mobilised”. Older workers were no longer perceived as just another vulnerable group meriting special attention, but as a core element in the labour supply of the future and a factor in the sustainable development of Europe. In the same period, EU instruments evolved from soft suggestions to binding guidelines and recommendations and the focus was widened from tax/benefit structures to practices of age management in work places and labour markets and the important role of social partners.

4 The underemployment of older workers accounts for about 25% of the difference in employment performance between EU and the USA.

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