Facing Demographic Transition

3. Total Employment
Figure 1 shows the percentage of total employment for a number of countries. The EU goal is to reach 70% employment. Total employment rate is age and education dependent as data for Croatia clearly demonstrate (see Table 2). The lower total employment rate in the EU compared to the USA is related to the education structure. The percentage of low-skilled workers in the EU amounts to 35.6% compared to 21.3% in the USA. In the USA and in the EU the average employment of low-skilled workers is about 45%. The employment of university graduates is over 80% and the fact that the USA has 26% of workers with tertiary education compared to 21% in the EU explains the lower total employment in Europe.
When an older person loses a job, it is almost impossible for him/her to find a new job. There are two main reasons. First, many older persons are inadequately educated or at least have no necessary skills for the present market implying that most of persons above 50 have much lower employment. Second, some older persons are in higher positions and therefore, very expensive to hire.
While total employment is considerably below 100% there is a rising workforce shortage. For instance, in the USA currently there is a shortage of about 100,000 nurses and it is estimated that soon (say by 2040) 200,000 MDs and 800,000 nurses will be needed. In developed countries about 50% of firms face workforce shortages. In Croatia 50% of persons in information-communication technology are without higher education. In a global world the workforce moves causing brain drain (resulting in brain gain in another place), but also resulting in brain waste, since many highly educated and talented persons are lost in a process of transition to a new and different place.
Poverty is also related to employment as shown in Figure 2. Employment is the principal means by which citizens in democratic, market economies can meet their needs and fulfil their socio-economic aspirations. Yet, governments accept high levels of unemployment and low level of employment with a sense of resignation and helplessness. This sense of helplessness is unjustified and unacceptable. The facts do not support a pessimistic outlook. In spite of the global population increase, technology progress and globalisation during the past 50 years the number of new jobs has increased 43% faster than the growth of population and during the past decade global job growth has been 21% higher than population growth (see Figure 3).
The distribution of necessary jobs has dramatically changed during the last century: the percentage of persons working in agriculture and even in manufacture has drastically decreased, while the need for ideas, creativity and wisdom has increased.

Figure 1: Total employment rate for several European countries

Table 2: Total employment rate for various groups in Croatia

Figure 2: Poverty and employment in Croatia

Figure 3: Population and employment from 1950 to 2000

The employment issue is of crucial importance in most European countries. Most of South-East and East European countries (e.g. Poland, Croatia, Hungary, Italy and Romania) have employment rates 25% lower than the EU target of 70-75%. Particularly troubling is the extremely low youth employment rate (e.g. in Croatia it is 24.9%) and high youth unemployment rate (e.g. in Croatia it is 36%). Similarly troubling is long-term unemployment: in Poland, Croatia and Slovakia it is twice as high as in the EU25.

4. Retirement
The present retirement system was introduced at the end of the 19th century. To reduce the influence of socialdemocrats in 1889-1891 Chancellor Bismarck introduced the retirement – first for state employees over 70, requiring that the cost for retirements be shared 50:50 by the employers and employees. in 1913 the age limit was set at 65 and in 1957 the pay-as-you-go system was introduced. The first retirement plan in the USA was offered in 1875 by the private firm American Express Company, and in 1880 railroads became the first major industry to provide a pension plan. In 1935 the USA Congress introduced the social security system. At the end of the 19th century life expectancy throughout Europe and North America was less than 50, and fixing the retirement age at 65 implied that very few persons would actually have to receive retirement benefits. If countries would accept the spirit of the Bismarckian prescription, rather than the actual number, it would follow that the present retirement age should be around 90.
Most of developed countries have low fertility rates (much less than the 2.1 required to maintain the population), education extends to well over 25 and first jobs are very demanding considerably reducing the time interval when women are likely to become pregnant, life expectancy is well over 70 and many businesses still maintain a practice of early retirement (typically between 55 and 60) to allegedly make room for younger, better educated and definitely cheaper, workers7. All of this makes the system of state pensions, as it is today, unsustainable. It will collapse — simply the ratio of retirees and employed persons is drastically increasing from acceptable 0.25 to about 1.
Progress in science and technology has resulted not only in a much longer and constantly increasing life expectancy, but also in healthier life so that disabled persons can now work. It is not surprising that many retirees work after they retire8. This is the realisation of the fourth pillar of the retirement system advanced by the Geneva association9. The three conventional pillars are: first, the compulsory pay-as-you-go retirement, second is the supplementary and often capital-funded company pension, and the third is individual savings. Only the fourth pillar — part-time, flexible employment after retirement is robust enough to withstand various perturbations.
It has been pointed out that older workers, specifically retirees have not only more experience, but are also more loyal, have high motivation and can learn, albeit in a different way than their younger colleagues but nevertheless quite fast and efficiently10. The human capital of older workers is often not used and therefore, it deteriorates. in 2005 the Geneva Association in collaboration with the University of Luenenburg launched a project ‘Silver Workers’ to understand post-retirement work11. Some of their findings based on the study of retired Germans aged 60 to 85 are: 1) 75% of retirees would work even without pay, indicating that the work itself provides various intangible benefits, 2) more than 50% consider the fourth pillar important, 3) about 70% would like that the fourth pillar provide between 10-30% of their retirements, 4) 79.3% would like to be integrated into an organisation where they currently work, 5) 42.4% of those employed after retirement work from home, though 79.5% worked originally in a company, 6) 84.6% are prepared to go on business trips, and 7) 68.6% have participated in advanced training since retirement. These findings clearly demonstrate a variety of benefits stemming from part-time, flexible post-retirement employment.

7 Simonetta, J. (2003): “The Participation of Older Workers in Employment and Training Administration Programs”, in J. Riley et al. (eds), A Compilation of Selected Papers from Employment and Training Administration’s 2003 Biennial National Research Conference, US Dept of Labor, Employment and Training Administration, Washington, DC.
8 Clifford, S. (2005): “Saying no to Retirement”, Inc. Magazine, 27(9), 27-29; Lang, S. S. (1999): “Go Back to Work — The Recipe for Happy, Retired Husbands”, Human Ecology, 27(4), 2.
9 Giarini, O. (2000): “An Ageing Society? No, a Counter-Ageing Society”, The Four Pillars, Geneva Association Information Letter, August, Geneva; Cagiano de Azevedo, R. (2003): “Invecchiamento o svecchiamento: questo e il problema?”, Giornale dell’Istituto Italiano degli Attuari, 66, 119-144, Roma; Giarini, O. and Liedtke, P. (1996): The Employment Dilemma and the Future of Work, The Geneva Association; Reday-Mulvey, G. (2005): Working Beyond 60, Palgrave, McMillan, New York.
10 Wise, D. E. (2005): “Facing the Age Wave and Economic Policy: Fixing Public Opinion Systems with Healthcare in the Wings”, Fiscal Studies, 26, 2005, 5-34.
11 Geneva Association (2007): Silver Workers, Etudes et Dossiers, No. 330, Research Report, August, Working paper series of the Geneva Association, and references therein.

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