Blog: Prioritise the 3 R’s for over 50s - recruit, retain, and retrain
Blog by Tom Ockendon, Project Co-ordinator, David Hume Institute
18th May 2022
Mass exodus of over 50s contributing to UK labour and skills shortage
The past two years have turned many people’s lives upside down. The way we lived, worked and played were upended by the pandemic and only now are we starting to understand some of the longer term effects. Shortages in the labour market have prompted grand theories like ‘The Great Resignation’, later downgraded to ‘The Great Contemplation’, but now might be better referred to as ‘The Great Retirement’.
One of the most important economic statistics emerging post Covid is the number of over-50’s dropping out of the labour market. This is reversing a trend for older people staying in the workforce longer that dates back to 1971.
It’s hard to begrudge people choosing to work less as they approach older age, if this is a conscious choice. Many people of all ages have evaluated what really matters in life since covid. There is also some information we don’t yet fully know on the impact of long-term sickness and clinical vulnerability amongst older workers. However, this trend is significant and affects us all, and for some leaving the labour market might not be a choice.
Older workers bring a wealth of knowledge and experience, and maintaining a diverse workforce is crucial for organisations that want to be innovative and resilient.
Although the connection between older workers leaving the labour market and rising inflation might not be immediately apparent, it almost certainly exists. The Bank of England recently announced they expect inflation will top 10% by the end of the year and the UK economy contracted in March, boosting fears of a prolonged recession.
Since the end of 2019, a third of inflation has been caused by domestic factors, including labour shortages. Between the end of 2019 and 2021, 522,000 left the labour market and those aged 50 or over contributed 94% to the overall change. As the furlough scheme came to an end in 2021, redundancies were highest for the age group 50-64 and many of those made redundant have not returned to employment.
Those from the professional occupations, particularly men educated to degree level or equivalent, were more likely to leave the workforce between the ages of 50 and 64 between 2019 and 2021. On the flip side, as the state pension age increased from 65 to 66, those found to be working for longer were disproportionately women, those with lower levels of education, and those living in the most deprived areas of the country. Potential diverging retirement ages for different groups within society bring issues of fairness and equality. This matters as it is long established that more equal economies have higher productivity.
What can be done to address this trend? We need to value what older workers can bring to the table, challenge assumptions about ageing, and invest in older workers with training and development to ensure we do not lose people that want to work. Some older workers might benefit from more targeted support to stay in the workplace.
We also need to better understand how pension policy could be making the problem worse. This includes whether the ability to access defined contribution pensions from the age of 55 has played a part in enabling older workers to step out of the labour market and whether some of them might need to rethink in the context of stock market volatility and high rates of inflation. On top of this, the loss of older staff as a result of taxation rates, often perceived as punitive, for those workers who have reached their lifetime pension savings allowance could be making the problem worse. This is especially a problem in the NHS as the BMA have highlighted.
Moving forward, as our population ages, we need to be thinking about 3 R’s for over 50s - retain, recruit, and retrain. Making the most of our highly skilled and experienced workforce for longer will be essential to ensure a prosperous, inclusive and fair Scotland.