The quiet jobs revolution
* Jobs markets are barometers of social change. In the last 30 years much of the growth in employment in the West has been driven by women and foreign-born workers. Employment rates for men have declined. In the US in the early 1950s around 90% of men of working age were in work or searching for a job; today, with America’s unemployment rate close to record lows, just over 70% of men are working. Explanations range from the loss of traditionally ‘male’ jobs to diminishing returns to unskilled labour, the competing appeal of computer gaming and the role of women, parents and the government in supporting male incomes.
* Arguably the most profound trend in jobs markets in recent years has been the rising numbers of over-55s who carry on working. (In this note we describe over-55s as older workers; this is, of course, an arbitrary and subjective benchmark.)
* Since 2012 most of the growth in employment in the West has been driven by older workers, a majority of them women. In the UK the proportion of 55 to 64-year-olds who work has risen from 58% in 2008 to over 65% today. The same trend has been seen across the industrialised world.
* Money is, of course, a key motivation. The shift from generous defined benefit to patchier coverage of defined contribution pensions is starting to be felt among those aged over 50. Worries about social care costs, asset returns and benefit levels have created new uncertainties. Some parents stay on at work to help their children cover the rising cost of university and housing. Others, with irregular earnings or few savings, have no choice but to carry on working.
* There are also positives reasons for the growing representation of older people in the workforce.
* Many older workers say they want to remain active and enjoy the sense of purpose a job can bring. People who work later tend to be healthier than those who don’t, though it is unclear which way the causation works. A fixed retirement age is anachronistic in a world where people live longer, healthier, lives. The decline of physical labour, and the growth of ‘people focussed’ and cognitive work, has lowered one barrier to later working; age discrimination legislation has reduced another. Meanwhile, growth in flexible and part-time work and in self-employment makes it easier for older people to combine work with other interests and responsibilities.
* The trend to working later has wider benefits. It offers part of the solution to the burgeoning cost of state pensions, social care and health care. Later working counters the depressant effect on GDP growth of lower birth rates and a shrinking younger workforce.
* People are retiring later across the West, but at very different ages. Retirement comes earliest in France and Spain, where just 52% of 55 to 64-year-olds work. At the opposite end are Sweden and New Zealand, where 78% of 55 to 64-year-olds carry on working. The idea that extending working lives reduces the amount of work available to young people is not born out by experience; young people are, for instance, far more likely to be in work in Sweden and New Zealand than in France and Spain. Flexible, open job markets help younger and older people.
* Academic studies disagree on whether productivity declines with age. A recent UK government report found “no consistent evidence that older workers are generally less productive than younger ones” noting that, “knowledge and experience…compensate for age-related declines” in many aspects of performance. A 2010 study of productivity in Dutch manufacturing found, “little evidence of an age-related pay-productivity gap”. Yet far more compelling is the simple fact that businesses are employing increasing numbers of older workers; they do so because it makes business sense.
* Despite recent increases in workforce participation, older workers remain an underexploited resource. For instance, raising UK employment rates for 55 to 64-year-olds to Swedish or New Zealand levels would increase the UK workforce by over 3%, an increase of 1 million people.
* To achieve this requires a greater focus on training and education for older workers (employment rates among less skilled older people are far lower for those with qualifications). The structure of work also needs to evolve. In Germany Porsche is re-designing factories to enable older people to continue working. The pharmacy chain CVS allows its older workers in northern states to move and work in branches in warmer southern states in the winter months.
* A quiet revolution is underway in the workforce. Ageing populations mean longer working lives. A brief era of multi-decade retirement is drawing to a close. Business, government and individuals need to prepare for it.
PS: Last week we wrote that the European Central Bank (ECB) seemed set to ease policy in an attempt to boost growth. On Thursday, Mario Draghi, the ECB’s outgoing president, announced a cut to its benchmark rate from -0.4% to -0.5%, the lowest on record, and a revival of its quantitative easing programme, this time for an indefinite period. It also eased lending terms for European banks and downgraded its euro area growth and inflation forecasts for this year and next. Mr Draghi urged governments to play a greater role in supporting growth by easing fiscal policy. Governments are likely to face growing pressure to act against the downturn by increasing public spending and cutting taxes.
OUR REVIEW OF LAST WEEK’S NEWS
The UK FTSE 100 equity index ended the week up 1.1% at 7,367 as markets were buoyed by the ECB announcing stimulus and optimism over a de-escalation in the US-China trade dispute.
Economics and business
* The ECB has lowered its deposit rate from -0.4% to -0.5% and restarted its programme of quantitative easing to boost euro area growth
* US president Trump criticised the move saying “they are trying, and succeeding, in depreciating the Euro against the VERY strong dollar…”
* The ECB downgraded its euro area growth forecast for this year and next citing “weakness of international trade” and “global uncertainties”
* UK GDP grew by 0.3% month-on-month in July, easing fears that the UK is entering a recession
* UK wages grew at an annual rate of 4% in the three months to July, their fastest pace since 2008
* US president Trump delayed the imposition of additional tariffs on Chinese goods until 15 October
* China responded by suspending import tariffs on some US goods ahead of further talks later this month
* Drone strikes caused major damage at Saudi oil facilities. The US blamed Iran, a charge which Iran rejected
* With growing US-China tensions, US universities are buying insurance against a drop in international student numbers, the FT reports
* The UK government announced that international students in the UK will now be given two years after graduation to work or look for work
* UK store closures rose to a five-year high in the first half of 2019 testifying to the difficulties facing the high street
* UK Labour Party leader Jeremy Corbyn announced he would beef up enforcement of workers’ rights and strengthen trade unions should he be elected to government
* South Korea has complained to the World Trade Organisation over recently imposed Japanese trade restrictions in an escalation of an ongoing political dispute
* The outsourcing company Capita is to pay the living wage to its lowest paid employees, accounting for around 10% of its workforce, from next year
* US president Donald Trump fired his hawkish national security adviser John Bolton widely interpreted as due to differing opinions on foreign policy
* The London Stock Exchange rejected a takeover offer from Hong Kong Exchanges and Clearing who own the Hong Kong Stock Exchange
* A number of UK banks have announced that last minute claims for mis-sold payment protection insurance have been significantly higher than expected
* Visits to Hong Kong were down 40% in August on a year earlier
* Apple has announced it is entering the video streaming market with its Apple TV+ service priced at $4.99 a month, well below rivals
* The US is to ban the sale of non-tobacco flavoured e-cigarettes citing safety and underage vaping concerns
* In a YouGov survey of 28 countries Americans were found to be the most sceptical that climate change is happening or is man-made. People in China and India were among the least sceptical. However, absolute levels of scepticism are low, even in the US. Just 15% of Americans believe that the climate is not changing or that change is not caused by humans
Brexit and European politics
* UK MPs blocked prime minister Boris Johnson’s second attempt to hold an election
* MPs also voted to compel the government to release documents covering its scenario planning for a no-deal Brexit
* Scenarios assessed by the government included the possibility of delays at the border, shortages of medicines and essential goods, and higher food prices for consumers
* Parliament was then suspended for five weeks prompting protests from opposition MPs
* The Scottish Court of Session ruled that Mr Johnson’s suspension of the UK Parliament was unlawful
* The government is appealing the decision in the UK Supreme Court
* John Bercow, the speaker of the House of Commons, perceived as pro-EU by Brexit supporters, is to step down
* The pro-EU Liberal Democrats announced they would campaign to revoke Article 50, effectively cancelling Brexit, in any upcoming election
* Margrethe Vestager, who has been unpopular with the US for taking a hard line against US tech companies as the EU’s competition commissioner, has been appointed executive vice-president of the European Commission
* Spain is likely heading to the polls for the fourth time since 2015 after prime minister Pedro Sanchez failed to form a coalition
And finally… a Russian rapper who describes himself as Putin’s best friend deleted his new music video from YouTube after it became the most disliked video ever on Russian YouTube. The song contained lyrics such as “I don’t go on protests” – hip-flop