Older people in the labour market Original title: Starejši na trgu dela Lenart Lah Irena Svetin Barica Razpotnik Translated by Boris Panič Published by the Statistical Office of the Republic of Slovenia on Smashwords The publication is available at www.stat.si/eng/pub.asp Information provided by the Information Centre phone: + 386 1 241 64 04 e-mail: info.stat@gov.si CIP - Kataložni zapis o publikaciji Narodna in univerzitetna knjižnica, Ljubljana 331.5-053.88(0.034.2) LAH, Lenart Milan Older people in the labour market [Elektronski vir] / Lenart Lah, Irena Svetin and Barica Razpotnik ; translated by Boris Panič. - El. knjiga. - Ljubljana : Statistical Office of the Republic of Slovenia, 2014 Prevod dela: Starejši na trgu dela ISBN 978-961-239-291-8 (ePub) 1. Gl. stv. nasl. 2. Svetin, Irena 3. Razpotnik, Barica 272697344 Issued and published by the Statistical Office of the Republic of Slovenia, Ljubljana, Litostrojska cesta 54 – © SURS – Use and publication of data is allowed provided the source is acknowledged – ISBN 978-961-239-291-8 INTRODUCTION Ageing is a biological process that brings psychological and social changes into a person’s life. For successful coping with changes it is important and necessary to be strong in several areas. Population ageing is one of the greatest social and economic challenges of the 21st century Europe, since due to longer life expectancy the number of older people (aged 65 or more) is constantly increasing. It is important to be well and timely prepared for the changed demographic situation; in health care, social welfare, labour market and pension system. All these issues are discussed in this brochure in which we tried to describe the current demographic situation and on the basis of population projections predict what lies ahead. We examined how many people are still in the labour market after completing 50 years of age and what is the position of Slovenia among other EU Member States. Despite some recent changes, the pension system will very soon become unsustainable again since the ratio between the number of persons in employment and the number of retired persons is constantly getting worse. The increasing number of older people presents a larger burden on the pension and health care funds. Our main focus in discussing the issue is older working age population in the labour market and transition from work to retirement. Slovenia is known for having low activity rates of older people in the labour market. Demographic predictions and the current state of the pension system call for reforms; they will have to focus on making people work longer, but alternative solutions will have to be found for the growing number of retired persons. According to data and forecasts presented in this publication one can see that the growing number of older people will be one of the key challenges in the coming decades both for Slovenia and the European Union. Genovefa Ružić Director-General CONTENTS COLOPHON INTRODUCTION CONTENTS THE GROWING NUMBER OF OLDER PEOPLE HOW MANY PEOPLE WORK AFTER COMPLETING 50 YEARS OF AGE? TRANSITION FROM WORK TO RETIREMENT HEALTH PROBLEMS OF OLDER PEOPLE AND THE LABOUR MARKET RETIRED PEOPLE TROUBLE WITH OLD AGE CONCLUSION ABBREVIATIONS HOW TO OBTAIN STATISTICAL DATA AND INFORMATION? The EU population is ageing. The lower number of births and the longer life expectancy result in a larger share of older people. In the past fifty years life expectancy at birth in Slovenia increased by more than ten years. In the next fifty years it is expected to increase by another six or seven years. People aged 65 or more represent one sixth of Slovenia’s population; fifty years from now their share is expected to increase to a third. People aged 50–64 represent more than a fifth of Slovenia’s population. This is a part of the generation born after World War II, when the number of births increased. Never before was this age group such an important part of the population. In the coming decades the share of people aged 50–64 will decrease; in 2060 it is expected to be below 17%. All generations born after the most numerous generations born around 1950 are (and will be) numerically weaker, so in the future at age 50–64 they will be less distinct than today. The number of older people is growing In 1992 the share of older people (aged 65 or more) in the EU was 14.1%. For Slovenia the share was 11.1%. In 2012 the share of older people in the EU was 17.8% and in Slovenia 16.8%. Between 1992 and 2012 the share of older people increased more than in Slovenia only in Malta, Latvia and Lithuania. The absolute increase in the number of older people is the result of lower mortality and thus longer life expectancy. Living to an advanced age is a result of better quality of life, which is largely due to progress in science and health care in the past century. Since 1992 life expectancy at birth in Slovenia has increased for men by 7.6 years and for women by 5.7 years. A boy born in 2012 in Slovenia can expect to live 77.0 years and a girl 82.9 years. Together with life expectancy at birth, life expectancy at age 65 is also increasing. In 2011 a 65-year-old man in the EU could expect to live 17.8 more years and a woman 21.3 years; in Slovenia the values were slightly lower (for men 16.9 years and for women 21.1 years). The ratio between the number of older people and the number of children in favour of the former The group of older people (aged 65 or more) already includes the numerically very strong generation born after World War II, the so-called baby boom generation. After World War II by far the greatest number of births was recorded in the 1949–1953 period, about 34,000 per year (compared to fewer than 22,000 in 2012). So in the next few years the number and share of older people will increase significantly. Despite slightly increased fertility in the past few years, the ageing index (i.e. the ratio between people aged 65 or more and children aged up to 14) in Slovenia will be increasing. Eurostat’s EUROPOP2010 projections predict that as early as 2035 there will be twice as many older people as children in Slovenia. The entire EU should have this ratio between older people and children much later, in 2050. Even more important than the ratio between older people and children is the ratio between working age population and other population. The age dependency ratio is the indicator showing the relationship between age dependent (children up to 14 years of age and older people aged 65 or more) and working age population (people aged 15–64). Today there are 46 children and older people per 100 working age population in Slovenia, i.e. 46 children and older people depend on 100 working age population. EUROPOP2010 projections predict that in 2060 25 children and 58 older people (i.e. 83 people) will depend on 100 working age population in Slovenia. With longer life expectancy, there are an increasing number of older working age people (aged 50–64) whose parents are still alive aged 85 years or more. The indicator showing the ratio between the number of the oldest population (aged 85 or more) and the number of older working age population (50–64 years) is called the parent support ratio, which is a good indicator of the burden families experience taking care of the oldest. In 2012 the ratio for the EU was 11.6 (100 older working age people had to take care of almost 12 of the oldest people). In Slovenia the value was 8.3, but according to EUROPOP2010 projections by 2060 it should increase significantly to almost 42 per 100 older working age people. Only in five EU Member States the value of this indicator is expected to be higher. One of the main characteristics of Slovenia’s labour market is the low activity rate of people aged 50–64, which is mostly the result of early retirement. That Slovenes dislike working at slightly later age was obvious when the pension reform, which among other things included a higher retirement age, was rejected at the referendum held in 2011. Aversion to work at a later age is additionally confirmed by the results of the Eurofound survey conducted in 2010, in which employees were asked whether they think they will be able to do the same job they were doing then when they are 60 years old. Only a quarter of employees in Slovenia answered yes: this figure put our country last among EU Member States. The average for the 27 EU Member States was almost 60%. Demographic forecasts do not give hope for better times. The transition of the baby boom generation among older people (aged 65 or more) will mean rapid decline in the number of working age population. The declining ratio between older people and working age population (i.e. between persons in employment and retired people) will hinder economic growth, since relatively few persons in employment will have to support a large number of inactive population. How to increase the activity rate among the older working age population will be one of the key challenges in the Slovene labour market to overcome this situation. The current situation After 50 years of age of an individual generation the employment structure of the population starts to change significantly: the older the age group, the fewer there are active population and the more there are inactive population. A review by 10-year age groups shows that in 2012 62% of people in the age group 50–59 years were in employment, 5% were unemployed and 33% were inactive. In the next 10-year age group (60–69) only 12% of people were in employment, 88% were inactive and only a handful was unemployed. People very rarely work (are in employment) after they complete 80 years of age, but quite a number of people still work after they complete 70 years of age. In 2012, 5% of people aged 70–79 were in employment; most of them (83%) were farmers. The remaining 95% of people of that age were inactive. A comparison with other EU Member States Data show that the activity rate among people aged 50–64 in Slovenia was 51% in 2012, which means that in addition to Malta Slovenia was the country with the lowest activity rate for this age group in the EU (the average value of this indicator in the EU-27 was just over 63%). The rise of the retirement age in Slovenia brought by the new pension reform should improve the value of this indicator according to which our country differs so much compared to the EU average. So it might be surprising that in 2012 Slovenia was first among the EU Member States as regards the activity rate in the age group 25–49 let. In addition to the activity rate, there are two other important indicators describing the situation in the labour market: the employment rate and the unemployment rate. As regards the employment rate among people aged 50–64 – which is connected with the activity rate – in 2012 Slovenia was among the EU Member States with the lowest values. The value of this indicator in Slovenia (48%) was more than 10 percentage points lower than the EU average. The employment rate was lower only in Malta and Greece, while the highest employment rate was recorded in Sweden (almost 80%). The unemployment rate for the people in this age group was also lower in Slovenia than the EU average; however, in contrast to the activity rate and the employment rate, in this case the lower the rate the better the situation; Slovenia’s rate was 6.6% and the EU average 7.4% More farmers, fewer sellers It often seems that some occupations are somehow better suited for older people and some for younger people. Faculty professors, for example, are usually older people who obtained the title after years of experience. On the other hand, some work is almost exclusively “reserved” for younger people: moving services are often related to student work. But is this impression that older people are more active (in number and share) in some occupational groups and activities than in others confirmed by the data? A review by occupational groups shows the highest share of older persons in employment (the same as the total population of persons in employment in Slovenia) in occupational group professionals (19.6%). As regards service and sales workers the share of older persons in employment (9.1%) is much lower than the share for the total population of persons in employment (14.3%). In a much larger share than the total population of persons in employment they were skilled agricultural, forestry and fishery workers (9.3% vs. 5.4%) and managers (9.9% vs. 7.9%). A similar comparison by activities shows the highest share of older persons in employment in manufacturing (20.0%) – the same as the total population of persons in employment (22.4%). The difference between the two shares was the highest in agriculture, hunting, forestry and fishing (13.3% for older persons in employment and 8.3% for the total population of persons in employment). On the other hand, the share of older persons in employment was lower than the share of the total population of persons in employment in trade, maintenance and repair of motor vehicles (8.5% vs. 12.1%). It is also interesting that the share was higher in health, education and culture, i.e. public sector activities. From the stated data we can see that compared to the total population of persons in employment a lower share of older persons in employment is present among sellers, a much higher share among agricultural workers, clerical workers and professionals and a slightly higher share among public sector employees. Gradual transition to retirement? When people leave the labour market is mostly their own decision. From the stated data we can infer that most people in Slovenia want to retire as early as possible. Young people in Slovenia also support early retirement since they think that only in this way employment opportunities will open up for them. Some countries are solving this problem with gradual retirement, which means that older persons in employment work fewer hours per week before they finally retire. Such gradual retirement can be measured with the share of older persons in employment (50–64 years) working part time. Slovenia is among the countries with low shares (in 2012 it was 9.8%); it was more than 10 percentage points lower than the average share in the EU-27 (20.4%). Young people in Slovenia strive for early retirement of older people because they think that this way more stable employment would open up for them. Slovenia is namely known for having the highest share of fixed-term employment of young persons in employment (aged 15–24) in the EU, 72%, and a comparatively low share of fixed-term employment of older persons in employment (aged 50–64), 7%. Older people and employees earn more It is a generally accepted rule that a person’s wage increases with years in employment. With years in employment a person gains experience, knowledge and respect (reputation), which increases the person’s price in the labour market. Data for 2011 show that average monthly gross wages of employees aged 50–64 amounted to EUR 1,774 or EUR 192 more than average monthly gross wages of all employees, which amounted to EUR 1,582. A review by gender shows that average monthly wages of older men in employment (50–64 years) are higher than average monthly wages of older women in employment, which amounted to 96.5% of the men’s wages. Restricting ourselves to wages of persons in employment aged 55–64, women’s wages were higher than men’s wages (they were 103.8% of men’s wages). A person’s wage largely depends on the activity in which the person is employed. In 2011, older people employed in financial and insurance activities and in electricity, gas, steam and air conditioning supply had the highest wages; the average gross wage in these activities was around EUR 2,400. A look into the future European labour market projections predict that due to later retirement by 2060 the participation of people aged 55–64 will increase significantly. In 2012, 44% of men and 27% of women of that age in Slovenia were active, while in 2060 the share is expected to be around 62% with a minimal gender difference. In Slovenia persons in employment aged 55–64 represented a tenth of persons in employment aged 15–64 in 2012. Their share will constantly grow in the next decades and is expected to reach 17% in 2060. Activity of people at slightly later ages does not mean only later retirement and thus lower pension expenditure but also preserving people’s mental activities and physical health. New challenges facing the pension system Present and expected demographic trends – decline in the number of births, longer life expectancy and the resulting population ageing, and transition to the long-lived society – bring and will continue to bring new and important challenges for the pension and disability insurance, demanding constant adjustment to the ageing population. Two tasks are and will be important: prolonging of active period of each individual and stimulating youth employment. Only in this way will it be possible to provide the appropriate ratio between active and retired people. Employment rate for people aged 55–64 is low in Slovenia Due to experience gained during the decades of work, the older labour force should be a valuable source of knowledge for employees, but in Slovenia the potential is not well exploited. Among people aged 55–64 the employment rate is the lowest; in 2012 it was just over 30%. As mentioned, as regards this indicator Slovenia is the last in the EU. The most logical way to increase the employment rate is to prolong the period of employment. In recent years many enterprises have gone bankrupt and due to such events particularly older employees have lost their jobs. Many of them have become unemployed, so the age structure of the unemployed has significantly deteriorated. In recent years many of them have gone into early retirement, but this is not the right solution since such conditions should be created in the labour market that employers will be willing to employ older people and employ them at jobs where they can be effective and have the opportunity to contribute to the productivity of the enterprise. Exiting the labour market Decisions of older people to participate in the labour market and exit the labour market are diverse and complicated since they are influenced by a much larger number of factors than for younger people, who are mostly just entering the labour market. In the 1940s and 1950s most retirements were involuntary (people mostly retired due to health problems, being laid off, legislation, etc.). Since then in most countries people’s room for manoeuvre to decide about retirement increased, even though most retirements in the 1960s and 1970s were still involuntary. Voluntary retirement – i.e. particularly early retirement – started to happen at the end of the 1970s. People finish their careers in different periods. For everyone retirement can be stressful, since life changes overnight. Some of them – particularly those less motivated or those for whom work is stressful – stay home as soon as they can. The other group includes those who stay working even after they could retire; they also feel stress but they think of it as something positive. For them their tasks, business contacts and new challenges are stimulating. Older people who are respected by their colleagues more rarely decide for early retirement. In the spring of 2012 almost 40% of persons in employment aged 50–69 who had already been receiving a pension continued to work due to financial reasons. One can suppose that people do not trust the pension system, since only about a third of those who stated that they are still active due to financial reasons explained that by doing that they want to get a slightly higher pension. More than 70% of them stated that they are still active in order to survive, i.e. without their working their income was not enough to cover the needs of their households. Gradual retirement Troubles caused by the transition from active to retired life can be partly avoided by gradual retirement. This agreement between the employer and the employee that before retirement the employee’s tasks are gradually diminished, that the employee works part-time or works at home, etc., can last for several years or only for a few months. In this way the retiring people’s physical burden diminishes while their knowledge and experience are slowly transferred to other employees. Survey results show that in the spring of 2012 relatively few people (5%) were working after they started to receive their pensions. Those who wanted to continue to work after they started to receive their pensions represented a slightly higher share (9%). And 7% of people decided to work part-time for some time before retirement. As people get older they have more health problems, which influence their effectiveness in the labour market. One of the indicators of the impact of health problems on work is absenteeism. However, data from the Labour Force Survey show a perhaps slightly surprising fact that as regards absence from work due to health problems there are no major differences in the age of employees. In 2012, in the week before the survey 8% of persons in employment aged 55–64 worked fewer hours or did not work at all due to health problems. The share for persons in employment aged 45–54 was 6%, for those aged 35–44 5% and for those aged 25–34 4%. Health problems are longstanding illnesses and problems limiting people in everyday activities. In the spring of 2011 a special set of questions was added to the Labour Force Survey to obtain some data on the status of persons with health problems in the labour market. More than half of older people have health problems As expected, survey results showed that older people have more health problems than younger people: among people aged 15–64 who had at least one health problem almost 55% were 50–64 years old. Of the 430,000 people in this age group 247,000 or 57.3% had at least one health problem. The most frequent longstanding illness was heart, blood pressure or circulation problems (almost a quarter of people aged 50–64), followed by back or neck problems (20.4%). Problems limiting people in everyday activities are often related to illnesses bothering them. In view of the frequency of back or neck problems it is thus not surprising that most of the respondents said that the following activities are frequently difficult to perform: lifting and carrying (23.3% of respondents aged 50–64), walking, climbing steps (16.8%) and sitting or standing (16.7%). Is poor health the reason for low activity? The fact that more than half of people aged 50–64 had some kind of health problems perhaps explains the low activity rate for this age group. Is perhaps poor health the reason for fewer older active population in Slovenia? If one takes a look at their labour status, one can see that among people with health problems 58.9% were inactive and 41.1% were active. Among the active, 90.4% were in employment and 9.6% were unemployed. The data thus indicate that a large number of older people in Slovenia are inactive and that a large number of older people have health problems. Nevertheless, the data do not confirm the thesis that poor health is the reason for a low number of active population aged 50–64. In 2012, 72.2% of people in this age group stated retirement as the main reason for being inactive; for 14.5% of people in this age group the main reason for inactivity (not seeking a job) was inability to work (due to illness or disability). Compared to other EU Member States the share was low. In Sweden, 61.4% of people in this age group did not seek a job due to inability to work, while the share for the EU-27 was 21.1%. Many problems can be solved with the help of colleagues at work Some health problems are such that they do not make it completely impossible for a person to work but can make it impossible for a person to perform some activities. In some cases this can be solved by using different tools or by adjusting the working environment (e.g. large fonts on computer screens, adjusted toilet, a parking space for disabled), in some cases the people require assistance by their colleagues and in some cases special working conditions are required. Around 20% of people aged 50–64 needed or would need adjusted tools or working environment or assistance by their colleagues due to health problems. Much higher (37.8%) was the share of those who needed or would need special working conditions, e.g. less demanding work, flexible working hours, or working at home. In recent years Slovenia has been striving to change its pension system, since the current one is no longer good enough. The pension system is not sufficiently adjusted to the declining number of persons in employment generating revenue, the increasing number of young people entering the labour market later in their lives and the increasing number of older people who still retire relatively early. The number of pension recipients is growing In 2012, 589,562 people in Slovenia were receiving pensions, which is around 140,000 more than twenty years ago. In other words: in the past twenty years the number of pension recipients has increased by almost a third. The number of insured persons has also increased in these twenty years but significantly less (by 91,000 or only 12%). The ratio between insured persons and retired persons is getting worse: in 1992 it was 1.7 employed per retired person, in 2002 1.6 and in 2012 1.5. Pensions are falling Unfavourable labour market conditions and a rather large number of pension recipients led to a decline in the amount of pensions. Due to the change in the currency, inflation and other factors, the amounts are not directly comparable, but we can compare the ratios between the amount of wages and pensions. In 1992 the average net pension was 71% the average net wage, in 2002 66% and in 2012 57%. Longer pension qualifying period, older retired people, receiving pensions for a longer time The average pension qualifying period, i.e. years of service required to achieve a pension, is getting longer. In 2002 the average period of being included in compulsory pension and disability insurance was 31 years and 2 months and 10 years later 32 years and 9 months. The average age of new pension recipients also increased: in 1992 it was 54 years and 3 months, in 2002 57 years and 8 months and in 2012 60 years and 5 months. When they received their first pension, men were on average three or four years older than women. The average period of receiving pensions is also getting longer. On average, retired people who died in 2002 had been receiving pensions for 14 years and 10 months and those who died in 2012 for 16 years and 1 month. Older people (aged 65 or more) have the highest risk of poverty. In 2011 one in five people in Slovenia aged 65 or more was living in a household below the at-risk-of-poverty threshold, i.e. a household with disposable income below the amount that represents the at-risk-of-poverty threshold. For people aged 75 or more the share was over a quarter. Older people are more at risk of poverty The most at risk are older people (aged 65 or more) in one-person households, i.e. older people living alone in private households. In 2012 more than 35% of all older people in Slovenia were living alone in private households, while 41% of them were living together with a spouse or a partner. 80% of older people living alone were women. In the EU almost 50% of older people were living with partners and 74% of one-person households of older people were “female”. Social exclusion Age is often associated with social exclusion. For many people retirement means a break in everyday contacts with other people, while living in one-person households and poor heath additionally isolate older people, which can lead to mental distress and depression. According to the European Quality of Life Survey, in 2007 almost one in ten people in the EU aged 65 or more felt excluded from the society. In Slovenia the share was slightly lower. With the rising share of people aged 65 or more the rising share of people aged 80 or more will also be very important. By 2060 the share of these people in total population is expected to increase significantly: in the EU to 12% and in Slovenia even more. Today people aged 80 or more represent 4.5% of total population in Slovenia. This is a subgroup of older people who are much more dependent on the rest of the population, since they frequently need assistance in everyday activities and often also more intensive health care. Poor health In 2011, 36% of the EU population aged 85 or more thought that their health is bad or very bad. In Slovenia the share was 47%. At that time 77% of people in Slovenia aged 85 or more had problems with everyday activities (the EU share was 73%). In 2009 more than three quarters of the EU population aged 65 or more visited a general practitioner or a specialist at least three times and almost a half at least six times (in Slovenia 31%). As regards people aged 18–64, in the EU almost 20% visited a doctor at least six times (in Slovenia 14%). Growing costs of health care Due to more frequent treatment, health expenditure is growing with age. In Slovenia almost 24,000 patients per 100,000 people aged 65–69 and almost 44,000 patients per 100,000 people aged 85–89 were discharged from hospitals in 2010. The share for men – representing almost 40% of the population aged 65 or more – was 46%. The gender difference was the greatest in the age group 65–74; men represented 45% of people of this age and 54% of patients discharged from hospitals. In higher age groups the difference is slightly smaller but still noticeable. A higher share of men among hospital patients in the age group 65–74 can be explained with data on the mean age at death, since hospital treatment is the most frequent in the last years before death. In 2010 the mean age at death for men was 70.7 years and for women 79.3 years. In 2010, public health expenditure in Slovenia represented 6.1% of GDP. Several variants have been prepared that take into account different possibilities of development: most of them anticipate that by 2060 between 7% and 8% of GDP will be necessary to cover health expenditure. Long-term care expenditure Advanced age brings expenditure for long-term care, which covers both health and social components. Many of the oldest people depend on formal (e.g. old people’s homes) or informal (e.g. children, grandchildren) forms of assistance. Public long-term care expenditure is lower than health expenditure, but it is growing; particularly due to the rapidly growing share of the oldest people, who due to poor health frequently depend on other people’s assistance. The number of people who will require formal long-term care will be growing; now the oldest people are mostly taken care of informally by their partners or children with families, but in the future due to longer labour market participation and smaller households they will no longer be able to do this to such an extent. According to various scenarios, in 2060 about 13% of people are expected to depend on long-term care in Slovenia, of whom a third on formal forms and two thirds on informal forms of long-term care. Long-term care expenditure is expected to represent about 3% of GDP (in 2010 the share was 1.4%). Long-term care expenditure will increase also due to greater need for personnel, lack of personnel and the resulting higher wages of people employed in this activity. CONCLUSION Due to significantly improved hygiene, development of health care and generally better standard of living, it is now completely normal that people reach old age, and it is up to the society to adjust to the new situation as soon as possible. If work is an important value, if working conditions are appropriate and if people take care of their health throughout their lives, they can work longer and can be active longer than most people used to be. The increasing number of older people should not be understood as a burden, since formally inactive older people have an important role in the society. In any case, we are all following them. ABBREVIATIONS GDP Gross domestic product EU European Union EU-27 27 Member States of the European Union Eurostat Statistical Office of the European Union SURS Statistical Office of the Republic of Slovenia HOW TO OBTAIN STATISTICAL DATA AND INFORMATION? •on Statistical Office’s website www.stat.si/eng •via mail, phone, fax and e-mail address: Statistical Office of the Republic of Slovenia, Litostrojska cesta 54, 1000 Ljubljana, Slovenia phone: +386 1 241 64 04 fax: +386 1 241 53 44 answering machine: +386 1 475 65 55 e-mail: info.stat@gov.si •by ordering statistical publications address: Statistical Office of the Republic of Slovenia, Litostrojska cesta 54, 1000 Ljubljana, Slovenia phone: +386 1 241 52 85 fax: +386 1 241 53 44 e-mail: prodaja.surs@gov.si •by visiting the Information Centre office hours: Monday to Thursday from 9.00 to 15.30 Friday from 9.00 to 14.30