I very much agree with Mark Littlewood’s blog yesterday on the proposed ending of default retirement. While as an employee I may welcome the opportunity to work longer, as someone involved in employing people I can also see the downside.
Evidence I have looked at from Canada and the United States suggests that abandoning mandatory retirement at 65 will have a smallish but still significant impact across the economy, with an increase of maybe a couple of percentage points in those continuing work beyond 65 (which 10% of men and around 5% of women do already).
However, in some fields the increase could be rather larger and it may be interesting to see why. One area with which I am very familiar is employment of university academics. Academic work still has high levels of autonomy, a lot of flexibility and few physical demands. Academic staff have greater than average life expectancy and enjoy their work. Already many staff ask to stay on, even though they know that such permission is given sparingly and only for a limited period. I suspect that we could now see quite an upsurge in those working later.
In the USA, when the mandatory retirement age was raised from 65 to 70 in 1982, 40% of academics chose to work beyond 65. When mandatory retirement was dropped in 1994, one study suggested that around 15% of academics would work beyond 70. Professors in their 70s and even 80s are now common in American universities.
If something similar happens in the UK, I can see a number of problems. Older academics are paid a lot more than junior academics – even though they are doing essentially the same job – because of the various grades through which they are promoted, and increments within those grades. So the wage bill will rise. In particular narrow fields of the sort which proliferate in universities, bed-blocking academics will prevent newer recruits: if there are only five or ten posts in Persian in the country you will be able to forget about entering that field any time soon. University restructuring will become more difficult as natural wastage declines: universities will have to spend a lot of money – as in the USA – in buying out elderly professors in areas of declining demand.
Communication with young students may become more difficult. And it is no use pretending that older staff who are no longer performing competently can be eased out. Any competence tests would have to be applied to all staff, or else this would clearly be age discrimination. Tests for all (presumably on an annual basis) would be costly – and likely inconclusive, as strong unions already make it extraordinarily difficult to remove anyone unless for theft, fraud or sexual misbehaviour.
To abandon mandatory retirement without also freeing up labour contracts – needed in universities as elsewhere – may create more problems for employers than the breezy Ed Davey imagines.