The coalition government is considering scrapping the fixed retirement age and Minister for Employment Relations, Ed Davey, is promoting the policy on the grounds of choice – You don’t have to work beyond your 65th birthday, but you can if you choose to. The stark reality of an ageing population and the clever spin of the new policy being about improving flexibility and ending arbitrary laws makes the announcement a public relations success.
Sadly though, the policy in isolation will be bad for employment and particularly for the elderly. I’m all in favour of the state extinguishing a vast number of employment statutes and regulations, but it’s a leap in the wrong direction to effectively extend employees’ rights whilst continuing to undermine the discretion exercised by the employer.
As far as practicable – and certainly a lot further than permitted in 2010 Britain – we should allow workers and businesses to negotiate their own contracts. So remove statutory provisions about retirement ages by all means, but replace them with the discretion to write into an employment contract that any retirement date can be agreed. This might be 65. Or it might be 35. It could be a ten or twenty year deal from the employee’s start date. Or, rather like some football managers, some employees might have a rolling contract renewed on a year-to-year basis. If the coalition’s proposals are going to remove the dead hand of Whitehall regulation and replace it with this sort of discretion, then that would be a welcome move.
Unfortunately, this doesn’t seem to be the case. From an employer’s perspective, offering a contract of employment could be seen as close to offering a deal for life. Assertions that people can be “performance managed” out of jobs towards the end of their careers are of little comfort. Workforce planning becomes very difficult and costs to the employer are certain to rise. Neither of these is conducive to boosting employment.
Indeed, recruitment decisions may start to go against the interests of those in their 50s and 60s. A young person at the start of their professional career, taking a role as a stepping stone on their long career journey, might stay in post for a few years before moving on elsewhere to a more senior position. But someone in their late 50s, possibly taking on their last employed role, is far less likely to depart willingly. And the employer’s commitment is open ended – how do they know whether the employee is planning on retiring at 60, 65, 70 or 75? Or maybe later still. If the employer has concerns that due to the onset of age or declining health, they might find themselves with a long-term staff appointment with diminishing productivity, they are likely to lean towards younger recruits.
A flexible and dynamic labour market will tend to thrive as statutes and regulations are repealed, but only if combined with much greater discretion in terms of freedom of contract. Getting only half this equation right could prove to be a retrograde step.