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• Introduction
• Background
• Lessons Learned
• Specific Lessons Learned for Displaced Older Workers
• Conclusion

Introduction

This study is part of the Lessons Learned series produced by Human Resources Development Canada (HRDC). The report summarizes the findings from a study conducted to identify the lessons learned from past experiences with programs for assisting displaced older workers; those people aged 45 to 64 who have lost a job for any number of reasons. Besides looking at displaced older workers, the report also attempts to shed light on what is the current status of older workers in general, keeping in mind their role in any future economy. This report is based on evaluations, assessments, and/or reviews of older worker adjustment programs in Canada, the United States, and selected OECD countries (Australia, France, Germany, Japan, the Netherlands, Sweden, and the United Kingdom).

Background

The number of older individuals relative to the population as a whole has been growing at a steady pace over the past 20 years in many industrialized countries. Coinciding with this aging trend has been large-scale economic and industrial restructuring. While these economic adjustments are generally viewed as necessary and beneficial in the long term, they often result in business closures and displacement of workers in the short to medium term.

These circumstances have served to generate a number of labour market problems for labour forces in general, and in particular for older workers. Studies indicate that older workers face a number of systemic barriers to obtaining re-employment and training which younger individuals may not face, including skills that are no longer in demand, less education, lack of mobility, lack of job-search experience and negative stereotyping by employers.

Historically, there have been very few government programs in place for assisting displaced older workers because they have enjoyed more stable work histories at higher wages than younger workers and they have also demonstrated consistently lower rates of unemployment. However, labour market trends suggest that the traditional labour market advantages possessed by older workers are beginning to subside. In addition, the labour force participation share of older workers has not progressed at the same pace as their population share. For older workers, and for economies as a whole, there is a clear need to address these problems.

Lessons Learned

The broad lessons identified in this report recognize that programs designed to assist displaced older workers in the short-term, must be flexible enough to adapt to Canada's changing demographics. Without a long-term perspective, viable short-term solutions may only serve to limit future policy options.

1. The productivity of older workers remains fairly constant.

Studies indicate that there is no significant overall difference between the job performance of older and younger workers. While poor health can affect productivity and is a higher risk among older workers, trends toward longevity are reducing its influence. Trainability is more likely to be a factor, and while older workers tend to have less education, a learning environment at work can mitigate this effect significantly.

2. The "anticipated" age of retirement affects recruitment, training, and pay practices throughout a career.

As workers move closer to retirement, they tend to have fewer opportunities to participate in training. Workers and employers both need good information, well in advance, about anticipated demographic trends and retirement policy directions, in order to make sound decisions about the likely returns to investment in skills upgrading.

3. The transition from work to retirement is still generally experienced as being abrupt.

The shift from work to retirement can be a sudden and disconcerting experience. One international study noted that in the majority of cases, the transition from work to retirement is a relatively abrupt one, especially for men, as there are few opportunities to move to lighter work or to part-time work as an intermediate phase.

4. Pension eligibility plays an important role in the timing of retirement.

Public and private pensions often create incentives for workers to retire at the first age of entitlement because of high tax rates on earnings. In some countries, unemployment and disability benefits can also "encourage" early withdrawal from the labour force.

5. Most displaced older workers want to resume full-time employment.

The literature informs us that most older workers want to work and, if they become unemployed, want to obtain a new job. For the majority, only full-time employment would satisfy their economic, social and psychological needs.

Specific Lessons Learned for Displaced Older Workers

The effectiveness of labour market adjustment programs depends a great deal on the economic and labour market environments in which they operate. For our review, adjustment programs are classified according to three types.

I. Active Employment and Adjustment Services

Active employment and adjustment services refer to those initiatives designed to prolong the labour market participation of older workers until normal retirement age is reached.

6. General adjustment services using traditional approaches such as skills development and counselling have not been effective for older workers.

Research in all the countries examined in this review shows that while active employment and adjustment services can assist in re-employment of older workers, programs designed for workers in general that focus on traditional training and counselling approaches neither attract nor benefit significant numbers of older workers.

7 . A number of specific features appear to contribute to effective programming for the re-employment or maintenance of employment of older workers.

There are a number of specific features of labour market adjustment programs that are reported to contribute to the re-employment of displaced older workers. While it may not be possible to integrate all these features into every program, they do provide a strong set of guidelines when designing programs with older workers in mind. Some of these features include: goals of programs, clearly defined in consultation with the older workers; partnerships among service providers; alternative work environments; job placement; peer counselling; and a community-based approach among others. The success of these measures has been attributed to the high degree of support and guidance provided to participants, as well as their focus on building self-esteem and motivation among older individuals.

II. Income Support Programs

Income support programs represent passive approaches designed to provide older workers with financial assistance either to bridge the gap between a job loss and re-employment, or to ensure that they are provided with sufficient income until they become eligible for retirement benefits.

8. Income support mechanisms for older workers appear to be an effective means for ensuring the financial security of those who have suffered a job loss, but they present a disincentive for re-employment.

While income support measures have been found to be significantly effective for reducing the financial hardships associated with a job loss, they were found to perpetuate labour market inactivity among older workers.

9. Income support measures designed to facilitate the early withdrawal or retirement of older workers do not necessarily improve the overall labour market adjustment process.

At the firm level, it appears that some government and private sector compensation-oriented policies have successfully led to improvements in labour market adjustment, while averting undue hardship for older workers. However, a 1995 report by the International Labour Organization (ILO) found that the early withdrawal of older workers does not guarantee benefits for younger workers. The reason for this is that new entrants to the labour market often lack the experience and know-how necessary for the jobs vacated by the older workers. More often, the jobs just disappear.

III. Strategies for Easing the Transition From Work to Retirement

Initiatives developed to help ease the transition of individuals from work to retirement include measures such as work-sharing, part-time employment, and phased retirement. They allow older individuals to maintain their labour force attachment and continued income from employment, and are intended to reduce the financial and emotional shocks often associated with full retirement.

10. Programs other than income support programs, that are designed to ease the transition from work to retirement, can benefit older workers and assist overall labour market adjustment.

Initiatives intended to ease the transition of older individuals from work to retirement have met with some success. A good example would be Sweden’s partial retirement scheme, under which workers have access to partial pension benefits, while remaining active in the labour force, albeit at a reduced rate. Participants have reported that they value their increased leisure time and many feel more rested and healthy than they did during full time employment. Firms have been able to reorganize their human resources in order to achieve greater productivity, while continuing to benefit from the experience and resourcefulness of older workers.

Conclusion

Overall, it appears that older worker adjustment programs have met with some degree of success depending on the economic and political objectives being sought. Some countries have emphasized active measures in order to maintain older workers in the work force, while others have opted for passive income support measures for laid off or retiring older workers. Canada has used a combination of both active and passive measures. In the end, it appears that the real success of a program is dependent on its ability to recognize and address the individual needs and circumstances of older workers.

Policy makers need to recognize that the aging of our population means that the role of older workers in the economy of the future is of growing importance. The lessons of existing programs need to be applied not only to respond better to the needs of older workers today, but also to plan the labour market of the future. It is hoped that the lessons presented in this report Will inform and help stimulate future debate on policies and programs designed for this rapidly expanding segment of the workforce.