Companies should already start investing in older workers

Workers aged 50+ are the future of the Polish labor market. This is not an election campaign slogan, but an observation arising from the changing demographic situation.
Companies should already start investing in older workers

(MFA of Poland, CC BY-ND)

In 30 years people in their sixties will constitute 40 per cent of all Poles. Unfortunately, neither the employers nor the politicians seem to understand the implications.

For the time being employers are not thinking about changing the age structure of their staff. For most of them it’s a too distant future to deal with right now. The politicians, on the other hand, prefer to pursue their political commitments, even if they are in contradiction with their economic and pro-development slogans. That is because the possible restoration of the retirement age of 60 years for women and 65 years for men will be happening at a time when the numbers of workers aged 50+ are increasing faster than those of other age groups.

50+ on the labor market

Over 16 million Poles are economically active. Out of the 262,000 people who began working during last year (for the first time or again), more than half (129,000) were aged over 55. At the end of the year more than 4.28 million people over 50 were economically active, including 2.52 million over 55 years of age. These are the data of the Central Statistical Office (GUS) for the previous year.

Unfortunately, the information from the current year have disturbed these positive trends. In the spring the number of employed people decreased by over one quarter of a million people (from 16.28 million at the end of 2015 to 16.01 million workers at the end of March). It should be noted, however, that the GUS has simultaneously lowered the estimated population of Poland by approximately 250,000 people. It has updated the population estimate used for the LFS studies in one go (rather than in quarterly increments). Therefore, until we learn about the details (which we will know in the autumn), it is difficult to examine the quarterly labor market trends presented according to the LFS methodology.

NBP economists pointed out this problem in their „Quarterly report on the labor market in 2016Q1”. According to them, the reduction of the population by about 250,000 is equivalent to a decrease of -0.8 per cent over six quarters. „If the GUS had accounted for the population changes on an ongoing basis, the changes observed in the previous quarters would have been lower, and the base for the changes from the first quarter of 2016 would also have been lower,” explained the authors of the report. They point out that we need to look at the detailed data before we will be able to determine whether the upward trend in the number of employees has ended, or whether the number only grew at a slower rate last year.

Despite this statistical turmoil, the important thing is that according to the GUS, in the spring over 47 per cent of people aged 55+ were economically active. This is 1.4 percentage points more than the year before and 2.7 percentage points more than two years ago. Some 45 per cent of people aged 55 and older were employed. Over two years, this figure has increased by 3.9 percentage points.

The fact that the number of economically active people in middle age and older age is growing is important for social (individual) and demographic reasons. We already have more (7.5 million) 60-year-old women and 65-year-old men (and even older) than children and young people (6.92 million). According to the CSO, these trends will accelerate and in 30 years people aged 60-65 will constitute 40 per cent of the inhabitants of Poland. Therefore on the labor market there will be increasingly few young people and an increasing number of mature people.

Political stir

The government of Beata Szydło and Law and Justice (PiS) on the one hand wants to counteract the negative effects of demographic changes on economic growth (as assured by, among others, Deputy Prime Minister Mateusz Morawiecki), and on the other hand is planning to fulfil the election promise to restore the previous retirement age.

The originators of this idea (including President Andrzej Duda) argue that the retirement age is only a suggestion, which may be followed, but does not have to be. However, reality contradicts this opinion. Most Poles want to retire immediately after obtaining the right to do so.

Data from the Social Insurance Institution indicates that in the previous year 224,400 people obtained the right to receive the retirement pension. That is over 66,000 more than two years ago. This is also the largest number of retirement pensions awarded since 2009, when the last groups of people exercised their right to go on early retirement (243,000).

In 2015, women applied for the retirement pension at an average age of 60 years and seven months, and men at an average age of 62 years and eight months. In comparison with 2014, the average age of people retiring increased by 11 months for women and by as much as one year and eight months for men.

It would seem that this is a positive trend. However, in the justification for the president’s draft legislation amending the Act on Pensions and Disability Pensions Paid from the Social Insurance Fund and Certain Other Acts it was stated that, „the labor market and the public health care system in Poland were not and are still not prepared for an extension of the period of professional activity of the insured. (…) According to the statistical data, the tendency towards an increase in life expectancy of people aged 65 years in Poland is not accompanied by the process of extension of the average expectancy of life in good health. Poles are living longer, but at the same time their ability to work is not extending.”

In the justification it was rightly noted that in the previous year registered unemployment decreased in all age groups except for the unemployed over the age of 60. During the year, the number of unemployed persons aged 60+ in the registries of labor offices increased by 6,500 people. The share of the oldest persons in the total number of registered unemployed is still the lowest and amounted to (at the turn of 2015 and 2016) 5.8 per cent for people aged 60+ and 11.9 per cent for those aged 55-59 years.

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The increase (by almost 7,000) among persons aged 60+ likely stemmed in large part from agreements between the companies and institutions and their employees, who agreed to voluntary redundancy. Because the retirement age was extended, they are not entitled to pensions. They also have no health insurance. Voluntary health insurance costs over PLN300 per month. It is cheaper to simply register as an unemployed person.

In the justification for the presidential proposal to lower the retirement age, it was stated that since there are many unemployed among older people, we should not extend the retirement age, because in this way we will increase unemployment. This assertion is economically risky, especially since according to labor ministry data, the rate of inflow into unemployment of persons aged 50+ has slowed down in recent years and is lower than in the case of younger people.

It is true, however, that it is harder to find work for people over 50 years of age than for younger persons. People aged 55+ who enter the registry of the unemployed (at the end of June there were over 282,000 such people), remain there significantly longer than the younger unemployed.

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Older workers require more attention

“According to data of Work Service, as many as 76 per cent of employers do not have employee development programs tailored to people aged 50 and above,” says Andrzej Kubisiak of Work Service.

Some time ago his company prepared a press release claiming that „seniors, like the Millennials, are the future of the Polish labor market”. In the press release it presented the financial incentives which entrepreneurs can receive for employing workers aged 50+.

Andrzej Kubisiak admitted that in many companies and institutions the recruitment procedures are adapted to young people. The press release was only supposed to remind of the changes occurring in the Polish labor market.

“Changes are inevitable. Not all entrepreneurs and employers in Poland are thinking about this,” emphasizes the expert.

He admits, however, that in some sectors (e.g. automotive industry or household appliances) companies are rebuilding old teamwork methods: the master-apprentice model, where the competencies of the experienced persons are utilized.

“Mechanisms for engaging seniors are more frequently applied by foreign companies and international corporations than the domestic companies. They are accustomed to workforce deficits associated with business cycles. In our country, an employee’s market has only existed once – at the time of the transformation – and lasted for a brief period,” says the representative of Work Service.

His company is trying to persuade employers to more fully utilize the potential of workers aged 50+.

Economists are pointing out that the retention of experienced workers in the labor market should be accompanied with a more flexible organization of work.

“Today’s 50-year-olds are better educated than persons born a decade or two earlier. If companies want them to work with them as long as possible, they must offer them a flexible way of working: perhaps flexible working hours, and perhaps work on 3/4-time basis instead of full-time work,” argues Wiktor Wojciechowski, the Chief Economist at Plus Bank.

In his opinion, the strategy of companies should be based on adapting the working conditions to the productivity and capabilities of older workers. It should be different in the case of persons engaged in physical work, and different for those in office work.

“For both groups there have to be mechanisms for retraining and incentives, because not only employers but also employees must change their attitudes,” says the economist.

He also adds that an entrepreneur who begins to seriously think about keeping the senior workers in the company should also deal with other issues, such as, for example, stronger lighting or more comfortable chairs.

Care for psychological and physical comfort

The fact that the attitude of employees is slowly changing may be indicated by the public opinion survey conducted by the Aegon Center for Longevity and Retirement. Middle-aged and older people from 14 countries in the word (Australia, Brazil, Canada, China, France, Germany, Hungary, India, Japan, Netherlands, Poland, Spain, Turkey, the United Kingdom, and the United States) were asked when they wanted to retire, why they wanted to work longer and what their employers were offering them.

The survey shows that people aged 50+ are thinking of remaining at work after reaching retirement age mainly due to their own psychological and physical comfort. Surprisingly, financial considerations ranked second in terms of importance. The results were published in the report „New, flexible forms of retirement”.

The study covered 15,000 people. Half of them intend to work longer than until the age of 65. Up to 55 per cent of workers aged 55 and older expect a flexible transition to retirement (that is, for example, the possibility of reducing the number of work-hours, a change in the scope of responsibilities).

Poles, however, are not among the leaders of longevity in the workplace. Thirty per cent of people aged 55+ want to retire earlier than within 10 years. However, more than half would like it to be a flexible retirement from the labor market. We do not know whether these are the same or other people, but 50 per cent of the respondents admit that they want to remain in their workplace because of their attachment to the employer. Sixty per cent of respondents would like to remain physically and intellectually active as long as possible. Are the companies helping them in that regard? Only one in twelve people have an employer who offers retraining, and only slightly more employers (30 per cent) are enabling a switch from full-time to part-time work.

When asked about the reasons for staying longer in the labor market, six out of nine respondents in all the countries replied: „I want to remain physically and intellectually fit”. The older the respondents, the more important that argument was for them. Some 39 per cent of respondents admitted that they „liked their job” and every third respondent is worried that the retirement pension will not be enough to support the level of living standards which they expect.

The survey has shown that only 24 per cent of employees aged 55+ believe that their employers offer the ability to switch from full-time to part-time work during the period of transition to retirement. Every fifth boss is offering experienced employees to change jobs for an easier one, and every seventh – to retrain. Therefore, the survey shows that Poles are not leading in this regard, and are hardly participating in the changes.

Half of the respondents who are not yet retired believe that their employer does not provide them with sufficient information and support to help them prepare for retirement. This rate is the highest in Spain, Poland, Hungary and Japan. The authors of the study note that these are also the countries in which employees have the least positive attitude towards retirement.

Already in the first months of 2018 we will find out whether the Polish respondents do in fact value work above the desire to rest. By then we will know how many of the people now subjected to the extended length of service required for retirement applied for a pension immediately after obtaining the right to do so. Companies and institutions have one year to persuade at least some of the quarter of a million employees (that many may be affected by the retirement changes) to remain at work.

(MFA of Poland, CC BY-ND)
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