Employment Levels of Older People

Lord Freud Excerpts

Thursday 5th March 2015 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, like other speakers in this debate, I am grateful to the noble Baroness, Lady Greengross, for bringing this question to the Committee. I am really pleased to acknowledge the work she has done in this area. She has been director general of Age Concern and is now chief executive of the International Longevity Centre. I am also very pleased to be able to respond to as many of the points made by colleagues in the Committee as I can.

We are today talking not about a potential increase in the employment of older people but about a very real and sustained improvement. The past year has seen the number of over-50s in work exceed 9 million for the first time. It has risen by nearly 250,000 in the past 12 months and by more than 1 million since 2010. That is not just about the number of older people rising. The proportion of over-50s in work has also reached the highest on record.

The question of whether the increase in the number of old people in work has an impact on other groups is one that I think we are all in violent agreement on—the lump of labour fallacy. The figures that we have just seen demonstrate that it is a fallacy. If we exclude young people who are in full-time education, the employment of under-25s has risen by nearly 70,000 in the past year alone and by 140,000 since 2010.

I will pick up on the point made by the noble Lord, Lord Shipley, and the noble Baroness, Lady Sherlock, that 16% of young people are still unemployed. The actual figure, if students are excluded, is 6.8% of young people unemployed at that level. So we should not worry about a rise in employment in one group damaging the chances of another. We are not in a zero-sum game. A recent report for the European Parliament which looked at employment trends for older and younger workers across the EU found no trade-off between rates of employment. The IFS study which the noble Baroness, Lady Sherlock, quoted looked specifically at the UK. It concluded:

“When looking at the entire 1968 to 2005 period … we find no evidence of long-term crowding-out of younger individuals from the labour market by older workers”.

It is interesting how Governments used to think like this. The 1970s and 1980s programmes such as the Job Release Scheme, which positively encouraged older people to leave the market so that it would free up jobs for the young, had their origins in that thinking. It is interesting that the IFS concluded that that particular programme did achieve one of its aims. It reduced employment among older workers but there was no evidence of a corresponding effective employment of young people.

The noble Baroness, Lady Greengross, raised the Saga report on how over-50s make an important and growing contribution to society. It made the point that she was making that encouraging people to leave the labour force early reduces spending power and demand in the economy.

Evidence from research goes in the entirely opposite way to the lump of labour fallacy, because older and younger workers are likely to complement each other. A study by the RAND organisation in 2009, using data from 22 OECD countries, suggested that there was a positive effect. In other words, for every one additional older person in work, the overall effect was nearly 1.1 more people in work. Far from the substitution effect, firms may choose to hire both because this brings a healthy mix of skills, qualities and experiences.

I want to outline briefly what the Government are doing for older workers. We abolished the default retirement age in 2011; we extended the right to request flexible working for all; and we have introduced Fit for Work, which helps with sickness absence and provides an occupational health assessment and health and work advice to employees, employers and GPs. In Jobcentres, work coaches have the flexibility to offer all claimants a comprehensive menu of support. In addition, in last year’s Autumn Statement we announced two pilots, which will support 3,000 people who need help to move back into work or start a new career in a different sector. These will be based on our current sector-based work academies and work experience programmes—currently more orientated at youngsters—but tailored to the needs of older people.

We are planning two further trials that will explore what may provide effective support for these older claimants. The first will look at support through a career review-based approach and the second will look at providing IT and digital support. We will also introduce regional champions in Jobcentre Plus, as referred to by the noble Baroness, Lady Greengross. That champion role will start later this month. I want these roles to work with local employers and share good practice so that we can promote activity for older claimants in the regions.

The noble Baroness raised the issue of those made involuntarily workless and talked about there being 1 million of them. We published Fuller Working Lives to set out what the Government and others are doing to tackle this. We are making good progress on the commitments in respect of it.

The noble Baroness, Lady Sherlock, asked about the Work Programme. That treats everyone as an individual rather than looking at this on the basis of age. Up to September 2014, there had been 300,000 referrals of people aged 50 and over, which resulted in more than 42,000 job outcomes.

The noble Baroness, Lady Sherlock, made a point about flexibility in pension schemes. That is key, in that it enables more flexible retirement options. We are bringing in new flexibilities in April for people with defined contribution pension arrangements by introducing new freedoms in terms of how and when they access their pension payments.

As for policies for younger workers, sector-based work academies are available in England and Scotland. That has been a very successful programme, with a combination of pre-employment training, work experience and guaranteed interviews. They are local and demand-led, so you have different sectors depending on where you are running those schemes. There have been more than 88,000 sector-based work academy starts for 18 to 24 year-olds since the scheme began in August 2011. We have had 247,000 work experience placements for 18 to 24 year-olds, and various healthy outcomes, with half of work experience participants off benefits 21 weeks after starting their placements. The noble Lord, Lord Shipley, raised the issue of the success of apprenticeships. There have been more than 2 million since the election.

This is more of a theoretical debate than a political one, but I will just pick up very gently the description given by the noble Baroness, Lady Sherlock, of some of the Labour policies, such as the jobs guarantee. I am in despair about all that, because that is the kind of top-down approach of saying, “We can produce the jobs for the people and put them into them”, which is exactly the wrong way to go about creating a dynamic economy. You want to have people put into real jobs that will last. I just express my despair and move on.

To pick up the point about apprenticeships again, we clearly need to see how that works for older people. It has worked really well for younger people and is something that Ros Altmann has been championing for older people. As noble Lords have pointed out, there are schemes now, from Barclays for example, to do that. In response to the noble Lord, Lord Bhattacharyya, they have been successful: 89% of employers report that that process has helped their business and improved their quality and standards. Last year the Education Secretary announced a new careers and enterprise company for schools to transform the provision of careers education and advice for young people. I repeat my thanks to the noble Baroness, Lady Greengross, for bringing this Question to the House. Today’s contributions have been interesting and I think we are all fundamentally in agreement, apart from my one point of despair.

Youth unemployment is a really serious matter and this debate has been another opportunity for us to emphasise that increasing the number of older workers does not have an adverse effect on youth employment.