Employment Levels of Older People

Lord Shipley Excerpts

Thursday 5th March 2015 Grand Committee

[Lord Shipley (LD)]

My Lords, I am grateful for the opportunity to discuss this issue and I thank the noble Baroness, Lady Greengross, for initiating this debate. I share her concerns and conclusions. There is an assumption that apprenticeships should be for younger people, but there are advantages in apprenticeships for older people—I think of the example of Barclays, as well as others in the construction industry, which are particularly welcome. The noble Baroness is absolutely right, too, to draw our attention to the needs of the over-50s. Those who, for whatever reason, lose their jobs in their late 40s or early 50s can find it quite difficult to return to the world of work.

It is true that more older people work than used to be the case. There are now more than 1.1 million people aged over 65 who work—an increase in the last year of more than 50,000. I welcome the opportunity for older people to be in work if they wish to be, and I accept entirely that we have to do more to ensure that every individual is enabled to work if they want to be in work. It is also true that younger people can face difficulties in securing employment, in securing employment that pays enough and in securing employment that can lead to career development. However, it does not follow—I am entirely with the noble Baroness, Lady Greengross, on this—that there needs to be an adverse effect on youth employment arising from older people staying in employment for longer.

There are two reasons for that. The first is the growth in the economy that we are now experiencing, together with the huge growth in vocational apprenticeships for young people, both of which will make a big difference. Secondly, older people will still be retiring at some point, so the growth need not be a long-term upwards trend, even if it continues for a few years.

Given the growth in the number of jobs that has taken place in the last five years, with almost 31 million people now in work in the United Kingdom, older people are needed, not least to train the next generation and transfer their skills to them. It is interesting to note that around two-thirds of the growth in employment over the past five years seems to be in higher-skilled jobs. Older people have tended to fill those jobs, and one consequence is that fewer young people get promoted and so start to earn more. As I said, before long that trend should cease.

Not everyone wants to continue working when they are older. Over the next few years, despite the growth in the number of older people staying in work for longer, some 200,000 people are expected to retire from manufacturing and engineering jobs. They will have to be replaced at a time when more are needed anyway. This country has a skills gap. All over the United Kingdom, in manufacturing, engineering and the process industries, there are shortages at level 3 and above. That is why apprenticeships matter—apprenticeships driven by the needs of businesses. We should welcome the huge growth in apprenticeship starts. There have been more than 2 million under this Government, which is twice as high as the figure achieved by the previous Government. That is contributing so much to vocational training and equipping many more young people to undertake skilled work.

Apprenticeships can be of different kinds, and older workers can transfer their skills to younger workers through them. I am impressed by the commitment of businesses all over the country to them—for example, the shared apprenticeship scheme of the Construction Industry Training Board, which enables more young people to be trained because they can be with more than one employer over the three-year period of an apprenticeship. There have been successful pilots in Lancashire, Merseyside and Wales, with several more schemes now offering three-year apprenticeships. Importantly, more than 90% of those who complete their three-year shared apprenticeship by this means secure full-time jobs, which is higher than the average.

As we achieve higher growth, we need to reflect on the fact that just over 16% of young people aged 16 to 24 are still unemployed. That is around three-quarters of a million. Of those, some 40% are in some form of education or training, but that figure is simply too high, despite the significant achievements of this Government. We need much better careers advice for young people when they choose courses at school, to ensure that the courses they take enable them to take up the apprenticeships at a later date. We need careers advice in schools to broker better relationships with employers. Some very interesting research has been undertaken, not least that by IPPR North in January 2014 which explained how that might be done to the advantage of both employers and young people. The reason why all this matters is that the nature of employment is changing and the level of skills needed is higher than it used to be.

It is a welcome fact that unemployment is going down, and has been doing so for some time, but it needs to go down faster for young people, and the pay rates for young people need to rise. None of this needs have an effect on the potential for additional employment opportunities for older people. This week I noticed on Tuesday a report on the front page of the Financial Times and then later comments from the Institute for Fiscal Studies about movements in pay reported by HMRC from the PAYE system over the past six years. It is interesting to see that the regions outside London cut the pay gap with London in the six years from 2008 to 2014, with cash growth in median pay in London half the rate in the United Kingdom as a whole. Interestingly, the rate in London is a quarter of the rate in the north-east of England, where I live. Regionally, from the perspective of the north-east, I strongly welcome that. However, that is a geographical test of course, and we need to go a bit further. By age, the IFS said that median pay for young people between the ages of 22 and 29 is down 9% in real terms in those six years, so growth in median pay is lower in London and it is much worse for younger people. Those two facts relate to each other because in London young people make up a much higher proportion of the workforce: the average age of workers is 34 in London but 40 in the rest of the United Kingdom.

In one sense, this confirms what we already know in terms of intergenerational differences, but we need to be more alert to it because younger people cannot be expected to manage high personal debt as well as cover future debt from government borrowing today. They need secure jobs and jobs that pay enough to meet their essential expenditure. We need to ensure that the overall gains of economic growth resulting from the work that this Government have undertaken so effectively, particularly in the past two or three years, are spread and shared by all—both the older and the younger.