Working into old age has become trendy, not just for ageing rockstars. In many European countries, labour force participation rates beyond retirement age have increased sharply in recent years, though that has often been accompanied by a reduced workload.
In Switzerland, for example, the employment rate for over 65s is almost 13 per cent – a third higher than in 2005. The same applies to those between 55 and 64, where the labour market participation rate has risen from 64 per cent in 1996 to 75 percent today (see chart).
But working into old age was much more prevalent historically. Around 1900, it was even the norm: in France 54 per cent of those aged 65 or over were in employment; in Germany, the corresponding figure was 58 per cent. Sadly, no comparable data exist for Switzerland.
What that means is that the long term employment rate in Europe has undergone a U turn, with its nadir in the mid-1990s. Since then, employment of the elderly has climbed steadily.
How can this increase be explained? Seen historically, two commonly held views can be partly discounted. Medical progress has played a part, but old aged health has improved over more than a century, not just in the past three decades. Likewise with better education: it is claimed repeatedly that only highly qualified older employees have a chance in today’s labour market. Indeed, among the employed over 65s, academics are strongly over-represented, comprising 44 per cent of the total, although only 23 per cent of over 65s have a tertiary degree. However, overall education levels started rising well before the mid-1990s.
A recent study by international social security experts provides more convincing reasons for the changes. First, were the pension reforms implemented in many countries in the 1990s. In Italy, for example, a minimum retirement age of 52 (sic) was introduced in 1996 and gradually increased to 63. That sharply lifted employment in the corresponding age groups. A similar trend took place in Japan, Germany and the Nordic countries. Even in Switzerland, where structural reform is still pending, the gradual increase in the retirement age for women from 62 to 64 has prompted an immediate increase in their participation in the labour market.
Indeed the increase in the overall employment rate is likely to have been due to the increasing labour market participation of women. Previously, many women dropped out of the labour market after their first child. That became less prevalent after the 1990s – a trend still having its impact today. The gender gap in the employment rate of 55-64 year-olds has halved in the last 30 years, falling to just 14 percentage points from 31 in 1996.
Greater employment of older women has, interestingly, also had an effect on male participation. Possibly, couples prefer to retire at the same time. Since women work longer, their partners stay employed for longer too. The effect is considerable: the study attributes around a third of the increase in older men’s labour market participation to women’s longer working lives.
Admittedly, correlations do not suggest causal relationships. That requires more detailed study. Nevertheless, in addition to the statutory retirement age and other parameters of old-age provision, changes in women’s employment behaviour are likely to play a decisive role in the future of old-age work. The Rolling Stones may be heading your way soon.