The press release issued by PWC on 13 July 2023.
- The UK ranks 21st in the OECD, a club of rich economies, on PwC’s Golden Age Index. New Zealand, Iceland and Japan rank the highest and are among the world’s leaders at the inclusion of older workers in their labour force
- In the UK, nearly a quarter of a million more older workers remain economically inactive compared to before the pandemic, marking it as an outlier among the G7 bar Italy
- Increasing the number of older workers in the labour force could help to alleviate inflationary pressures in the UK
- Over 55s in South East England are more likely to continue working than those in other regions due to less physically demanding jobs
People in the UK aged over-55 are more likely to have left work and not returned than those in other G7 countries, according to the latest edition of PwC’s Golden Age Index, which measures how well countries are harnessing the power of their older workers.
The Index, based on most recently available data from 2021, finds that the UK’s ranking of 21 out of 38 OECD countries remains unchanged to its position in 2016, as it struggles to close the gap on how well it includes older workers in its labour force relative to other economies. The UK is an outlier among the G7 as economic activity level among older workers has not recovered to pre-pandemic levels, with over 55s driving three-quarters of the rise in total economic inactivity since the pandemic.
High house values, investment income and poor health are the primary reasons for the UK’s deteriorating employment rate for older workers, as New Zealand, Iceland and Japan top the rankings for the highest proportion of economically active over 55s in the labour force.
Barret Kupelian, chief economist at PwC, says:
“Post-pandemic, the UK economy has struggled to grow the supply side of its economy. In terms of the labour market, there are one million vacancies and the unemployment rate is relatively low. Some of the shortage in the labour force can be explained by the economic inactivity rate, which is higher than during the pandemic, and driven predominantly by almost 244,000 older workers, equivalent to the size of Portsmouth, who withdrew from the labour force during the pandemic and have not returned. While this has undoubtedly been a choice for many – driven by relative prosperity of this age group taking early retirement – it is also clear that ill health is part of the story which explains this trend.
“Understanding the cause of these labour force trends is crucial for the UK, as convincing older workers to return to work could help businesses deal with labour shortages fast with experienced staff, ultimately helping to alleviate domestic inflationary pressures. It’s vital, therefore, that businesses and policymakers focus on designing policies to support those who want to continue to work, as well as help to incentivise older workers to return to work if they want to.”
The report also identified workforce health as a key factor which influences the employment rate of older workers. The ONS for example has found that a third of over-50s who quit their job during the pandemic are on NHS waiting lists.
The report highlights that reversing the trend in long-term sickness amongst the population could be one of the key policy levers to bring workers, and particularly older workers, back into jobs. PwC’s survey of 1000 people (conducted as part of the Golden Age Index) showed that the age cohort that is suffering the most from long-term sickness is the 35-44 age group followed by the 55-64 and 65+ age groups – meaning health-related concerns and issues are holding back both the current and future generation of golden age workers.
In separate research by PwC for The Times Health Commission, two in five businesses (38%) have seen an increase in the number of employees taking long term sick leave due to mental health related illness since the pandemic.
The Golden Age Index also notes the role house prices and investment income could have had during the pandemic to lower the employment rate of older workers. Specifically, the analysis suggests that historically a 10% increase in house prices has been associated with a 0.1 percentage point fall in employment rates for 55-64 year olds, all things remaining equal. This indicates that positive wealth effects from the rapid appreciation of house prices of more than 20% during the pandemic could have contributed to a reduction in the post-pandemic employment rate of older workers in the UK.
There is significant regional variation in the employment rate of older workers in the UK, ranging from around 57% in the North East of England, to 68% in the South East. This is important when considering the number of workers – for example, if the North East of England recorded the same employment rate for the 55-64 age group as the South East, an additional 40,000 jobs would be created.
Divya Sridhar, economist at PwC, says:
“Our analysis shows that if all regions of the UK absorbed older workers into the labour force to a similar extent as the South East, it would translate to an additional 320,000 jobs. This is equivalent to around one third of UK vacancies. However, older workers in the South East are more likely to work in sectors which allow more flexibility in terms of locations and hours, such as financial and professional services, while those in the North East are more likely to work in the education, health and manufacturing sectors account, which are generally more physically demanding and require more on-site presence. It’s therefore important that future policies for older workers are tailored to reflect the unique industrial mix of each region.”