What do the ONS labour stats tell us?

Released on Wednesday, the Office for National Statistics figures for April to June found an employment level of 8,767 for those aged between 50 and 64, with the employment rate for the cohort at its highest ever at 71.2 per cent.

While the employment rate for over-65s has plateaued above 10 per cent for the past two years, a wider glance reveals that that figure has doubled since 2000.

The figures come with important caveats. Firstly, as Brian Beach, senior research fellow at the International Longevity Centre-UK noted, the elevated numbers of older people in employment are drawn from the largest ever population in that age cohort.

In all of this we must beware straying back into the tangled complexity of means testing

Tom Selby, AJ Bell

Secondly, the statistics can be distorted by the experience that a specific generation might have of the labour market, making it difficult to compare the older worker cohort of today with those in recent history.

“Fifty to 64 today was 40-54 [a decade] ago, and they have very different employment issues [to those who were 50-64 a decade ago],” said Beach.

Nonetheless, he said the rising number of workers aged 50-64 and largely unchanged number of workers aged over 65 indicated the influence of the state pension age on retirement habits, serving as a “cultural normative marker”.

Lessons for the state pension

The Department for Work and Pensions has recently decided to increase the speed of state pension age increases, following recommendations made by the Cridland report.

Beach said this move was supported by a broad trend of people living longer and staying healthy and able to work for longer, but cautioned: “However, there is still a particular proportion of people approaching state pension age… who do end up with health issues and fall out of the labour market.”

Malcolm McLean, senior consultant at Barnett Waddingham, said this showed that further changes to the state pension might be necessary.

“The Cridland report on state pension ages seemed to me to be a bit too much of a blunt instrument,” he said, suggesting that an early retirement option with a lower level of state pension could be useful for those who are simply unable to work any longer.

The Labour Party is in the process of constructing its own response to this problem, and has sought to gain political capital by embarking on a “state pension tour” attacking the Tory increase to the SPA.

However, its hints at policies to redress unfairness in the current system have so far involved a form of means-testing partly focused on the onerous conditions of some work, something experts were wary of.

“In all of this we must beware straying back into the tangled complexity of means-testing, which created a hugely costly and complicated state pension framework that even pensions experts struggled to get their heads round,” said Tom Selby, senior analyst at AJ Bell.

He added: “Ultimately if life expectancies continue to rise we all have to accept that the amount we get from the state will have to drop, or the age at which we get it rise.”

Doubts over impact of saving habits

Good levels of workplace and private pension provision are traditionally thought to reduce the financial imperative for people to work later in life.

This has been argued to give employers a vested interest in contributing to schemes, as reluctance to retire among staff could hinder their ability to inject fresh talent into their businesses.

“If more and more older people are staying on in work that must have an impact down the line as it were, and it also blocks career prospects for younger people,” said McLean.

But amid falling unemployment rates across the working population, any knock-on impact on younger generations was difficult to highlight in the ONS figures. Youth unemployment stood at 10.6 per cent for those aged 18-24, and has not been significantly lower since 2004.

Beach maintained that the “lump of labour fallacy” was just that, citing the correlation between high elderly employment and high youth employment in local authority areas as proof that the economy has no fixed capacity for jobs.

“If there were to be any kind of decline in employment rates for younger people I think that would be related to different issues,” he said.

He also said that financial wellbeing had a limited impact on the timing of labour market exit, arguing that employers may see workers stay later because they have stopped discussing retirement options for fear of being seen as discriminatory.