We need to get the elderly back into work to tackle budget deficits and public debt

Getting retired, fit people back in to the workforce, and treating them as an economic resource, is right – even if it is provocative

‘The decline in the share of the working age population will reduce the productive capacity of the economy’ (PA Archive)

Our ageing population is fuelling inflation and adding to public debt. Getting elderly, retired, but fit people back in to the workforce, and treating them as an economic resource, is right even if it is provocative. These were some of the conclusions to emerge from a conference this month on the future of ageing (#FutureOfAgeing; International Longevity Centre).

Britain, like other developed economies – and China – is getting distinctly older. The percentage of the population aged over 60 is around 22 per cent, having risen from 16 per cent in 1990 – and is projected to rise to 25 per cent in another 40 years.

And, within that total, the share of the very old (over 80) is growing especially rapidly, from around 2.4 per cent now, to an estimated 7 per cent in 40 years’ time.

Projections are, of course, uncertain. The main assumption is that people are living longer thanks to better health treatment and healthier lifestyles, but this is not inevitable – as we have seen from declining life expectancy amongst males in the USA.

The fertility of women of child-bearing age has been declining to around 1.6, and is likely to stabilise at a lower level still. Net immigration is also a big factor in population size and composition, and if this were cut in line with the Conservative government’s aspirations it would have the effect of reducing the proportion of younger people and increasing the number of over 60s.

Other countries have progressed further in the ageing process. The share of the over-60s is 33 per cent in Japan, 29 per cent in Italy and 28 per cent in Germany. That share is expected to rise rapidly to over 40 per cent in those countries by the middle of the century – and they will be joined by China.

The economic effects of ageing are complex, but we can make a few plausible assumptions. First, there is a pressure on government budgets, since there are more people with high dependency requiring expensive health treatment and social care.

At the same time, the share of population which is working goes down, reducing the tax take. So, in the absence of continued budget tightening, governments will run up growing budget deficits and public debt.

In addition, the retired population will spend out of its accumulated savings. The decline in the share of the working-age population will reduce the productive capacity of the economy.

Increasing demand for goods and services while reducing supply will create inflation, all other things being equal. In practice, governments will use monetary and fiscal policy to counter the trend; but it will be like walking into a stiff headwind.

Another likely consequence is growing inequality between generations. The old demand more spending on health and social care as pressures on hospitals grow. We have seen that budgets for school and colleges are being – relatively – squeezed.

Additional spending currently promised for health and social care is being financed by taxes which fall on the working population (in the form of National Insurance Contributions) rather than by taxation on the accumulated capital of the elderly.

That is not all. In the last “decade of austerity”, with falling real wages for many working families, pensions were protected through the “triple lock”. There is also a political ratchet effect whereby ageing produces an ageing electorate, and one where older people have a higher propensity to vote, defending its interests in terms of government spending priorities at the expense of younger people.

Moreover, younger people have less secure employment than before, with fewer careers offering steady progression and salary increments and essentially none offering final-salary pensions And, there is an inflationary property market – which excludes those with low and average incomes and rewards older owner-occupiers with appreciating property wealth.

Some of these pressures could be eased if younger, fitter, people of retirement age were to continue working. They would help to meet growing labour shortages. They would generate more tax revenue for government. And, in many cases, they would keep themselves mentally and physically active, thereby postponing the onset of conditions leading to high dependency.

The barriers to such employment are falling. Compulsory retirement has been outlawed and age discrimination is illegal, too (at least in theory). The nature of work is less physical and more desk based.

While more flexible working patterns, like zero-hours contracts, are less secure; they may suit older workers, who are looking to supplement their pension income. Fitness levels are generally higher: all those yoga and pilates classes, walking, gym and cycling (or, in my case, ballroom dancing and gym).

Furthermore, many older people need to work because their occupational pension provision is inadequate for comfortable retirement. In particular, there are large numbers of women who prioritised unpaid parenting and are now denied the full state pension – or who have been caught out by the postponement of the women’s pension age.

“Work until you drop” used to be a feature of exploitative capitalism or enslavement. “Work as long as you can” may be the slogan of a society trying, in an ageing society, to get a better balance between the interests of young and old. How do we achieve it?

First: more imagination. There are numerous roles – teaching in schools and colleges; policing; nursing and doctoring; legal work; accounting; working in supermarkets; delivering the post – which those who have reached pensionable age may be happy to perform for a limited number of hours provided there is no financial disincentive. But it requires employers to be flexible and to maximise synergies between workers of different age and experience.

Second: retraining. Skills atrophy. And older workers will often lack IT aptitude. As a 78-year-old part-time worker, I put in a lot of creative hours – but have the computer skills of a six or seven-year-old. People are expected to teach themselves keyboard skills, which are daunting for those who honed their communication skills in a world of pen and paper.

Adult education institutions should be seen not just as places for hobby learning, but for improving such basic modern, generic, skills: perhaps (in short) “boot-camp” retraining programmes.

Third, we should learn from countries further advanced in ageing – especially Japan. The oldest area in Japan is called Akito. It has been described as, “the backwater which leads the world”. The local authorities, instead of the usual emphasis on sheltered housing for retired people, encourage integrated living.

The elderly offer childcare, and in return, working-age families offer services which the older residents need. Women are able to work without the uncertainties and costs of childcare, and elderly people have a useful role as well as support.

Finally, there are millions of older people who cannot work and depend on care. As with others who have a physical or mental disability or chronic illness, they rely on an army of carers. Many carers are volunteers and are unpaid, especially relatives of dependent loved ones. They may not pay tax and are not counted in GDP statistics, but they substitute for people who do and are.

Their role in an ageing economy needs to be factored in. That means providing much more respite care, both as a compassionate measure and as a means of postponing when people have to go into expensive institutional care permanently; and far more generous carers’ allowances to compensate for dropping out of formal work.

Britain has the advantage of time to prepare gradually for an ageing population and to adapt. For many that will mean working longer. But that is the price we pay for living longer.