Yesterday, I was writing about how we in Europe and other developed countries might follow in the footsteps of Japan by increasing labour participation rates among older people – not because older people want to go back to work, but because they have to in order to survive.
Does this not just shift the age at which companies make workers redundant to 49 given that companies are not willing to pay for these social damage annuities?
That’s why you have to phase it in in the sense that for younger workers they have to gradually pay more of the public cost. Besides, if you restrict yourself to employees aged 49 or younger you are pretty soon out of a qualified workforce.
I think companies would plan the labour hiring process in accordance to reduce their monetary liabilities associated with redundancy process. In fact they could probably even stop hiring older people altogether and play hot potato with the older workforce. It would also be complicated to implement with higher rate of casualisation in the labour market.
In my opinion, there should be incentives on keeping an employee long term instead. The longer an employee stays with the company would provide incremental incentives for the company.
Companies are quite responsive to incentives and rather extremely adept at avoiding any kind of punishment driven policies.
Good idea (the incentives). But I doubt that older workers would be made redundant in masses. It would inevitably reduce the supply of younger workers and create wage inflation for younger employees to the point where the higher wages make up for the cost of firing an older worker.
Good point. As everything is, it gets complicated. Probably a more dynamic system that changes incentives as per the needs of the society? We do have the data and technical capabilities.
Is this all not just a band-aid to cover the fact that encouraging people to retire at 57 is just crazy. Move the age at which you can retire with a full state pension to 67 and the problem goes away.
Interesting idea, but it can lead many employers to avoid hiring middle aged/older employees in order not to pay potential annuity in case of redundancies. Plus younger employees are usually less paid. So the unintended consequence might be actually worsening the employment prospects in category of employees 50+.
JK - you've made a really good argument for the case of automation - ultimately it will be too economically burdensome for companies to take on human capital. Pay-off the near retirees and do away with "employees" wherever a machine can do a job. The world used to always need "ditch-diggers". Now that they have been/will be displaced, can we reasonably expect to train that segment of a work-force to be programmers/write-code? And then the UBI conversation comes round again...
As another reader commented, I think this just moves the keep/fire decision to 49 from 57.
I don’t care for the pollution analogy because that is a bad act by the employer. Letting a less productive employee go is a rational act and will help a younger, cheaper resource in society to become productive and meet needs that he has no cushion of savings to fund. Possibly the root problem is that the retirement benefits at 57 are too generous (kind of like our problem in the US right now with too generous unemployment benefits!).
How about going into opposite direction and getting rid of all the "protections" for older workers? In Poland you cannot fire people for a few years before retirement which is the main reason these people are fired before the period.
Does this not just shift the age at which companies make workers redundant to 49 given that companies are not willing to pay for these social damage annuities?
Thank you for your blogs very insightful
That’s why you have to phase it in in the sense that for younger workers they have to gradually pay more of the public cost. Besides, if you restrict yourself to employees aged 49 or younger you are pretty soon out of a qualified workforce.
I think companies would plan the labour hiring process in accordance to reduce their monetary liabilities associated with redundancy process. In fact they could probably even stop hiring older people altogether and play hot potato with the older workforce. It would also be complicated to implement with higher rate of casualisation in the labour market.
In my opinion, there should be incentives on keeping an employee long term instead. The longer an employee stays with the company would provide incremental incentives for the company.
Companies are quite responsive to incentives and rather extremely adept at avoiding any kind of punishment driven policies.
Good idea (the incentives). But I doubt that older workers would be made redundant in masses. It would inevitably reduce the supply of younger workers and create wage inflation for younger employees to the point where the higher wages make up for the cost of firing an older worker.
Good point. As everything is, it gets complicated. Probably a more dynamic system that changes incentives as per the needs of the society? We do have the data and technical capabilities.
It looks like pension in another name.
It’s a contingent pension like a call option.
Is this all not just a band-aid to cover the fact that encouraging people to retire at 57 is just crazy. Move the age at which you can retire with a full state pension to 67 and the problem goes away.
Interesting idea, but it can lead many employers to avoid hiring middle aged/older employees in order not to pay potential annuity in case of redundancies. Plus younger employees are usually less paid. So the unintended consequence might be actually worsening the employment prospects in category of employees 50+.
JK - you've made a really good argument for the case of automation - ultimately it will be too economically burdensome for companies to take on human capital. Pay-off the near retirees and do away with "employees" wherever a machine can do a job. The world used to always need "ditch-diggers". Now that they have been/will be displaced, can we reasonably expect to train that segment of a work-force to be programmers/write-code? And then the UBI conversation comes round again...
As another reader commented, I think this just moves the keep/fire decision to 49 from 57.
I don’t care for the pollution analogy because that is a bad act by the employer. Letting a less productive employee go is a rational act and will help a younger, cheaper resource in society to become productive and meet needs that he has no cushion of savings to fund. Possibly the root problem is that the retirement benefits at 57 are too generous (kind of like our problem in the US right now with too generous unemployment benefits!).
How about going into opposite direction and getting rid of all the "protections" for older workers? In Poland you cannot fire people for a few years before retirement which is the main reason these people are fired before the period.