We’re pleased that the Government is pressing ahead with plans to abolish the Default Retirement Age – as our population ages, it is vital for economic recovery and growth that more older workers are able to stay in work if they so choose.

During the recession, the number of economically active people aged over State Pension Age actually increased, by around 10%, indicating that there is huge potential for older people to continue to make an economic contribution. For the individual, there are significant health, financial and social benefits to be gained by staying in work.

Our big challenge is how to tackle the higher rates of worklessness experienced by older people; there are currently 4 million people aged between 50 and 64 who are not working, costing the economy around £72 billion per annum in benefits and lost productivity.

So while the abolition of the Default Retirement Age is welcomed, we also need to do more to support older people to remain in work, to make the transition to other types of work, including self-employment, and for those who find themselves made redundant, to provide help back into work at an early stage, well before they become yet another long-term unemployed statistic.

The number of older workers trapped in long-term unemployment has rocketed to a ten-year high – soaring by over 50 per cent in the last year alone. Planned changes to working age benefits could drive this figure even higher, warns Age UK today.

PRIME’s Director of Development, Peter Bennie, said that against this increasingly challenging backdrop for older workers, it is important that those who become unemployed look at what help there is to find other ways of working, including self-employment.

Earlier when interviewing Andy Harrop from AgeUK, BBC Breakfast’s Sian Williams seemed dubious about the opportunities for unemployed over-50s to set up in business.

As we know at PRIME, this can be a viable option for many people – currently 18% of working people aged between 50 and State Pension Age is self-employed^† – and research shows that business survival rates are almost four times better than for younger people.

We, like AgeUK, are also concerned about the disproportionate number of over 50s who are becoming long-term unemployed, and the prospects of re-employment for the huge number of public sector workers who are projected to lose their jobs over the next few years.

Since August 2008, the number of unemployed over 50s has risen by 51%, compared with 36% for the under 50s^††, and the cost of 50+ worklessness now stands at £72 billion per annum.

At this time when Government is putting together the specifications for the new single Work Programme, we cannot afford to miss the opportunity to build in tailored, effective measures to help a significant number of the 3 million workless over-50s back to work, particularly as the changes to Retirement Age will bring even more older people into the workforce who would otherwise be drawing their State Pension.

These measures must include help to make the transition from employment or unemployment to self-employment. The AgeUK article “Number of 50-plus workers trapped in long-term unemployment rockets to 10-year high” can be downloaded from

http://www.ageuk.org.uk/latest-press/50-plus-workers-trapped-in-long-term-unemployment/

^†source: ONS Annual Population Survey, September 2009

^††source: ONS Labour Market Statistical Bulletin, July 2010

Government plans to scrap the default retirement age from October 2011 are to be welcomed. Our sister charity Age UK estimates that around 100,000 older workers were pensioned off against their will in 2009 as employers used forced retirement as a shortcut to shed jobs. So potentially the new policy will contribute to an immediate reduction in the number of older people who find themselves unemployed.

However, this is only one measure. There is a lot more that government can do to meet the challenges of an ageing workforce and spiralling pensions costs.

Over the next 20 years, the UK will see an extra 3.6 million* over-50s in the ‘working age’ population, but as things stand, one-in-three people in that age group is out of work. Click for details

The cost of over-50s unemployment is currently £72 billion a year, and as this age group increases from being a quarter to a third of the workforce, there is risk that these costs will increase massively.

The Coalition’s proposed new Work Programme provides the opportunity to put in place carefully thought-through support that creates sustainable work solutions for older people, including self-employment.

Let’s hope the opportunity is taken.

USEFUL LINKS

BBC coverage of ending of fixed retirement age in UK has good case studies of people forced out early

Detailed coverage at our PRIME Business Club web site of the pros and cons and what small businesses that employ people have to do.

Give your opinion to BIS. The government’s consultation on this proposal is open till the end of October 2010.

The House of Commons Work and Pensions Committee has been looking at contracted employment programmes – the sort of thing people are sent on by Jobcentre Plus after they have been out of work for a while.

Jobcentre itself does not actually run these programmes, but instead contracts them out to mainly private providers. The bulk of the work is carried out by a mixture of private companies and some “third sector” non-profits. PRIME itself has sometimes been a provider in such schemes, so we know what they are like.

Most of the organisations involved, whether private or charitable, are actually looking to make a profit or surplus on providing such services. Payment to the providers is usually by results in some way. They receive a portion of the money up-front when they start training or helping a person, but the majority later – when the trainee achieves some target outcome, like ceasing to claim benefit or staying in a job for three months.

This all sounds pretty efficient, but there are some potential problems with this model. The Committee has drawn attention to them in its report – and found some evidence that bad things are happening.

Basically providers have a financial incentive to concentrate their efforts on the candidates most likely to succeed – in the words of the report to “cream off” the people most likely to help them attain their targets. Meanwhile those the provider thinks are not likely to end up giving them good or profitable outcomes are at risk of being simply “parked” – i.e. minimal effort is expended on them.

This is indeed a real risk, and it is likely that future back-to-work schemes, whichever flavour of government is in power, are likely now to follow some payment by results model. The Committee is to be congratulated on drawing attention to the problems that can result. The solution, if there is one, is to police the contracts more effectively, and perhaps to broaden the range of rewarded outcomes, so that all who go on these programmes get a fair crack of the whip.

Extract from report below.
Full report at the Parliament web site – HTML version (browsable) or PDF version.

Creaming and Parking

100. Providers are increasingly being paid by results, on the basis of the number of customers moving into work, rather than a flat fee. There are two particular risks associated with this approach. The first is that of ‘creaming’, where contractors who are paid by results are likely to concentrate their efforts on those participants who are closest to the labour market and more easily placed in a job. The second is that of “parking” where participants who are deemed furthest from the labour market will receive a bare minimum of services and are unlikely to make any progress whilst participating in a programme. In this way providers seek to maximise their profit, focusing on customers who will earn them outcome payments, while spending as little as possible on customers who will not.

101. There is evidence that creaming and parking is taking place in the Pathways to Work programme. Research by the Department found that provider staff felt that the focus on performance targets influenced their behaviour with clients, to the extent that they spent less time than required with people with multiple barriers to work (and perceived as harder to help). They also felt that they needed to encourage job ready clients to take jobs that would enable a swift return to work, rather than take lengthier routes towards jobs that they wanted.

102. In addition, most providers who took part in the research perceived that clients were, on the whole, harder to help than they had anticipated and some staff expressed concerns that this had also led to job outcome targets being prioritised ahead of clients’ well being and ability to sustain employment.

from p28, section 4, Vulnerable Groups in The House of Commons Work and Pensions Committee – Fourth Report Management and Administration of Contracted Employment Programmes