04.06.2018 | INGRID MARIE FOSSUM
Most children born in Denmark since 2000 will live to the age of 100 years or more. The increasing number of elderly people leads to a growing need for people to help carry out the tasks in society. This speaks in favour of us staying longer in the labour market.
Not only do we live longer, we also enjoy a greater number of so-called “well-years” in which we are neither ill nor disabled. In other words, in terms of our health we are able to work longer.
Together with Paul Bingley from VIVE, Professors of economics Nabanita Datta Gupta and Peder Pedersen from Aarhus BSS have conducted a thorough study of the unused work capacity in the Danish population.
“By applying two different methods, we reached the same result. The Danish older population represents approximately 5 years of unused work capacity - 5 years for men and 5.5 years for women. This means that we are in fact able to stay on the labour market for a few more years after we turn 65, which is the current retirement age,” says Nabanita Datta Gupta.
From now on, the Danish retirement age will be linked to the population’s average life expectancy. This means that as our life expectancy increases, we will gradually be working a bit longer. However, this will happen rather slowly, and our retirement age will not have increased by a whole year until 2030. The new study shows that we have the capacity to move at an even faster pace.
"The Danish older population represents approximately 5 years of unused work capacity - 5 years for men and 5.5 years for women"
Nabanita Datta Gupta - professor
The research shows that the differences in the unused work capacity depend on the population’s level of education. There is more unused capacity among highly educated people – especially highly educated women.
“For men, we find the greatest unused capacity in those with an upper secondary school level education. For women, we find the greatest unused capacity in those who have an even higher level education such as a university degree,” says Datta Gupta.
Politicians often say that since we live longer, we also have to work longer. However, it is not just a question of health, but also of people’s preferences. People at a certain age might simply prioritise their leisure time over work. For this reason, the researchers behind the study do not wish to take a stand on whether or not we should actually work longer.
There might also be barriers that older people face on the labour market e.g. lack of jobs, discrimination and unaccommodating workplaces.
In the decades following 1979, the year in which the post-employment wage (‘efterløn’) was introduced, the employment rate fell. But since the late 1990s, the employment rate among the older part of the population has increased. This is positive in relation to the challenges facing society.
Next the researchers are hoping to uncover why the labour force participation rate among the elderly has increased since the late 1990s.
“We’d like to find out what has caused this development. Is it due to the recent changes in the pension system, improved health conditions or more people preferring to work longer? Our jobs are different nowadays. We have made a shift towards a knowledge-based economy and this means less physically demanding work,” says Datta Gupta.
During the last 20 years, Nabanita Datta Gupta, Peder Pedersen and Paul Bingley have been part of a network of researchers from a number of OECD countries. The purpose of the network has been to study the countries’ pension systems and explore how the incentives in the pension systems affect the population’s retirement behaviour. The network is called International Social Security and was founded by researchers from Harvard University. The network’s latest research reveals the labour capacity of the elderly part of the population in the OECD countries.
Nabanita Datta Gupta, Peder Pedersen and Paul Bingley have been responsible for carrying out the Danish part of the research.
The researchers were able to reach the assessment of five years of unused work capacity in Denmark by exploring how much elderly people would be able to work today if compared with a corresponding mortality rate in 1977. The year 1977 was chosen as it is prior to the introduction of the post employment wage, which offered many people the opportunity to retire from the age of 60.
In 1977, you had a one per cent risk of dying at the age of 55. In 2010, the corresponding mortality rate was found at the age of 60 years. In 1977, 86 per cent of the 55-year olds were working, while only 67.4 per cent of the 60-year olds were working in 2010. This equals a difference of 18.6 per cent. If you make the same comparison for each year until 2010, the difference gets smaller and smaller. On average and calculated in years, the difference corresponds to approximately five years of unused work capacity in the Danish population.
In an alternative approach, the researchers explored the correlation between work and health. The researchers had access to self-assessed health data from the population through SHARE, a detailed questionnaire study conducted in a number of European countries. The data included information on BMI, diagnoses, disabilities, doctor’s visits and hospital admissions, etc. The researchers applied figures for how much today’s 50 to 54-year olds are actually working (with any health-related challenges they might have) and assumed that an older population would be able to work a corresponding number of years if they were in similar health condition. The conclusion is that people are working a great deal less than what their health allows. Calculated in years, we are dealing with approximately five years of unused work capacity. More specifically, 5.03 years for men and 5.55 years for women.
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