Rethinking retirement: changing realities for older workers and employee relations?

Citation

Loretto, W., Lain, D. and Vickerstaff, S. (2013), "Rethinking retirement: changing realities for older workers and employee relations?", Employee Relations, Vol. 35 No. 3. https://doi.org/10.1108/er.2013.01935caa.001

Rethinking retirement: changing realities for older workers and employee relations?

Rethinking retirement: changing realities for older workers and employee relations?

Article Type: Guest editorial From: Employee Relations, Volume 35, Issue 3.

Introduction

Until comparatively recently, research on older people's employment focused on explaining and understanding the causes of “early” exit from employment, i.e. retiring before state, contractual or expected retirement ages. This is not surprising, given the sharp decline in older men's employment between the mid-1960s and late 1990s (in contrast to women, who had stable but much lower employment levels throughout (Phillipson, 1998). Employee relations were an important influence on overall declines in employment during the period. As Ebbinghaus (2006) shows, countries such as Germany and the Netherlands with very high early retirement had “cooperative” employee relations systems and generous social insurance benefits. This enabled collusion between the social partners, who used social benefits/pensions as pathways to exit older workers early in the face of a declining labour demand. In the UK voluntarist system of employee relations, with a lack of generous state benefits, early exit “collusion” of this sort was less common. Nevertheless, in the context of declining labour demand and increasing prosperity for some older people, the proportion of UK men aged 60-64 in employment fell from 83.3 per cent in 1971 to 50.2 per cent in 1995 (Phillipson, 1998, p. 57).

Since the 2000s the situation has changed dramatically and we are seeing a significant reversal in early retirement. As Figure 1 shows, between 2000 and 2011 the proportion of people aged 55-64 in employment rose in all the countries examined by Ebbinghaus. In Germany and the Netherlands in particular, countries with strong histories of early retirement, there were dramatic increases in employment, with Germany actually over-taking the UK by 2011 in terms of employment levels. Increases in employment levels for this age group were more modest in the UK (rising from 50 to 56 per cent); of greater note has been the significant increase in employment rates of “post-retirement-age” workers, those in the 65-69 year old age category (Figure 2). While it needs to be remembered that the majority still leave work at or before 65 in the UK, these figures nevertheless signal trends of increasing employment amongst older people.

During the period of earlier employment exit, retirement explanations often revolved around labour market factors that “pushed” people out of employment, pension incentives that “pulled” people into retirement, and “jump” factors whereby individuals left work to fulfil other ambitions (see Jensen, 2005). However, this research legacy of focusing on early exit, coupled with the recency of employment increases, has left us with insufficient understanding of the changing situation of older people's employment. Reasons why people work longer, while recognised as varied and complex (Vickerstaff et al., 2008; Flynn and McNair, 2009), are far from being fully understood. The focus of much research has been on the individual determinants of extending working life (for a review see Weyman et al., 2012). This is mirrored by policy pronouncements which similarly concentrate on the supply side of the issue: urging individuals to delay retirement and work for longer (Department for Work and Pensions (DWP), 2006; Pensions Commission, 2005). There has been a relative paucity of investigation into the demand side: we know much less about employers’ attitudes and behaviours towards older workers (Loretto, 2010). In particular we need much more understanding of how employment and retirement transitions are influenced by changing organisational practices (Vickerstaff, 2006). It may be that dramatic changes in retirement behaviour will come from employer action rather than public policy or changes in individual preferences (Vickerstaff et al., 2003; Frerichs et al., 2012).We also need to recognise the political and economic contexts of these changes – older worker employment has been increasing during a time of sustained economic recession. This raises questions about issues such as job quality (Lain, 2012), flexible working (Lissenburgh and Smeaton, 2003) and the role of trade unions (Duncan et al., 2000; Flynn et al., 2013).

The papers in this special issue attempt to increase our knowledge in these areas. They stem from the Economic and Social Research Council funded “rethinking retirement” seminar series, which explored how work and retirement is changing (see www.rethinkingretirement.org). The first three papers illustrate the importance of key aspects of the changing employment context for older workers. The second three papers explore two inter-related facets of the changing opportunities for older workers: the broadening of pathways by which to make the transition from (full-time) work to retirement; and the uneven distribution of opportunities between different groups of older workers.

The changing employment context for older workers

As outlined above, one of the key debates is the extent to which employer attitudes and practices shifting away from a predominantly negative or ambivalent stance (Taylor and Walker, 1994; Loretto and White, 2006; Conen et al., 2012a, b). Surveys of employers in the UK have demonstrated that many organisations have not thus far focused on the demographic shift which is likely to transform their labour supply (McNair and Flynn, 2005; Metcalf and Meadows, 2006). Research in other parts of Europe suggests that ageism amongst employers is alive and well (Van Dalen et al., 2009), but there is also evidence of pockets of good practice (Frerichs et al., 2012). Undoubtedly, two of the key contextual influences on employers will have been legislative changes and changes to occupational pension provision.

In the past in the UK, organisations explicitly used age as a criterion in their employment activities, specifying age limits in job advertisements (Taylor and Walker, 1994, p. 573), and using mandatory retirement ages (Metcalf and Meadows, 2006). Even where individuals did not have a mandatory retirement clause in their contract, employers often had “normal” retirement ages with line managers to a large degree controlling who was allowed to continue working beyond this (Vickerstaff, 2006). Since the late 1990s, however, English-speaking countries have been gradually outlawing mandatory retirement (New Zealand in 1999; Australia in 2004; Canada in 2009 and the UK in 2011; see Wood et al., 2010). Although the UK made this move only in 2011, changes leading up to this may have had some impact – following the Employment Equality (Age) Regulations 2006 employers were no longer able to enforce retirement on the basis of age before age 65. Furthermore, employees were given the right to request continued employment after 65, something employers were mandated to consider through a formal procedure (Parry and Tyson, 2009). Large numbers of organisations added age to their equality policies in the build-up to this legislation (Parry and Tyson, 2009). In this context some employers may have become more inclined to consider allowing employment after age 65, although the final decision appears to be strongly influenced by whether there is a business case for doing so (Flynn, 2010). Since the full abolition of mandatory retirement in 2011 we are likely to see an even bigger impact, if the experience of countries such as New Zealand is replicated in the UK (Lain and Vickerstaff, forthcoming). This is of course not to suggest that the use of age as an organising principle or source of discrimination will be eradicated in practice by legislative changes; it is important for employee relations scholars to examine the impact of such changes in reality. For example, while legislation is likely to have had some impact in New Zealand, Harcourt and Harcourt (2002) nevertheless found age discrimination violations of Human Rights law in many job application forms they analysed. Harcourt et al. (2004) further demonstrate the importance of employee relations in research demonstrating that the presence of unions increased employer compliance with age discrimination provisions within law.

Changes in the provision of occupational pensions are also likely to influence increasing employment levels. In the UK, financial incentives to retire are shifting considerably. In the past employers were more likely to provide “defined benefit” final salary occupational pensions that were not uncommonly available before age 65 (Meadows, 2003). These have become much less prevalent in the dominant private sector (see Pensions Commission, 2004, pp. 114-125). Workers are now increasingly dependent on income from investments, typically in the form of defined contribution pensions (Pensions Commission, 2004). Evidence from the USA shows that people with these pensions retire later than their counterparts with defined benefit pensions (Munnell et al., 2004). This is likely to be because another year of work adds to the pension “pot”, with less fear of missing out on payments by delaying retirement (Arkani and Gough, 2007; Munnell et al., 2004). The value of this pot can decline dramatically, as happened after the financial crash (Guardian, 2008). It was in this context that the UK government first strongly indicated it would abolish mandatory retirement (see H.M. Government, 2009), and this decline in funds is likely to have influenced continued employment during this period.

The first paper in this special issue by Beck further highlights how employer practices are changing in the context of increased legislation and changes to occupational pensions. Her qualitative investigation of employers investigates why older workers appear to fared better in this recession than at previous times. She finds less emphasis on redundancy and early retirement schemes than was the case in previous recessions. This was undoubtedly affected by labour market factors – legislative change in relation age discrimination – and financial considerations in the form of a reduced availability of occupational pension incentives as a pathway out of employment. However, more positively she found that greater attention was being paid to working flexibly, both as a means of retaining employees during difficult times, but also in retaining or even bringing back skills that were in scarce supply. This may highlight additional labour market differences compared with previous recessions, when older men in particular were strongly concentrated in declining industries where there was often less demand for their skills (Taylor and Walker, 1997). Nevertheless, Beck still identifies concern about the abolition of mandatory retirement, with employers seeking to re-establish control they felt they had lost over the retirement process, in some instances actively “managing people out”.

One of the conclusions to be drawn from Beck's paper is the importance of empirically examining employer practices in the changing labour market/policy environment, rather than taking them for granted on the basis of previous experience. These practices can vary between employers, as Fuertes et al. paper on small- and medium-sized organisations (SMEs) illustrates. SMEs are important because of the propensity of over-50s to work for smaller organisations (Smeaton and McKay, 2003). Despite this, most research has tended to focus on age attitudes, practices and policies of larger employers. Although Fuertes et al. find that attitudes and practices are influenced by the same mixture of positive and negative stereotypes that exist throughout employment, they also identify some key challenges that affect SMEs more acutely. While Beck's paper observes an increase in flexible working in the organisations she interviewed, Fuertes and her colleagues identify that for small businesses organising employment in this way can be a challenge. This is despite the fact that small organisations can, in an ad hoc fashion, be more flexible on occasions, given their greater degree of informality (Cebulla et al., 2007).

Grady's paper takes a rather different perspective on the pensions context. Starting from the position that many older workers are facing a financially precarious retirement, she argues that the “pensions crisis” in the UK is a construct created and sustained by the dominance of a neoliberal discourse since the 1980s. She presents a detailed picture of the ways in which trade unions have reacted to the changes and the extent to which they have engaged in or challenged the discourse. Her arguments resonate beyond her immediate focus and provoke thought about other discourses, whether social and/or political, that surround retirement and work in later life. Several of these discourses are represented in the papers throughout this issue. The related discourses of choice and control have prevailed in much policy pronouncement on extending working lives, but as the remainder of the papers in this special issue demonstrate, choice and control are far from evenly distributed amongst older employees. Moreover, as Beck's paper illustrates, later working life represents areas of contested control, with governments, employers and employees all looking to gain power over the processes.

Changing opportunities for older workers

In addition to constraints and opportunities afforded by employer practices, legislative changes and financial arrangements, the nature of peoples’ attitudes and preferences, and their ability to realise these, are important in understanding changing employment patterns among older workers. The potential significance of what we might term non-financial “preference-realisation” factors should not be under-estimated in terms of its influence on employment. Analysis of the English Longitudinal Study of Ageing 2009 revealed that 44.48 per cent of people working past state pension age gave an enjoyment of working as the main factor and 15 per cent said they worked to keep fit and active. Likewise, most people working over state pension age are working part-time by choice (Smeaton and Mckay, 2003), which is consistent with wider evidence of the potential popularity of gradual retirement (Vickerstaff, 2007).

The remaining papers explore the various opportunities available to people towards the later stages of their working lives, and clearly demonstrate the differing degrees to which occupational groups are able to realise their preferences for employment. Parry and Bown-Wilson's focus on older financial managers’ career plans emphasises how the transitions that people make towards the end of their working lives can be much broader than simply work to retirement. They also show how the psychological bonds to work alter over time and how important these are in influencing decisions. Their work draws out important gender implications which are often overlooked in the debates over managing degendered “older workers”.

Davies and Jenkins’ focus on older academics also demonstrates a heterogeneity of attitudes and preferences, and a complexity of transitions between full-time work and full retirement for this group. A clear relationship between attitudes to work and attitudes to retirement is shown. Their study also illustrates the changing nature of the psychological contract over the (life)course of employment and highlights the unevenness of choice and control over retirement decisions and transitions. This unevenness is striking, as a group older academics arguably have greater potential for high degrees of self-actualisation compared with most workers, and are often able to implement their employment preferences through reconfigured work arrangements such as becoming Emeritus professors or through part-time buy backs post-retirement.

Hennekam-Treguier and Herrbach, in contrast to the other papers, focus on workers in lower status jobs – a group that receives less attention than white-collar workers – in the Netherlands. They investigate the ways in which HRM practices influence older worker attitudes and practices to working or retiring, concluding that there is no direct effect. They discuss the complexity of factors that may influence retirement decisions, noting the broad array of financial and personal factors that have been raised in previous research (see e.g. Loretto and Vickerstaff, 2013 for a summary). Interestingly, they found that flexible work practices were not related to intentions, a finding they attributed to the employment context in which the research was conducted. Part-time working is already extremely prevalent in the Netherlands and so flexible working may not offer any additional utility to or for older employees. One of the most intriguing findings, however, is that organisational commitment (which is a likely to influence employment) is related to job design, i.e. the degree to which there are “the creation of new roles for older employees, career planning, the provision of challenging assignments and the possibility to transfer to a less strenuous job”. The given explanation for this is that lower status workers need these considerations to make their otherwise routine and physically demanding jobs attractive in older age; one might speculate that it is precisely the inability of many lower status workers to achieve such changes that has an influence on exit. The authors note that previous research on managers did not find this positive relationship between job design and commitment, suggesting that they already have jobs which are attractive for them in older age. Whether or not this would be true of managers in the UK, is open for debate. However, this line of reasoning does remind us that, unlike academics, for most workers the option of reconfiguring employment in ways that meet with their preferences is currently distant.

Conclusions

The idea behind this special issue (and the ESRC seminar series which gave rise to it) was that we needed to rethink retirement in the light of an ageing population and the development of some profound changes to patterns of retirement. What appeared to have evolved in the last half of the twentieth century as a relatively predictable part of the life course and organisational life cycle is now undergoing a series of changes (for a recent discussion see the collection of articles in a special issue of Human Relations, “Reinventing Retirement”, 2013). Government policy, at least in the UK, has given relatively little thought to how to extend working lives beyond the supply side issues, viewing the raising of state pension ages and anti-discrimination legislation as the keys to increasing the age at which people retire.

As the discussions in the papers in this issue suggest, rethinking retirement also involves reconsidering the practical and psychological relationships between employees and employers across the lifecourse. We need to pay more attention to the way in which employment preferences in older age are shaped, and the extent to which employer responses to the changing context enable or inhibit older people to realise these preferences. In doing so, we need to be much more aware of gender, occupational status and other important influences which serve to constrain choice. A more varied approach would extend existing ways of thinking about factors prompting decisions about when and how to retire. Popular explanations of retirement behaviour, which focus on the interactions between factors that “push” or “pull” people out of employment and into retirement or cause them to “jump” into new arenas of activity (Jensen, 2005), divide scholars as to their utility. It is not our purpose here to engage with these debates; instead we wish to highlight that such models were conceived in a time of concern with early exit from employment, and have also served to focus attention onto the importance of the latter stages of working life in shaping transitions. Our contention here, based upon contributions to this special issue and wider research, is that work-retirement transitions are becoming more varied in their nature and timing and need to be considered within a much broader frame of reference.

Acknowledgements

The Guest Editors acknowledge the support of the ESRC in funding the seminar series Rethinking Retirement (RES-451-26-0910, 2010-2012), which gave rise to this special issue. We wish to thank all the contributors to that series. In addition, we are very grateful to Dennis Nickson, the team at Emerald and to all our reviewers, without whom this special issue would not have happened.

About the authors

Wendy LorettoProfessor of Organizational Behaviour at the University of Edinburgh Business School. Her main research field is age and employment, with a particular focus on changes in employees’ and employers’ attitudes and practices in extending working lives. She is especially interested in the ways in which gender and age interact to affect work and retirement experiences amongst older men and women. Drawing upon a range of policy-related projects she has published in the above areas as well as those of organizational change, employee well-being and matters related to employee wellbeing in later life. Wendy Loretto is the corresponding author and can be contacted at: Wendy.Loretto@ed.ac.uk

David Lain Leverhulme Early Career Research Fellow at the University of Brighton Business School. He is currently writing a book on changes to work and retirement in the United States and United Kingdom, and has previously published articles and book chapters on people working past age 65 in these countries.

Sarah VickerstaffProfessor of Work and Employment, Head of the School of Social Policy, Sociology and Social Research, University of Kent. Her research focuses upon paid work across the life course especially at the end of working life. She has completed projects on older workers and retirement for the Joseph Rowntree Foundation, the ESRC and the Department for Work and Pensions.