Raise the retirement age? 40% of the Swiss aged 50+ actually want to work beyond retirement age!
Zurich/Geneva, 14 November 2019
The Swiss population is ageing. By 2030, the Swiss labour market is likely to face a shortage of up to half a million workers. One solution is to make better use of the potential represented by the 50+ age group. According to a new Deloitte study on the ageing workforce, 40% of workers currently aged between 50 and 64 would actually like to continue working beyond retirement age. Yet very few assume that they will do so. Swiss companies, along with the government and the employees themselves, need to take action to bridge this gap.
The growing demographic imbalance is not only putting pressure on Switzerland’s social security system but also reducing the pool of labour. According to UBS calculations, by 2030, the Swiss labour market will face a shortfall of between 230,000 and 500,000 workers. The economy will, therefore, have to make better use of the pool of potential labour if companies are to remain competitive in the long term and have the right skills in their workforce over the coming decades.
While the Swiss labour market is a favourable environment for the 50+ age group as a whole, this group still represents substantial untapped potential for employers. Labour market participation decreases significantly starting at 60. Many older workers are leaving the labour market before statutory retirement age, even if a majority are doing so voluntarily. The 65-69 year-old age group have a relatively low participation in Switzerland (23%) compared to the OECD average (27%). This is mainly due to Switzerland’s fixed retirement age, which is low by OECD comparison. If this untapped potential could be utilised, it could substantially cushion the impact of demographic change on the labour market.
Two out of five want to work longer than retirement age
Individuals already integrated into the labour market who want to continue working beyond retirement age represent a significant pool of labour – and one that could be easy to mobilise. To quantify the size of this group and the potential they represent, Deloitte Switzerland conducted a representative online survey of 1,000 individuals aged between 50 and 70. The results are striking: 40% of the economically active persons between 50 and 64 years old are willing to work beyond the age of retirement. 35% would like to continue working part-time and 5% full-time. This would translate into an additional 578,000 people in the workforce.
“Our study shows that a good part of the 50+ age group is clearly willing to continue work beyond the statutory retirement age. This is good news for the Swiss economy. If this potential were fully tapped, it could substantially correct the worsening imbalance between those entering and leaving the labour market and relieve pressure on the social security system. Mobilising this group could fill a significant part of gap forecast by UBS for 2030,” says Michael Grampp, Chief Economist at Deloitte Switzerland and co-author of the study.
Older workers want to work longer – but do they and can they?
Comparing the relatively high willingness to work beyond retirement age with the actual labour market participation of those already over retirement age reveals a significant mismatch. In 2018, just 23% of 65-69 year-olds were still actively employed – a much lower figure than the potential of 40% stated above.
What’s more, although 40% of 50-64 year-olds’ state that they would like to continue working beyond official retirement age, only 30% of those believe that they will be able to (see chart below).
At first glance, this marked discrepancy between aspiration and (assumed) reality is very surprising. A closer look suggests that it can be attributed to employees’ mindset. The existence of a statutory retirement age suggests strongly to many employees that they will automatically retire when they reach that age.
Lack of opportunity is another reason for this mismatch: According to the Deloitte survey, 66% of respondents who are already retired were unable to continue working. Of this group, 46% would have actually liked to do so – equivalent to almost one third (30%) of all people already receiving their pension. There are a number of reasons why companies do not employ workers beyond retirement age, including cost, skills mismatch and prejudices. Yet other companies may simply be unaware of the potential that older workers represent, not least because Switzerland has a fixed retirement age and companies expect their employees to retire automatically at that age.
Lastly, the mismatch between willingness to work beyond retirement age and reality may also be explained by the fact that incentives are lacking. If it is not financially advantageous to continue working beyond pension age, many employees will not do so, even if they would actually like to do so.
Companies need to take action…
“It is key that not only employees, but also employers change their approach to the ageing workforce if we want to ensure an improved inclusion of older people in the labour market. Companies must create opportunities to dissuade employees from taking early retirement or to continue working beyond retirement age. And we’ve seen that that’s something that a lot of workers actually want, not only companies looking to make better use of the potential pool of labour represented by older workers,” says Adam Stanford, Managing Partner Consulting at Deloitte Switzerland.
He adds, “To fundamentally change the corporate culture and managers’ mindsets, it is imperative that we break down prejudices against older employees. Companies also have to establish a culture of dialogue between managers and older employees. Our study shows that almost 50% of those who are already retired would have been willing to work longer if their employer had discussed concrete opportunities with them way before they retire. This is ultimately a missed opportunity for both employers and employees.”
Specific measures that could help to keep those employees who are willing in the workforce beyond retirement: Boosting the opportunity and attractiveness of part-time work and institutionalising rainbow career models. 40% of those already retired state that they may have continued working if they could have reduced their hours. Adapting working conditions such as more freelance models, or shifting job roles of older workers towards more expert or adviser roles are other possible measures.
Also, companies can make better use of the potential of older workers by ensuring that their workforce regularly undergoes training and adapts its skills to the future requirements of the world of work. Of course, maintaining employability also requires effort on the part of the employee – the concept of lifelong learning has to be embraced by both sides.
…and so does the government
Companies are not the only ones who need to act, so too does the government. The current statutory framework is not helping to mobilise the additional labour potential represented by older people. Two areas are particularly important: modifications to the retirement age, and removal of financial disincentives.
“As a recently published OECD report stated, updating the pension system and lengthening working lives is crucial to ensure adequate old-age incomes and avoid ageing becoming a burden on firms and workers. It’s clear: If older workers are to remain in employment for longer, the government must make the pension age more flexible. Otherwise, the rigid mindset of retirement at a given age will persist. Pension provision needs to be tailored to the average life expectancy or length of an individual’s working life for the system to be financially sustainable. Measures to increase flexibility must also involve effective incentives: those working for longer must also earn more, even after tax and social security deductions,” says Michael Grampp.
Increasing the retirement age should be carried out in conjunction with measures to make it more flexible. Here Switzerland could follow the lead of countries such as Sweden and Canada, which have both linked increases in the statutory retirement age to measures to make retirement more flexible, and neither requires employees to retire at a fixed age.