As populations around the world get older, most nations are looking to extend the working lives of citizens by linking the retirement age more closely with life expectancy.  This isn’t always straightforward, however, as ageism can prevent older workers from remaining productive into their later years, especially if they’re required to find a new job for whatever reason.

Indeed, the matter is further complicated by the fact that many OECD countries have strong incentives for early retirement.  This is increasingly pressing as the march of technology is pushing more and more older workers into retirement as the demand for new skills is not matched by the incentives for older workers to acquire them, as they will have less time to capitalize on them than younger workers.

Technology and older workers

A recent report from the OECD examines the impact automation-based technologies have on older workers.  The study found that workers in fields that have a higher risk of automation were more likely to enter what the authors refer to as the “unemployment tunnel”, especially if the job was associated with a high share of routine tasks.

Indeed, when older workers were both highly exposed to automation and also eligible for the unemployment tunnel, the risk of them leaving the workforce grew by 80%.

The authors highlight the case of Finland, which has attempted a few times to raise the eligibility age for entering the unemployment tunnel to increase the supply of workers in the labor market.  These efforts typically worked and raised the probability of older workers staying in employment, even if they’re exposed to a high risk of automation.

“Our analysis underscores the importance of labour market reforms that remove disincentives for older workers to continue working, in particular institutionalised pathways to early retirement, in extending the working lives under rapid technological change,” the researchers explain. “While studies and policy discussion concerning the future of work emphasise boosting lifelong training and learning, older workers would only have weak incentives to take up such opportunities as long as such pathways remain open. There is even a risk that a prospect of easy access to early retirement discourages younger cohorts of unskilled workers from investing in new skills.”

These measures should be accompanied by an increase in training and support, especially for low- and middle-skilled workers in their old age to help them back into the workforce after any displacement. This is especially important as the Covid pandemic has resulted in an excessive march of older workers into retirement.