Growing Employment among Over 65s makes reducing unemployment more challenging
Economic growth this year, so far, has been exceedingly rapid at 3.2% on an annualised basis and employment has responded too, up by an impressive 286,000 since the same time last year. Yet unemployment has been broadly static, falling by just 17,000. The explanation behind this apparent paradox is going to make preventing unemployment from rising over the next few years very difficult.
The first factor is that the British population is increasing. This is coming more from natural growth than migration as the numbers of youngsters entering the working age population at the moment is strong. The increase in the working age population at just under 200,000 over the last year means that about 140,000 jobs are required to hold the employment rate at 70%.
This challenge is being added to by the way older workers are not retiring in the way they used to. Some 850,000 over 65’s now work, up nearly 100,000 over the last year and some 260,000 since the recession began. Furthermore, women aged between 60 and 65, that is above the normal retirement age now but where the retirement age is rising to over the next decade, have seen a further 80,000 increase over the last year. Hence, to cope with older workers delaying retirement means a further 180,000 jobs need to be created to hold working age employment stable; this means a total of 320,000 jobs a year. There is a slight offset from more young people staying in full-time education but job creation needs to be extremely rapid just to hold unemployment steady.
Given a likelihood of slower growth next year with tax rises and spending cuts then a rise in unemployment starts to look inevitable. With unfilled vacancies falling steadily for the last five months, and long-term unemployment rising rapidly now, up nearly 200,000 in the last year, the prospects look bleak.