Closing ‘participation gap’ among Scots aged over-55 could create over 55,000 jobs

• The UK ranks 21st in the OECD, a club of rich economies, on PwC’s Golden Age Index 
• New Zealand, Iceland and Japan rank the highest and are among the world’s leaders for the inclusion of older workers in their labour force
• In Scotland, the latest data show the employment rate of 55-64 year olds was 60.7% - compared with 68.1% in the South East of the UK
• Over 55s in South East England are more likely to continue working than those in other regions due to less physically demanding jobs
• Increasing the number of older workers in the labour force could help to alleviate inflationary pressures in the UK

New analysis by PwC UK has shown that bringing labour market participation among Scotland’s older workers up to similar levels to the South East of England could create more than 55,000 additional jobs.

The latest Golden Age Index highlights the significant regional variation in the employment rate of older workers aged 55-64 in the UK, with Scotland the third lowest of the UK’s nations and regions at 60.7% - compared with 68% in the South East of England.

The Index measures how well countries are harnessing the power of their older workers. It shows that if all 12 UK regions absorbed older workers into the labour force to a similar extent as the South East, it would translate to an additional 320,000 jobs – equivalent to around one third of UK vacancies.

The regional disparities are believed to be driven by a variety of factors, including educational incomes and the likelihood of older workers in Scotland, the North East and Northern Ireland – which have the lowest employment rates of 55-64 year-olds – to be employed in industries like education, health and manufacturing which offer less flexibility for employees. 

Jason Morris, Regional Market Leader at PwC Scotland, said:

“Whilst there is no doubting the regional disparities at play when it comes to participation of older workers, there is a clear opportunity here in Scotland to work towards absorbing more people over the age of 55 into the labour force. This will not only benefit the growth of the economy and alleviate inflationary pressures, but could also allow businesses and younger members of the workforce to benefit from their invaluable skills and experience.

“To some extent, the findings of the Golden Age Index tie in with key points highlighted in our recent Good Growth for Cities Index – which showed Glasgow, Edinburgh and Aberdeen tracking below the UK average for health. There’s a possibility that the impact of these health inequalities could be contributing to older workers choosing to exit the Scottish labour market. 

“However, with more options for flexible working across key industries and the wealth of transferable skills our older Scottish workers possess, there’s real potential to harness the power of over 55s to boost the Scottish labour force and our resulting productivity. There’s a clear call to action for employers and businesses to target these individuals and support them in making the most of the skills they have at their disposal – or upskilling them to enable them to take advantage of more flexible working options.”

The UK-wide picture

The latest edition of the Golden Age Index shows people in the UK aged over-55 are more likely to have left work and not returned than those in other G7 countries. 

The Index, based on most recently available data from 2021, finds that the UK’s ranking of 21 out of 38 OECD countries remains unchanged to its position in 2016, as it struggles to close the gap on how well it includes older workers in its labour force relative to other economies. The UK is an outlier among the G7 as economic activity level among older workers has not recovered to pre-pandemic levels, with over 55s driving three-quarters of the rise in total economic inactivity since the pandemic. 

High house values, investment income and poor health are the primary reasons for the UK’s deteriorating employment rate for older workers, as New Zealand, Iceland and Japan top the rankings for the highest proportion of economically active over 55s in the labour force. 

Barret Kupelian, chief economist at PwC, says:

“Post-pandemic, the UK economy has struggled to grow the supply side of its economy. In terms of the labour market, there are one million vacancies and the unemployment rate is relatively low. Some of the shortage in the labour force can be explained by the economic inactivity rate, which is higher than during the pandemic, and driven predominantly by almost 244,000 older workers, equivalent to the size of Portsmouth, who withdrew from the labour force during the pandemic and have not returned. While this has undoubtedly been a choice for many - driven by relative prosperity of this age group taking early retirement - it is also clear that ill health is part of the story which explains this trend.

“Understanding the cause of these labour force trends is crucial for the UK, as convincing older workers to return to work could help businesses deal with labour shortages fast with experienced staff, ultimately helping to alleviate domestic inflationary pressures. It’s vital, therefore, that businesses and policymakers focus on designing policies to support those who want to continue to work, as well as help to incentivise older workers to return to work if they want to.”

The Golden Age Index also notes the role house prices and investment income could have had during the pandemic to lower the employment rate of older workers. Specifically, the analysis suggests that historically a 10% increase in house prices has been associated with a 0.1 percentage point fall in employment rates for 55-64 year olds, all things remaining equal. This indicates that positive wealth effects from the rapid appreciation of house prices of more than 20% during the pandemic could have contributed to a reduction in the post-pandemic employment rate of older workers in the UK.

You can access a copy of PwC UK’s latest Golden Age Index here.

Table: Employment rate by region, 55-64 year olds, 2022

Sources: PwC analysis, NOMIS