Employers Adjustment to Longer Working Lives

Kène Henkens, Netherlands Interdisciplinary Demographic Institute (NIDI-KNAW)
Jaap Oude Mulders, Netherlands Interdisciplinary Demographic Institute (NIDI)

In recent history the Netherlands saw a lot of retirement-related policy changes as a result of population ageing. These policy changes culminated in 2012, when the Dutch government decided to gradually raise the eligibility age for the public state pension from 65 to 67, after which it will be tied to life expectancy projections. These policy changes have led to increased labour market participation among older individuals, but have had severe implications at the individual level, with individuals having to work much longer than anticipated. But not only employees are affected; employers also have to deal with increasing numbers of older workers who are looking to stay employed until higher ages than before. The increase in public pension age thus has a direct effect on organizations’ workforce composition, staff planning and opportunities for organizational restructuring. In this paper, we study employers’ adjustment practices to the new reality of employees’ longer working lives, using data from the NIDI Employer survey, which is a survey of 1368 Dutch employers’ attitudes, policies, and practices related to an ageing workforce and longer working lives, held in early 2017. We introduce a new measure of employers’ adjustment practices, categorizing a series of items related to adjustment to longer working lives into three main concepts: information (e.g., informing and supporting older workers in their retirement decisions); health (e.g., an increased attention for healthy working conditions and work-life balance); and person-job fit (e.g., accommodating older workers to other jobs within the organization). Using a structural equation model, we then estimate which employers are most active in adjusting their practices to deal with longer working lives of their employees. Preliminary results show that mainly larger organizations with more older workers actively adjust to longer working lives. Organizations from different sectors and with different workforce compositions adjust differently.

Outline

In recent history the Netherlands saw many changes to its retirement-related policies. These policy changes were largely the result of population ageing, which created the need for longer working lives and higher labour market participation rates of older workers to keep the retirement system financially sustainable. In the Netherlands, financially attractive early retirement schemes were abolished, and ‘alternative routes’ into early retirement, through for example unemployment or disability benefits were severely restricted. The retirement-related policy changes culminated in 2012, when the Dutch government decided to gradually raise the eligibility age for the public state pension from 65 to 67, after which it will be tied to life expectancy projections.

These institutional changes have led to strongly increased labour participation rates among older individuals, especially between the ages of 60 and 65. Early retirement has become the exception rather than the norm, and the majority of older workers now retires at or very close to the public state pension age. The implications of these institutional changes for individual older workers have been severe. In response to the policy changes, the current cohort of older workers has had to adjust their expectations of their own retirement multiple times over the last decades. As Van Solinge and Henkens (2017) have shown, this has led to a lot of resentment and anger among older workers, especially those in more demanding jobs, and those with fewer personal and social resources.

However, not only employees, but also employers have had to adjust to the institutional changes. Employers have to deal with older workers that are looking to stay employed until higher ages than before. Because of the relatively high level of employment protection legislation in the Netherlands, and many older workers being employed in permanent contracts, employers can only dismiss most older workers at a very high cost. Otherwise, they have to employ an older worker until he or she reaches the state pension age, at which point they are commonly automatically dismissed due to mandatory retirement policies. The increase in the state pension age thus has a direct effect on organizations’ workforce composition, staff planning, the opportunities for internal promotions and of organizational restructuring. In this article, we aim to study to which extent employers have adjusted their policies and practices to deal with the effects of the institutional changes related to retirement and the general ageing of the workforce.

Methods

We use data from the NIDI Employer Survey. This survey of employers’ attitudes, policies, and practices related to an ageing workforce was held between December 2016 and March 2017. The surveys were sent hard copy to a sample of 6000 Dutch organizations, with the possibility of returning the paper version or completing an online version of the survey. The sample of employers was stratified by size and sector, predominantly to ensure the participation of large organizations (with more than 250 employees) and of organizations in the industry and public sector, which were therefore overrepresented in the sample. In total, 1368 organizations participated in the survey, for a response rate of 23%, which is comparable to other surveys in organizational research. Half of the responses were filled in on paper and sent by mail, while the other half of the responses were recorded online.

We introduce a new measure of employers’ adjustment practices, categorizing a series of items related to adjustment to longer working lives into three main concepts: information; health; and person-job fit. The items used for these concepts are as follows:

Information:

  • We inform managers about ageing and how to deal with it
  • We discuss each older worker’s individual desires and plans regarding work and retirement
  • We try to support employees in making their retirement decisions

Health:

  • There is increased attention for work life balance
  • There is increased attention for healthy and safe working conditions
  • There is increased attention for a healthy lifestyle

Person-job fit:

  • When health problems hinder productivity, we try to move an employee to another job within the organization
  • In the case of decreased employability, we try to accommodate the employee to another job with another organization
  • There is increased and continuous attention for each worker’s person-job fit

Results

Using a structural equation model, we estimate which employers are most active in adjusting their practices to deal with longer working lives of their employees. Preliminary results show that mainly larger organizations with more older workers actively adjust to longer working lives. Organizations from different sectors and with different workforce compositions adjust differently. We expect to be able to present a full model with extensive results at the time of the conference.

Presented in Session 1151: Economics, Human Capital, and Labour Markets