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Older people need to fill shortfall
July 2008
Migrant inflows and shifting people off capacity benefits are crucial to the economic and social well being-being of the nation.
The number of people retiring from the workforce is set to outstrip youngsters joining it by several hundred thousand over the next two decades, according to analysis by the financial times.
The shortfall is expected to be filled not only by the growing numbers of older people who, as the Financial Times reports today, are re-entering or remaining in the workforce. Continuing high inflows of migrant workers and greater numbers moving off incapacity benefit and into jobs will be crucial to the nations economic and social well-being, as the century advances leaving an increasing number of pensioners to be supported by a diminishing proportion of active workers.
Analysis of official population estimates by the FT reveals that by 2026 some 14.5m people will have reached the age of 65, the current state pension age for men. This is 331,000 more than the number of young people, currently aged less than 20, who will be coming through to replace them in the workforce.
The actual shortfall could be close to 5000,000 given that large numbers of youngsters will be expected to stay on at school until at least 18, under current education policies, with many going on to university or other forms tertiary education.
In a bid to ease the pressure on the public purse, as post-second world war baby boomers move into retirement and require more care, the government plans to raise the state pension for women from 60 to 65 by 2020.
The pension age for both sexes will then rise gradually to 68 by 2046.
The extent of the problem can be discerned from OECD figures, which forecast that be 2030 the UK will have 1.9 tax paying workers for each jobless person over the age of 65. This compares with a support ratio of more than 3 to 1 in 2005.
It warned that unless “there is a substantial increase in labour force participation, especially among older people … labour resources will remain broadly stagnant” leading to “rising labour shortages and pronounced slowdown in economic growth”.
Populations projections from the Government Actuary’s Department assume most of the shortages will be filled by migrant workers. Large inflows, from eastern and central European countries have persuaded officials to raise long-term forecasts of net migration during the next 50 years by 31 per cent from 145,000 a year to 190,000.
But this begs the question of what would happen if migrant numbers fell sharply or if more of those who are here already decide to return home, says John Philpott chief economist at the chief economist at the Chartered Institute of Personnel and Development.
Some 1m Poles are estimated to have come to work in Britain in the past four years. About half of these have already returned home according to the Institute for Public Policy Research. And more could soon be joining them with job prospects and wages improving in Poland while the value of the pound against the zloty has fallen by 38 per cent, making it less attractive to send money home.
The Work Foundation an independent think-tank, warned this week that a climate of hostility towards immigration risked “harming the ability of UK companies to attract skilled, talented people from abroad”.
David Frost, director-general of the British Chambers of Commerce, has accused Labour and Conservative politicians of trying to out bid each other in their tough rhetoric on immigration.
He says “The fight for global talent means we must not shut our borders to those who can help our economy diversify and grow”.
Both Labour and the Tories have targeted the 2.6m people on incapacity benefits, as another large source of unused labour.
The government has announced plans to reduce this number by at least 1m through a combination of more work focused advice and training: and, tough sanctions, including loss of benefit, for those who refuse help or job offers.
In 1979 740,000 people were on incapacity benefit. Since then numbers have risen more than threefold.
Source: Andrew Taylor Financial Times 17 June 2008
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