Retirement No Option for Older Workers in Europe’s Crisis
Jean-Luc Guillaume always presumed he’d retire at about 60, just like his civil-servant father.
One year from reaching that age, the biology researcher has no plans to stop working. Cutbacks to France’s retirement benefits, the European financial crisis and the cost of a recent separation have stretched out his horizons.
“Financially, retirement just isn’t an option,” said Guillaume at a street demonstration against job cuts at his employer, Sanofi SA (SAN), that he had traveled to Paris from his home in Toulouse to attend. “I’m looking at 66 at the earliest.”
Guillaume is part of a generation of European workers retiring later as the worst economic downturn in 70 years and higher retirement ages induce workers to stay longer. The proportion of over-55s in jobs has climbed even as unemployment rates have soared across the European Union.
While many economists say increased work for elders doesn’t reduce job opportunities for the young, deferred retirement has become a political issue for those who say otherwise, especially as youth unemployment in the EU exceeds 20 percent.
“They may not always be happy about it, but older people are staying in jobs longer than they used to,” said Eric Thode, senior expert at Bertelsmann Stiftung, a research institute based in Gutersloh, Germany. “Young people are taking the brunt of the crisis.”
Between 2000 and 2010, the percentage of those over 55 in employment rose in all 27 EU countries except Portugal and Romania, according to Eurostat, the European statistics agency. The trend appears to have continued most places into 2011, said Thode, based on employment reports.
It’s had political ramifications. Beppe Grillo, an Italian comedian-turned-politician, used anger over austerity and higher retirement ages to boost a political party that polls show could get as much as 18 percent of the vote nationwide in elections due by May. It also has won mayoral elections in northern Italy.
“Raising the retirement age to 67 means keeps the young out of the workforce,” Grillo wrote on his blog July 4.
The CGT, France’s largest union, said in an Aug. 29 statement about rising joblessness that “there will always be this much unemployment, precariousness and poverty until there is an ambitious jobs policy and the possibility for everyone to retire with a full pension at 60.”
In past decades, political leaders bought that argument. In economic downturns, older workers would lose their jobs first, often driven by government-inspired plans to push them into retirement to make room for younger workers.
This time around, countries are under pressure to reduce costs of state-funded pension programs. Leaders have increased the legal retirement age to reduce pension costs, passed anti- age discrimination laws and rolled back early-retirement plans, all to keep more seniors in their jobs.
When Carl Camden joined global temporary work agency Kelly Services Inc. (KELYA) as a senior vice-president 17 years ago, the biggest age group placed in both the U.S. and Europe was younger than 30. Now the largest segment is over 50 on both continents, said Camden, chief executive officer of the Troy, Michigan-based company.
“I do worry about the social fabric tearing apart,” he said in a phone interview. “I worry about social dynamics when economies aren’t growing fast enough to provide jobs for the young. There is a risk of generational conflict.”
End of Indexing
Italy in 1995 ended the indexation of pensions, causing them to lag behind the inflation rate and reducing an incentive to retire early. A 2008 law eliminated the possibility of retiring at 57 in certain cases. Prime Minister Mario Monti this year raised the number of years of work required for a pension and will lift the retirement age further to 66 from 65 by 2018.
The result: the percentage of people 50-64 in jobs reached 49.6 percent in 2011, up from 47.3 percent in 2008.
In France, most early retirement options were ended in 2003. Then in 2010 the minimum retirement age was lifted, to 62 from 60. President Francois Hollande returned the minimum retirement age to 60 after his May election, but only for those who started work as teenagers -- 110,000 people.
As in Italy, the proportion of older workers rose, to 56.5 percent of people 50-64 in the second quarter of 2012, up from 55.4 percent in the first quarter of 2008, when France’s overall unemployment rate was at its lowest since 1983.
“Throughout the 2000s there were a series of reforms to the pension systems in France and Italy,” said Jean-Olivier Hairault, a professor at Sorbonne Paris 1 University. “The result is that they’ve had no choice but to stay in the labor force and keep seeking work.”
Three years after the euro region’s debt crisis began, the 17-nation bloc is headed into recession and the August unemployment rate was 11.4 percent, the highest since the creation of the single currency. For those under 25, the rate was 22.8 percent.
The slow economy has given some older workers the worst of both worlds: They have to work longer, for less money. Antonio Di Florio, a 58-year-old assembly line worker at a Fiat SpA (F) car factory in Turin, was supposed to retire in April 2013 after 40 years of work with the carmaker.
Now, following Italy’s pension changes, his retirement is postponed until July 2015. Company production cutbacks have forced him to work part-time, reducing his monthly take-home to 850 euros ($1,109), 35 percent less than he earned before. One cutback victim: his 22-year-old daughter’s wedding.
“She likely won’t be able to have a honeymoon and we’ll have to rent the bridal gown rather than buying it,” Di Florio said in a phone interview yesterday. Still, he said, “I consider myself lucky to have a job, although one with a low salary.”
“Activity rates of elderly workers are more affected by policy choices, while young workers more at the whim of markets,” said Mathieu Plane, an economist at OFCE, a research institute associated with Paris-based graduate school Sciences Po. “The main adjustment to the crisis has come from companies not renewing the short-term contracts of younger workers.”
In the U.S, where the eligibility age for full Social Security retirement benefits is being gradually increased to 67 from 65, people are working longer as well. The proportion of those 65 years and older in the labor force rose to 18.6 percent in September from 13.6 percent that same month in 2002, according to the Bureau of Labor Statistics.
Europe’s elderly haven’t avoided suffering. While the percentage of those over 55 in jobs has risen, so has the number of elderly unemployed. The unemployment rate for those over 50 was 6.5 percent in France in the second half of 2012, up from 4.9 percent in the first quarter of 2008.
No Going Home
Elderly unemployed on average stay jobless twice as long as the overall population because their skills are often outdated and their salary needs too high, Plane said. Nor do they have the option of returning to education or moving in with parents.
While pushing elderly workers into retirement may open jobs for younger people at the company level, it doesn’t necessarily work that way across a nation’s overall economy, said Thode at Bertelsmann.
“Countries that have high rates of senior employment also have high rates of youth employment,” he said, citing Germany and Sweden. “Other countries fail both groups.”
Anne-Sophie Parent, secretary general of Age Platform Europe, a Brussels-based advocacy group for seniors, says the elderly are likely to take the brunt of the next round of job losses as countries cut into their civil service.
“Seniors have been in more protected jobs, but now we are seeing cuts in civil service in all countries,” said Parent. “For those over 45 who lose their jobs, it’s over for them.”
Guillaume, the Toulouse biologist, plans to make sure he’s not one of those people. Sanofi, France’s biggest drugmaker, last month announced plans to cut 900 jobs in France over the next three years. If he loses his job, Guillaume says, he’ll go on unemployment benefits and look for another job, since retirement isn’t an option.
“The market for researchers isn’t great in France now, but I have no choice.” Guillaume said.
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