Promoting the labour force participation and employment of older people in the EU
The labour force participation and employment of older people across the EU
Labour market participation of older people has improved
The labour force participation and employment of people between the ages of 55 and 64 has increased considerably, providing a major contribution to the EU labour supply.
In 2023, 41 million older people participated in the labour market in the EU and 39 million were employed . Their activity and employment rates – 67 % and 63.9 % in 2023, respectively – were both almost 20 percentage points (hereafter “pps”) higher than in 2009. These increases were more than four times higher than those for the prime-age population (25 to 54 years old). Moreover, in the last decade they have compensated for the negative impact of population ageing on labour supply. The increased participation of people aged 55 to 64 in the labour market has been largely independent of education levels and mainly driven by the retention of permanent, full-time positions . Since 2009 the activity and employment rates of older women have improved by, respectively, 5.7 and 4.9 pps more than those of men.
Graph 3.1: Activity rates by age in the EU-27 – percentage of the total population
Source:
Eurostat, Labour Force Survey.
Several factors have contributed to the rise of the activity and employment rates of older people.
These include improved life expectancy, health, educational attainment, policy changes to retirement systems, unemployment and disability insurance schemes, as well as favourable labour demand developments and a rising share of jobs in the service sector that offer less physically demanding employment . These factors, as well as the increasing availability of care services, which reduced the informal care responsibilities of older women, have contributed to increasing participation of older individuals and in particular of older women.
Graph 3.2: Employment rates of older workers (55-64 years old) across the EU (2023)
Note:
Darker colours correspond to higher employment rates.
Source:
Eurostat, Labour Force Survey. Map courtesy of EuroGeographics, the Food and Agriculture Organization and the Turkish Statistical Institute.
The employment and activity rates of older people differ substantially among Member States, suggesting an important role for policies and institutions.
In Czechia, Denmark, Germany, Estonia, Latvia, the Netherlands, Finland and Sweden the employment rates of older workers are above 70 %, while in Greece, Croatia, Luxembourg, Romania and Slovenia they are below 55 % (Graph 3.2). The largest increases since 2009 (around 30 pps) have been observed in Hungary, Poland and Slovenia for the age bracket 55 to 59 and in Denmark, Hungary and Slovakia for the age bracket 60 to 64 (Graph 3.3). The levels and evolution of activity rates across Member States have followed the corresponding employment rates.
Graph 3.3: Change in employment rates of older and prime-age workers (2009 to 2023)
Note:
Differences are expressed in percentage points.
Source:
Eurostat, Labour Force Survey.
This cross-country diversity is a result of the interplay of several economic and institutional factors.
Research shows that the labour market outcomes of older individuals have been strongly influenced by increases in statutory retirement ages across Member States, as well as by the restriction of eligibility criteria for early retirement and unemployment and disability insurance schemes . However, in Member States with the largest employment rates for people aged 55 to 64, other factors have also played an important role, such as health improvements in Sweden , preferences to work longer and a shift in social norms in the Netherlands and increasing reasonable accommodations at work in Denmark . Additional factors such as improved life expectancy , along with shifts in companies’ behaviour due to changes in labour market conditions, have also played a role in explaining cross-country differences in the employment of older adults. For instance, in some countries with the highest employment rates for older people, such as Czechia and the Netherlands, labour and skills shortages are at historically high levels, emphasising the potential importance of changes in the behaviour of companies, which may prefer to keep their older workers more than they did before, due to labour shortages. Furthermore, evidence shows that differences in the increase in the educational attainment of older workers across Member States can also partly explain cross-country differences in employment rates.
The unemployment rate of older people is lower than that of prime-age individuals and less responsive to the business cycle, but older people are more likely to become long-term unemployed for several reasons.
The rise in labour force participation of people aged 55 to 64 since 2009 has increased their employment rate without significantly affecting their unemployment rate. In 2023, the unemployment rate of older people in the EU was 4.6 %, 0.9 pps below that of prime-age individuals. Higher severance costs may discourage employers from dismissing older workers. Moreover, in some countries and sectors, older employees enjoy additional protection from dismissal compared with prime-age workers as they approach retirement age. After losing their job, older people are more likely to transition into inactivity rather than unemployment, or into invalidity, retirement or social welfare schemes. If they remain unemployed, they are more likely to have longer unemployment spells and face difficulties in returning to employment, especially if they have completed less education. In 2023, 50.9 % of unemployed older individuals were long-term unemployed in the EU, compared with 37.4 % of prime-age individuals. The situation has been particularly severe in Member States such as Slovakia (74 %), Greece (65.5 %), Italy (61.8 %) and Portugal (60 %). On the companies’ side, age discrimination, the need for specific workplace arrangements for older workers as well as the perception of older adults’ lower productivity are among the factors that hinder the return to work of older adults (see Box 3.1). Moreover, the multifaceted relation between wages and the employment and activation of older adults has also to be taken into account.
Despite recent improvements, older people are still under-represented in the EU labour market.
Their activity and employment rates are 20 and 18 pps lower, respectively, than those of prime-age adults (67 % and 63.9 %, compared with 87 % and 82.2 % for prime-age adults in the EU in 2023). Member States such as Croatia Luxembourg and Romania were characterised by the highest inactivity rates in 2023 (higher than 40 %), as shown in Graph . The major reason for the inactivity of people aged 55 to 64 has been illness or disability (as declared by 37.1 % of those who were outside the labour force but wanted to work in 2023). Other relevant reasons for inactivity are care responsibilities (17 %) and believing that no job is available (13.6 %).
Box 3.1: Factors affecting the employment of older people
The employment rates of older individuals have risen mainly due to higher retention rates, while hiring rates have remained low. In 2022, 54 % of EU workers aged 60-64 years old were in the same job as five years earlier, compared with 36.2 % in 2012 . The rise in retention rates can be driven both by the incentives for older workers to stay longer in the labour market, and by companies’ actions to retain their older workers (Konle-Seidl, 2018). In contrast, the EU hiring rate of older persons increased only slightly from 5.8 % in 2012 to 6.6 % in 2022, remaining low compared with younger age groups.
Low hiring rates can be due to demand-side constraints, including the perception of the lower productivity of older workers. Research findings suggest that the link between age and productivity follows an inverted U-shape, with a peak at the age of 55 or below (Picchio, 2021). However, various factors affect this relationship (Allen, 2019) . Recent evidence suggests that companies are still reluctant to hire older workers due to the large seniority wage premium, especially in countries with strict employment protection legislation. This is the case in Greece, Spain, and Italy, despite reforms that eased employment protection legislation for permanent workers (Martin, 2018). If wages rise with job tenure due to seniority pay, a gap can emerge between the unit labour costs of older workers who have been with the same employer for a long time and their productivity (Vandenberghe, 2022). This discrepancy can undermine the hiring of older job candidates if they are expected to receive comparable wages.
Low hiring rates can also be driven by age discrimination and the need for specific workplace arrangements for older workers. Ageism (Ayalon & Tesch-Römer, 2017) and negative stereotypes persist, with 52 % of EU citizens considering age the most important factor that can disadvantage a job candidate during the recruitment process (European Commission, 2023b) . Older adults can be perceived by employers as less adaptable, with poorer physical capabilities, limited technological competence and digital skills, as well as less trainable and less flexible. Furthermore, their experience may not be sufficiently appreciated. Evidence suggests that these perceptions can lead to age discrimination by employers (Carlsson and Eriksson, 2019) . Therefore, older people are more likely to end up in lower-skilled and lower-paid jobs after having been unemployed for a long period (Harris et al., 2017). Furthermore, they may need more workplace flexibility and accommodation measures, which employers may find too costly.
The employment of older workers is also affected by supply-side factors. The labour supply of older workers can decline with age due to health problems, family-related reasons (such as informal caretaking, or coordinated retirement decisions of spouses), their increased preference for leisure, or a lack of financial incentives to remain active in the labour market.
- Related note aOECD Older workers scoreboard.
- Related note bThe share of employees aged 55-64 with job tenure of less than one year as a percentage of total employees.
- Related note cStudies with different methods find different peaks and estimate steeper or slower declines in productivity with age.
- Related note dAgeism has been defined as ‘stereotypes, prejudice, or discrimination against (but also in favour of) people because of their chronological age’.
- Related note eThis figure represents a five pps increase compared with the previous Eurobarometer survey in 2019.
- Related note fThe authors demonstrate the presence of age discrimination in hiring by Swedish employers in a field experiment. According to the experiment of Van Borm et al (2021), employers engage in statistical discrimination (e.g. which relies on perceptions that may hold on average but may put individual candidates at a disadvantage), as they see old age as a signal of lower technological skills, flexibility and trainability. However, recruiters from companies employing a larger share of older workers show lover levels of age discrimination. More information on older workers can help to reduce age discrimination in hiring.
Graph 3.4: Inactivity rates of older people across Member States (2023)
Source:
Eurostat, Labour Force Survey.
The labour force participation of older people declines with age, with differences across demographic groups and Member States.
In 2023, the effective age for labour market exit stood at 63.8 years for men and 63.5 years for women in the EU (see Table 3.4 in Annex 3.1). Participation and employment rates both decline with age due not only to the impact of retirement but also to people leaving the labour market before statutory retirement age. Such early exits are more likely for women , people working in elementary occupations such as accommodation and food services, and people with disabilities . They are also made more likely by fragmented working histories, fewer opportunities for career development, and care responsibilities, as well as by a lack of flexible and part-time work opportunities . As concerns the employment of people over the age of 65, there are marked differences across Member States, with larger employment rates in Estonia (17.6 %), Latvia (14.5 %) and Lithuania (12.6 %), mainly due to low pension adequacy. This is interlinked with a lower-than-EU-average income for people over 65 years old compared with that of people between 18 and 64 years old and, as a consequence, a high risk of poverty and social exclusion for this population group . Ireland (14 %), the Netherlands (11.6 %), Denmark (11.1 %) and Cyprus (10.1 %) are also characterised by high employment rates for this age group, which could be due to their higher-than-EU-average statutory retirement age (see Table 3.4 in Annex 3.1 for an overview of statutory retirement age across Member States). In contrast, low employment rates can be found in Romania (2.2 %), Belgium (3.2 %), Spain (3.4 %), France (4.2 %) and Luxembourg (4.2 %) .
Gender, education, health and foreign-born status affect the labour market participation of older people
Among older people, women, individuals with disabilities or lower levels of education, and those who were born outside the EU are more likely to be inactive.
The highest activity-rate gaps, compared with the average activity rate of people between 55 and 64 years old, can be observed for those with low educational attainment (activity rate of 53.2 % in 2023 in the EU, a gap of almost 14 pps). The gap is similarly high for people with disabilities (activity rate of 53.4 % in 2022 for people with some disability, a gap of 13.6 pps) . The activity rate of older women is 6.1 pps below the average for older people. Older people who were born outside the EU are only somewhat more likely to be inactive, with an activity rate gap of 2.4 pps between them and native-born older people .
Older people with lower levels of qualifications have worse labour market outcomes and more challenging working conditions.
In 2023, the EU activity rate of older individuals with the lowest educational qualifications (53.2 %) was 27.6 pps below that of those with tertiary education, driven by Member States such as Czechia, Croatia, Lithuania, Romania and Slovakia, where this difference was higher than 40 pps. Moreover, older people with lower levels of education, particularly men, report higher exposure to health risk factors at work. In 2020, 74.7 % of lower-educated people aged 55 to 64 experienced these risks (77.7 % of men and 70.1 % of women) compared with 56.2 % of those with tertiary education. Exposure to physical risk factors at work can have a negative effect on the health of older individuals and might contribute to their labour market exit.
Graph 3.5: Activity rates of individuals aged 55 to 64 with various levels of disability, by Member State (2022)
Note:
Disability is measured based on the concept of self-reported ‘activity limitation’, which captures long-standing limitation in performing usual activities (due to health problems) for at least the past 6 months. Some statistics are omitted due to their low reliability.
Source:
Eurostat, Labour Force Survey.
Older people are more likely to suffer from health problems limiting their labour market participation, yet often they do not benefit from reasonable accommodations at work.
Currently, one third of all EU individuals in the group aged 55 to 64 suffer from a disability, with the prevalence being highest in Denmark, Estonia, Latvia, the Netherlands, Slovakia and Finland (higher than 40 %), and lowest in Bulgaria, Greece, Italy, Luxembourg and Malta (lower than 20 %). In all Member States, older adults living with disabilities participate in the labour market at lower rates (Graph 3.5). The inactivity rate of older individuals with disabilities was 55 % in the EU in 2022, which can be largely attributed to 13 Member States where these rates were higher than 60 % (and in particular to Bulgaria and Romania, where this rate was above 80 %). People with limiting health conditions are more likely to become long-term unemployed and exit the labour market, instead of reducing their working hours . This may be partly because only 20 % of adults with a chronic disease, and 30 % of those who are moderately or severely limited in their daily activities by their condition, report having benefited from reasonable accommodations at work . In particular, workers with low educational attainment and those in low-skilled occupations are more likely to have a chronic disease and experience limitations in their daily activities, and are also less likely to benefit from reasonable accommodations at work .
Gender gaps also persist for labour force participation and employment at an older age.
Even though the activity and employment rates of older women have improved more than those of older men in the EU since 2009 (by an additional 5.7 and 4.9 pps, respectively), these gender gaps remain sizeable (reaching 12.5 and 12 pps in 2023, respectively, compared with 10.4 and 10 pps for the whole workforce). The reasons for inactivity differ by gender. While similar numbers of men and women were inactive in 2022 due to long-term illness or disability (1.1 million and 1.2 million, respectively), other personal and family reasons and caregiving responsibilities are also major drivers of inactivity among women (Graph 3.6). The gender activity and employment gaps for older people are above 20 pps in Greece, Italy, Malta, Poland and Romania. Activity and employment gaps, along with the gender pay gap, contribute to the formation of the gender pension gap, which stood at 25.4 % in 2023 in the EU .
Graph 3.6: Number (in thousands) of inactive non-retired people in the EU in 2022, by gender, age and reason for inactivity
Source:
Eurostat, Labour Force Survey.
Older people born outside the EU have worse labour market outcomes than native ones in all Member States.
Their unemployment rates are above those of people born in the EU, and their employment rates are below those of natives (i.e. those who were born in the same country where they work; see Graph 3.7). This, however, conceals significant variation across Member States. People aged 55 to 64 born in non-EU countries had employment rates higher than those of natives in Luxembourg, several central and eastern European Member States – Bulgaria, Czechia, Lithuania, Hungary and Slovenia – and some southern European Member States – Italy, Malta and Portugal (Graph 3.7).
Graph 3.7: Employment and unemployment rates of native and foreign-born individuals aged 55 to 64 (2023)
Source:
Eurostat, Labour Force Survey.