Treasure our golden oldies

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Treasure our golden oldies

By Maurice Peston, The Observer

January 11, 2004

The House of Lords Economic Affairs Committee reports this weekend on our ageing population. Chairman Maurice Peston explains exclusively to The Observer why society must learn to accommodate its elderly citizens.

One of the more extraordinary aspects of the negativism that permeates our society is the fact that people living longer, healthier and more active lives is portrayed as a crisis.

This is even more remarkable in that these developments have been going on for a long time, but the doom-mongers have ignored how well we have coped with and benefited from them.

The House of Lords' Economic Affairs Committee decided to examine the consequences - chiefly economic - of an ageing population. Our main conclusion is straightforward, and pretty obvious: there is no crisis unless we make one for ourselves.

This is not to say that the Government and the private sector cannot and will not make a mess of things. But the economics involved is not difficult, and there is no mystery about what needs to be done.

First, if people experience an increase in their healthy lifespan, it would seem likely that they will wish to take some of this as a longer working life, and some as either a longer retirement or a later entry into the labour force.
This is so even in the context of a standard result in economics; namely that while rising average incomes might act as an incentive for some people to work more, others would prefer to take the benefit in terms of even more leisure.

Second, typical economics states that pension entitlements are part of a lifetime remuneration package. In general, no matter what the institutional formalities, the average worker pays for his or her pension. Firms may gain some temporary advantage by changing from one type of pension scheme to another. But, in competitive markets, to offer less by way of pension entitlements will lead to the need to offer more by way of salary.

It is worth mentioning here one of the many paradoxes that appeared in our evidence. We were told that, despite what economists believe, both workers and employers are irrational when it comes to pensions. The former undervalue their pensions, while still apparently demanding them. The latter underestimate their pension liabilities, and seem to have operated for years on the assumption that nobody will get old.

In fact, much of the population lives under the assumption that old age will never happen. Worse still, too many of us, until we are close to retirement, want our tax liability limited even if that means accepting severe limitation of the living standards of existing pensioners dependent on the state pension.

But we then campaign for more generous pensions when we ourselves get older. It is hard not to be cynical when one notes that those who now advocate linking of pensions to a wage index voted for an earlier government that abolished that link to cut taxes.

We have been convinced that the introduction of a decent non-means-tested citizenship pension would provide a basis for the fundamental change that is required. Targeting and means-testing may appeal to a myopic Treasury, unwilling to take a lead in the modern world, but it really is an obsolete response to the retirement problem.
With a guaranteed protection against poverty, it would then be reasonable to move to a society in which people make their own choices for what they think they want for additional retirement income.

Of course, they will then have to accept the consequences of their own actions. Too many policy makers, union leaders and industrialists are living in the past. They do not recognise how successful our economy has been.

They think workers cannot be trusted to decide what is right for themselves, and firms, in particular, are locked into the out-of-date mindset of compulsory retirement ages, rather than judging staff on their merits.
A related recommendation is that if we are to have more flexibility and move to a society in which older workers stay in the labour market if they wish to - which is something the Government says it wants - the state pension age should be raised. In addition, there should be a regular review of that age, since life expectancy will go on rising.

Certainly, the Government should not distort the system by making it harder for people to participate in productive economic activity.
On age discrimination more generally, our evidence shows that it is still rife. It occurs in employment in both private and public sectors. There is also serious ageism in public appointments.

No one seems willing to own up to this. It has even been suggested to us that officials are running their own policies, involving no appointments of people in their late sixties, and no reappointments of people older than that. Needless to say, apart from its inequity such a policy is grossly inefficient. It has to be brought to a stop. After all, such an approach would mean that most members of my own committee should never have been appointed, let alone allowed to stay on!

Our ages range from 50 to 95, and I find no correlation between age and performance. Furthermore, Ministers should be obliged to state for all legislation that it has been scrutinised for ageism and given a clean bill of health.

There is one aspect of this which relates to the row on tuition fees. There is an age limit on the availability of student loans. We assume the reason for this is the growing emphasis on higher education as a contributor to economic performance, rather than something valuable in its own right.
Thus, older entrants are considered unlikely to be in the labour force for long enough or to earn enough extra to repay their loans. The tuition fees fiasco will aggravate the bias here, and make it even more difficult for late starters to go to university.

Needless to say, both with regard to public appointments and to higher education, there is an anti-women side to all this. Any policy which rules people out on account of being too old must hurt women more than men.
That is not solely because women live longer. It is also because many of them start in the economy later, and they are older when their suitability for appointments will be recognised. This is quite unacceptable in a modern society.

The government guru

Lord Peston of Mile End, chairman of the House of Lords Economics Affairs Committee, was born in 1931 and educated at Hackney Downs School, the London School of Economics and Princeton University. He was an economic adviser to various government departments and special adviser to Secretaries of State during the Sixties and Seventies and is Emeritus Professor of Economics at Queen Mary College, University of London.