Denmark should act quickly to make it easier for older workers to remain in the workforce longer, according to a new OECD report. Unless action is taken, Denmark will face a shrinking workforce, a slowdown in economic growth and worsening public finances.
Part of the OECD series on Ageing and Employment Policies, the OECD report on Denmark outlines the main barriers to employment facing older workers, an assessment of the adequacy and effectiveness of existing measures to overcome these barriers and policy recommendations for further action by the Danish government, social partners and older workers themselves.
Recommendations for reform
The OECD’s report acknowledges that in some respects Denmark is better placed to meet the challenges of population ageing than many other OECD countries. First, population ageing is occurring less rapidly than in many other OECD ;countries. Second, labour market participation rates of older women and men are already among the highest in the OECD ;area. Third, a number of disincentives to continue working as well as the employability of older workers have already been addressed.
Nevertheless, the OECD notes that many older Danes continue to withdraw from the labour market well before reaching the official retirement age of 65. To remove the barriers that many older workers face to carry on working, the OECD calls on the Danish authorities to adopt a co?ordinated and comprehensive package of measures. These include:
- Abolish the voluntary early retirement pension (VERP). Despite past reforms, the VERP remains a major disincentive to working at an older age and should be abolished.
- Avoid unemployment benefits being used as a pathway to early retirement. The older unemployed should be granted benefits for the same maximum period of four year as the younger unemployed. This would mean reducing the maximum period from nine years currently for the age group 51-59 but extending the limit from two-and-a-half years currently for the age group 60 and over.
- Re-enforce mutual obligations for the 58- ;to 60-year-olds. Unemployed people aged ;58 ;to 60 ;may be excluded from various obligations to actively seek work or participate in training if they satisfy the conditions for entering the VERP at the age of ;60. As a result, unemployment rates are two to three ;times higher in this age group compared with the national average. This group should be subject to the same mutual obligations as other age groups in exchange for more help to find them jobs.
- Allow for well-designed flexible work-retirement pathways through the public pension system. It is currently not possible to obtain a reduced public pension before the official retirement age of ;65. If the VERP is phased out, there may be pressures for allowing more flexible retirement options through the public pension system. This can be done by making it possible to apply for actuarially reduced benefits before age ;65 and to combine pension benefits with work income so that there is a financial gain from gradual retirement.
- Promote an age-friendly environment in firms. In particular, mandatory retirement clauses available in collective agreements need to be abolished and awareness among employers of age?discrimination legislation raised. Also, there is a need for expanding training opportunities for older and low?skilled workers, through a life course perspective.
