Are the elderly driving our economic recovery?

26 July 2013

What is the state of the elderly in our country?

Some claim that pensioners have less disposable income than 11 year old children.

Today the Mail columnist Melanie Phillips argued in the Spectator that the elderly "are being scapegoated for the economic misfortunes of the young". In actual fact, she claims, they are driving the recovery.

Here we attempt to retrace some of the missing sources in Ms Phillips' article.

"When the jobs market peaked in April 2008, a record 690,000 over-65s were working. Now, it's a million. "

This is accurate. In fact the number of over 65s in the job market is at its highest since records began in 1992, and it reached 1 million for the first time, according to the latest ONS Labour Market statistical bulletin. The ONS argues that this is partly through more people staying on in work and also the aging population. In the last 30 years alone, life expectancy has gone up by 5 years for women and by 7 years for men.

Furthermore, the default retirement age (formerly 65) was phased out, so most people can now work for as long as they want to.

Given that the number of over 65s has also grown, what happens if we look at employment rates? It turns out this is also at its highest level since 1992.

"The last estimate shows them making a £40 billion contribution to the economy — but that was 2010, so the current figure will be far greater."

To be clear, this isn't an official estimate. In a 2011 report on the socio-economic contribution of elder people, the age charity Royal Voluntary Service (formerly known as WRVS) claimed that over 65s made a net contribution of £40 billion to the UK economy through taxes, spending power, provision of social care, volunteering and other contributions. The research was carried out by the research firm SQW on behalf on the charity.

The charity also adds that "in spite of future costs around providing pensions, welfare and health services to a larger and longer living population of older people in the UK, over 65s' net economic contribution will actually grow by £77 billion by 2030."

How did they calculate this?

In their report, the charity claimed that the spending power of over 65s was £76 billion.

The authors of the report quote Age Uk as an inspiration for this figure, though the latter took into account "the proportion of large spending that accrues to government in the form of indirect taxation (such as VAT and Excise duties)", whereas SQW incorporated these estimates elsewhere in their model.

The authors also factored in the provision of social care by older people - estimated to amount to £34 billion - and the "hidden value" of older people's volunteering, equivalent to £10 billion.


In this appendix, and in the literature review, the authors of the report explain the model employed to estimate the value of the "grey pound".

Other unofficial estimates on older people's contribution to the economy have been carried out by UCL in 2012 and, in the same vein, the Centre for Economics and Business Research, among others.

"Yet since the crash, far fewer of the working-aged (i.e. between 16 and 65) are in jobs."

This depends on what period of time Ms Phillips is refering to. Between November 2007 and January 2008 28.8 million individuals (72.9% of the working population) were in work. According to the latest ONS estimates, 28.7 million individuals aged 16 to 64 are in work, which translates into 71.4% of the working age population.

This, as we can see, isn't the lowest number since the crisis began.

"When the Prime Minister boasts about record numbers in work (which he does, regularly) he has pensioners to thank. If it weren't for them, there would be some 160,000 fewer people in work."

It is true that the Prime Minister has talked about the record numbers in employment, and this is something that we have recently looked into.

We contacted Melanie Phillips to ask her how she calculated the 160,000 figure and are waiting to hear back.

In the meantime, we have looked at how much the 65+ employment level has grown since the last election, assuming this was the method employed by Ms. Phillips. However, we don't know for sure which data points she was comparing. In the April-June 2010 period- (which covers the May election period - 823,000 over 65s were in work. The latest estimates for March- May 2013 show 992,000 over 65s in work. This is a rise of 169,000.

Commenting on these figures, an ONS spokesperson has told us that:

"The labour market isn't a zero sum game... there is little evidence to suggest the labour market would be worse without the rise in older workers in employment nor that they displace younger workers by remaining in employment longer. Either argument would be an over-simplification."

"Today, 20 per cent of British youth are unemployed — but the jobs market still absorbs some 600 immigrants a day and more oldies than ever."

The first figure is close enough. Currently 18.7% of individuals aged 18-24 are unemployed.

The second figure most likely derives from the May 2013 ONS Labour Market statistical bulletin which detailed the employment levels and rates by country of birth and nationality. In the last year the number of foreign nationals in employment went up by 225,000 or 616 per day.

Here we have tried to source some of the many claims from the original Spectator article. We haven't tried to assess Melanie Phillips' argument, although the ONS did comment that "there is little evidence to suggest the labour market would be worse without the rise in older workers in employment." All of these claims but one can be traced to official statistics. As we pointed out earlier, the estimates on older people's overall contribution to the economy were one private assessment commissioned by an age charity.


Flickr image courtesy of Tom Magliery

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