Europe must adapt to its ageing workforce

As the continent's birth rates decline and its population ages, policymakers face the urgent task of retaining experienced workers and adapting workplaces to meet the needs of an older demographic.

Europe is facing a significant demographic transformation. Populations are ageing, with natural decline offset only partially by net migration. This shift is creating pressure on labour markets, threatening shortages and straining pension systems as the baby boom generation retires. Recognising this, European policymakers have increasingly focused over the past two decades on encouraging longer working lives. This aligns with EU principles advocating for adaptable working environments and intergenerational fairness. Measures have included changes to pension systems, such as raising statutory retirement ages across most Member States and limiting early pension access. Raising retirement ages has often proved a politically controversial measure.

However, extending working life is more complex than legal changes alone. It requires a comprehensive approach addressing attitudes, workplace practices, and job quality for older individuals. A recent Eurofound analysis underscores this complexity, examining employment trends, job quality disparities, and variations among older workers. The core objective is to identify effective strategies to keep older people engaged, exploring enabling and motivating factors and the role that stakeholders can play in fostering age-appropriate environments.

Significant progress has been made. The number of workers aged 55 or above active in the labour market has steadily increased, from 24 million in 2010 to above 40 million by 2024. The employment rate for this group rose by more than 20 percentage points between 2010 and 2024, driven by pension reforms, increased life expectancy, and better health.

Despite this, challenges persist. Older workers face a higher risk of long-term unemployment, with the rate 13.5 percentage points higher than for mid-career workers. Once unemployed, they take longer to find new positions, highlighting potential labour market rigidities and biases. The share of older workers, who stayed with the same employer, increased from 44% in 2010 to 57% in 2022, reflecting pension reforms and tighter labour markets. Nevertheless, significant gender disparities in retention remain, particularly in some eastern EU Member States and Austria.

Addressing job quality and workplace barriers

Analysis suggests that, on average, job quality indicators can appear better for older employees. Part of the reason for this may be the 'healthy worker effect', where those in poorer quality jobs may exit the labour market earlier. However, aggregate figures mask significant inequalities. Examining job quality profiles of older workers reveals that while one-third are in good-quality 'empowered jobs', a concerning one-fifth are in 'high-risk' roles associated with low mental well-being, financial insecurity, and poor work-life balance.

Poor health is a significant risk factor for early labour market exit, with ill health increasing the likelihood of leaving through disability pension, unemployment, or early retirement. Long-standing gender inequalities also contribute to unfavourable conditions, including wage gaps, job insecurity, and mental health challenges, whose detrimental effects can compound throughout women's careers, impacting older women's employment.

Motivation to remain employed differs from motivation at work. Older workers who are highly motivated in their job may not be motivated to continue until or beyond pension age. This may be influenced by factors like self-determination, attitudes towards early retirement, and cultural preferences. Pervasive ageism and discrimination also remain barriers. Despite legislation, many older workers face unfair treatment in recruitment, promotion, and dismissal.

Beyond the workplace, the availability of flexible working arrangements, adequate care facilities and social support is crucial. Many workers, particularly women, exit prematurely to care for family members, especially where working arrangements are inflexible and care infrastructure is insufficient. Expanding access to quality healthcare and care services is therefore a critical labour market policy.

Policy responses and future directions

Recognising these challenges, Member States are implementing measures to incentivise extended working lives, such as providing additional pension benefits for working beyond statutory retirement age. There is also a growing trend towards flexible retirement options, including phased retirement schemes, which help retain workers who might otherwise leave entirely.

Sustainable workplace practices are key for retaining older employees. Efforts must span digital skills training, embracing flexible work like hybrid and telework, adapting human resources practices to be age-inclusive, and ensuring healthy workplaces through robust occupational safety and health practices. Collective agreements play a role, often focusing on retention schemes like reduced working time and phased retirement, though addressing demographic change is not yet universally a primary concern.

Moving forward, policy must be multifaceted and rigorously implemented. Public incentive systems should reward later retirement and engagement. While discouraging early exit, policymakers must consider the needs of workers in arduous professions or those with long careers. Prioritising support to prevent long-term unemployment for older workers is essential, including investing in retraining and encouraging redeployment within organisations.

Increasing access to and improving the quality of healthcare and care facilities is non-negotiable, particularly where informal caregiving drives early exit. Crucially, managing ageism in the workplace requires proactive effort from organisations to create age-inclusive cultures and tackle discrimination. Finally, integrating the concerns and needs of older workers into collective bargaining and social dialogue is vital. Joint action on issues like demographic funds[1], flexible work, age-appropriate training, and retirement transitions can lead to more equitable outcomes for Europe's ageing workforce. The challenge is clear; the path forward requires concerted effort across society.

Image © Iván Moreno/Adobe Stock

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