PwC: Extending working lives could increase OECD GDP by $2 trillion. The UK remains mid-table
OECD countries could add around $2 trillion to their total gross domestic product (GDP) in the long run if the employment rate for workers aged over 55 was equal to best-performing EU country Sweden, according to PwC economists.
The PwC Golden Age Index is a weighted average of indicators – including employment, earnings and training – that reflect the labour market impact of workers aged over 55 in 34 OECD countries.
The potential long-term GDP boost varies significantly across countries, from around 1% in Korea and 2% in Japan to around 16% in Greece. Other countries lagging behind in the index could also experience large gains, such as Belgium (13%) and Slovenia (12%). Given its size, the US has the largest potential absolute gain of around $0.5 trillion (around 3% of GDP).
“Between 2015 and 2035, the number of people aged 55 and above in high-income (OECD) countries will grow by almost 50% to around 538 million. It’s good news that we are living longer, but rapid population ageing is putting significant financial pressure on healthcare and pension systems. To offset these higher costs, we think older workers should be encouraged and enabled to remain working for longer. This would increase GDP, consumer spending power and tax revenues”, stated Ionuţ Simion, Country Managing Partner, PwC Romania.
The Nordic countries once again perform strongly on the index, with Iceland topping the list and Sweden in fourth and Norway in sixth place. Denmark (13th) and Finland (14th) don’t perform quite as well as their peers, but still make it into the top half of the OECD rankings.
Israel has climbed one place to third since last year, Korea and Japan have each climbed two places to seventh and eighth respectively, Australia are up four places to 12th, and Germany up two places to 15th.
The PwC report focuses in some detail on the trends in the UK, which also offers some lessons for other countries. While good progress has been made over time in the UK in the employment rate of older people, much remains to be done – with a potential £80bn boost to UK GDP if it can match the Swedish performance.
For governments across the OECD, the priorities include:
- reforming pensions systems and providing other financial incentives to encourage later retirement;
- support training/retraining of older workers, particularly in response to technological changes such as increased automation; and
- introducing measures to combat age discrimination in all aspects of employment.
“The clear positive correlation between country scores on our Young Workers and Golden Age Indices suggests that the employment of older workers does not crowd out younger workers. And our research indicates that the flexible working policies offered by the best-performing countries in the Golden Age Index also incentivise women to remain in work for longer”, pointed out Ionuţ Simion.