Gudrun Biffl and Joe Isaac

The policy challenge of ensuring a healthy workforce in an ageing society: Austria and Australia in comparison

IIRA-14th World Conference, Track 4: Policies of Social Protection, Lima, Peru

11-14 September 2006

21.04.23

How to promote a healthy workforce - a socio-economic challenge of ageing societies

Ageing implies a growing dependence on mature workers

The challenge ahead: to raise the employment rate of mature workers

without jeopardising productivity and economic growth on the one hand and

without compromising the wellbeing of mature persons on the other

The scope for raising the employability of mature workers depends on the health of the work force, but also on the educational attainment level, the types of work available as well as institutional factors

A comparison of Austria and Australia highlights differences and similarities of the various issues and the policy implications

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Demographic ageing and economic burden more pronounced in

Austria

While life expectancy at birth is fairly similar for men and women in Austria and Australia, fertility rates have been consistenly lower in Austria for decades (2004: 1.34 vs 1.75) contributing to a somewhat more rapid ageing process of the population than in Australia.

Thus, the demographic burden today (population 65+/population 20-64: 25% vs 20%) is higher as well as the dynamics in the future.

In addition, the labour force participation rate of mature workers is lower in Austria than in Australia (55-64 year olds: 31.7% vs 53.8%, - 22 percentage points).

Thus, the economic burden of ageing is higher in Austria due to a low activity rate of mature workers and a generous public transfer system, in particular old age pensions, compared to Australia

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Health issues

The relationship between health and economic growth deserves particular attention in the context of an ageing society.

The challenges are to prolong the work ability and actual employment rate of older workers and in so doing to reduce the pressure on public pension funds and public spending on health care.

The percentage of people with self-assessed good or very good health declines with age. This shows up in a rising morbidity rate with age.

The figures for Australia are lower than the Austrian for every age group, declining from about 60 percent for the 25-34 year olds to just under 50 percent and 40 percent respectively for the 45-54 and 55-64 groups.

In spite of that, a higher proportion of mature workers is working in Australia than in Austria.

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Decline of labour force participation with age

The drop-off of activity rates after age 50 is more pronounced in Austria than Australia

for men: 34 percentage points vs 18  for women: 44 percentage points vs 21 

Labour force participation declines with age and educational attainment, particularly in Austria

The main reasons for the 50-64 age group being out of the workforce are

illness/disability, discouragement from further job search (age

discrimination) and insufficient further education and training to raise employability

in Austria, an 'early retirement' culture, which is promoted by an easy accessibility to disability pensions as well as an earnings-related pension system offering a high income replacement rate at an early age

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Disability benefits: how to balance social protection against ensuring the incentive to continue to work

The inflow into disability benefits rises with age, particularly in Austria.

The employment rate of prime age disabled persons is higher in Austria than Australia, a result of the legal requirement of employers to offer a certain proportion of jobs to disabled persons. However, at 50+ the ratio of employment rates of disabled over non-disabled persons rises sharply in Austria

In Australia the ratio of the 55-59 age group compared to the 35-44 age group is somewhat above the OECD average of 3.1, while it is 16 in Austria (2003)

The sharp drop of the employment rate of older disabled workers in Austria may be attributed to a comparatively easy access to disability pensions, i.e., own-occupation basis of assessment (Berufsschutz) rather than general incapacity to work.

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Higher work-related accidents in Australia

Overall, the rate of work-related accidents involving more than three days absence from work is substantially higher for Australia than Austria.

The rate is slightly higher for older than younger persons in Austria while the reverse was true for Australia

In the case of Austria, this may be because older workers are more accident-prone than younger ones and/or because a larger proportion of older workers are concentrated in occupations with higher accident risks. It may also be linked to the lower skill level of older workers and the high proportion in manual jobs

In terms of compensation cases in Australia, there is a substantial increase in the incidence and frequency of cases affecting older workers, especially those over 50. This suggests that older workers have more serious work accidents than younger ones and/or it takes them longer to recuperate

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Work accidents with more than 3 days absence per 1000 employees, 2000

0

10

20

30

40

50

60

70

80

EU-15 B DK D GR SP F IRL I LUX NL AUT P FIN SW UK AUS

15-64 45+

S.: Eurostat — European statistics on accidents at work (ESAW). For Australia ABS -Work related injuries (6324)

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Investment in a healthy workplace raises productivity and

employability of mature workers

Better health can make a distinct difference to the employability and longer participation in work of older workers.

Moreover, prolonged unemployment of older workers also aggravates their health problems.

As with morbidity and mortality rates, the proportion of persons with bad health is highest amongst persons with low educational attainment level and lowest for persons with tertiary education

The relatively higher incidence of workplace injuries affecting older workers, the greater extent of morbidity among older persons of working age and the large proportion on disability pensions in both countries, indicate the importance of dealing with health and safety issues.

They suggest the need to tailor the nature of work to the capacity of older workers as a counter to the ageing of the workforce.

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Exit versus move out of career jobs into secondary jobs

In Australia, a large proportion of mature persons continues to work after losing their ‘career’ jobs; they tend to move into jobs with somewhat lower wages and working conditions, often combining work and welfare benefits.

In contrast, Austrian workers tend to exit the labour market after losing their first career job (tenure more important in Austria than Australia), due to

less labour market flexibility in Austria, partly resulting from seniority wages and the greater strictness of employment protection

compared to Australia - which suggests that when the employment of mature workers can be terminated more easily (the Australian case) there is less resistance from employers to the hiring of older workers

Lower occupational, industrial and regional mobility of workers in Austria

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Australian labour market is more flexible than the

Austrian

Australia has: more part-time work particularly of older

workershigher proportion of casual employees in

total employment, many of them part-time workers. While 15.7 percent of male employment in Australia is casual, and 26.3 percent in the case of females, the proportions are 5 percent and 12 percent respectively in Austria

a larger proportion of older workers are self-employed (39% of mature men vs 29%; 24% of mature women vs 18% in Austria

Austrians are working to a larger extent overtime, particularly older workers

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Employment rate of 50-64 age group unadjusted for hours worked

overestimates Australian true employment rate

Unadjusted Adjusted

Weekly hours of workEmployment Rate Employment Rate

Men Women Men Women

Rate (%) Rank Rate (%) Rank Rate (%) Rank Rate (%)Ran

k Men Women

Australia 68,9 13 49,9 9 62,8 14 35,2 12 36,5 28,2

Austria 54,8 21 35,9 17 54,8 20 31,1 17 40,1 34,7

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Seniority wages raise age-earnings curve

Seniority wages are at least partly responsible for the steep age-earnings curve in Austria. Somewhat more than 60% of wage and salary earners (including civil servants) have seniority wage schedules, strongly linked to union density.

In contrast, age-related ladders are less common in Australia, particularly in the private sector.

Seniority wages reduce the employment retention rate of workers whose productivity at work declines from a certain mature age onwards

The incentive to work of older workers may be negatively affected by low wage rates, unless the opportunity cost of work, i.e., welfare benefits, are significantly lower and subject to means testing. This is the case in Australia, thus making work also in mature age pay, quite in contrast to Austria, where work beyond a certain age does not raise current and retirement income.

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Age-earnings profiles in Austria, Australia and other OECD

countries, 2000

90

110

130

150

170

190

210

230

25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64

Austria France Germany Australia Sweden United-Kingdom

90

110

130

150

170

190

210

230

25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64

Men Women

a) 2001 for AustriaSource: Austria: Microcensus and “Wage Tax Statistics” (MZ Lst Data); France DADS; Germany: German socio-economic panel; Netherlands: Statistics Netherlands; Sweden:Statistics Sweden; United Kingdom: Labour Force Survey.

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The key role of the retirement system in determining the

employment rate of mature workers

The age pension schemes in the two countries differ markedly:

The Australian system aims to alleviate poverty on a flat rate basis and is subject to an income/assets test.

The Austrian system is a contributory scheme and is earnings-related.

The income replacement rate is around 80 percent for men compared to about 32 percent in Australia.

But both have employment disincentives – in Australia, the high effective marginal income tax; in Austria, the offset of pension benefits from any employment income during the period of early retirement.

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Increasing equality promotes good health

The extent of inequality reflected in the social hierarchy, distribution of incomes, the level of education, skill and occupation has an impact on health and longevity.

The last 20 years have seen a widening of differences in income and wealth in Australia and Austria, having a negative impact on the health of persons at the lower end of the education and income scale

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The complexity of the issues calls for a complex set of

measures

This paper is concerned with health issues that arise from the work environment.

These relate to the effects on the health from inadequate attention to health and

safety at the workplace, a harsh and/or stressful work

environment, wide dispersion in pay, protracted unemployment and

employment insecurity, both aggravated by inadequate skills and by age discrimination,

and to disincentives to remain in the workforce.

These issues call for concerted action in a number of ways

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Policy response: Systematic Occupational Health and Safety

Management

Implementation of a comprehensive system of Systematic Occupational Health and Safety Management (SOHSM) which in essence involves:

management planning and allocated responsibilities;

employee consultation; specific programme elements (including the

specification of rules and procedures, training, inspection, incident reporting and investigation, hazard identification and prevention, data analysis and system monitoring and evaluation)

This is a demanding concept, calling for a high level of management commitment to the procedural requirements and acceptance of formal employee participation in OHS committees.

The self-regulation has to be complemented by an active monitoring system.

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Policy response: Human resource management

While labour market flexibility is inherently neither good nor bad, it has to be judged in relation to its effects on employer profitability, workers' security and the health and employment of older workers.

As more mature workers move into a more flexible employment environment, particularly after exiting from their original career jobs, their working conditions have a tendency to deteriorate. This has a negative impact on health, aggravated by the reduction of investment in further education and training.

In order to promote the employability of workers beyond a certain age, enterprises are increasingly turning to age-management, which entails:

the establishment of an age-balanced work force, age-appropriate job design, preventive occupational health measures, implementation of life-long learning and broad-banding of skills, Promotion of intergenerational knowledge transfer and systematic integration of older workers into innovation

processes.

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Policy response: industrial relations

Industrial relations based on unions and collective bargaining operate differently in the two countries.

In Australia, industrial tribunals have played an increasingly smaller part in determining the terms of employment while union power has been reduced considerably and individual bargaining has been encouraged at the expense of collective bargaining, resulting in widening of pay differences with implication for the health of those at the bottom end

In contrast, in Austria the social partnership concept still applies and the social partners rather than government have increasingly established themselves as the national platform on matters of employment of an ageing work force.

Further, at the workplace level, worker participation either directly or via union representatives in the form of works councils, is an important element in ensuring a healthy work environment

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Policy response: public policy

Government together with collective bargaining institutions has to see to it that the tendency for increased inequality of pay is being reversed

In Australia, this requires a return to a more collective bargaining oriented labour market with less restrictions on union power to make collective bargaining meaningful, together with a restoration of the authority of industrial tribunals in determining the safety net in pay and conditions for those unable to bargain effectively.

In Austria, the onus on public policy is more on developing a comprehensive system of continued learning, promoting the employability of mature workers and finding a balance between social protection and the incentive to continue to work up to and possibly beyond the legal retirement age.

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Concluding Observation

The comparison of Austria and Australia indicates that different models of socio-economic organisation, in particular different industrial relations systems, result in different priorities as countries strive to preserve the internal consistency of their national socio-economic institutional framework.

The Australians follow the Anglo-Saxon 'market' model, which is increasingly based on individualisation and union exclusion, while Austria continues to have strong corporatist institutions, which are trusted to serve the interests of society best.

While Australia has tended to be more concerned with creating an economic environment which promotes economic growth, Austria has been more concerned with preserving social cohesion.

The test is whether the corporatist model with its concern for social cohesion will be able to deal effectively with the ageing problem, or whether something like the Anglo-Saxon more market driven model will prove to be a more appropriate approach to the economic and social problems of an ageing society.