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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
There is a market for sweeping economic analyses, generally predicting that the sky is about to fall on our heads. Thomas Malthus arguably started it with his 18th-century prediction that population growth would always run ahead of food production. He was unlucky in having his conjecture picked over for centuries. Normally, economists get away with it.
Before reading the IMF’s recent long-term prediction of global labour markets, therefore, I felt the need to go back a quarter of a century to see what similar organisations were forecasting. The OECD’s 2000 report on “reforms for an ageing society” is representative of the thinking at the time and its logic remains sound.
Baby boomers in middle age would start to retire in the 2000s, it predicted, ensuring that total employment as a proportion of the population would start falling from 2010. This drop would be mitigated by more women working, but overall the effective working life of someone in an advanced economy would hover around 34 to 35 years.
“The data suggests retirement and active ageing are not yet going hand-in-hand,” the OECD concluded, adding, patronisingly, that evidence showed older people simply spent time on “more television-watching and sleep”.
What nonsense.
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Even though the world has had its fair share of economic crises since the millennium, the proportion of the population in employment is showing signs of rising rather than falling. An end to shorter male working lives and much higher employment rates among women have also ensured that effective working lives have risen past 38 years, far more than expected. Almost everything that the OECD described as a challenge has improved significantly.
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It is not often that columnists write about what has gone right, so it is worth examining why jobs and lifetime employment have done so much better than previously thought.
The OECD might like to claim that these changes were caused by its own warnings, prompting governments to reform labour markets and retirement systems. It is a comforting thought for those working in international organisations, but highly unlikely.
In a telling recent study, economists at Goldman Sachs noted there was precious little correlation between longer working lives and changes in official retirement ages in different countries. The trend towards longer working lives has taken place almost regardless of whether governments have undertaken targeted policy reform.
Instead, both Goldman Sachs and the IMF account for most longer working lives by a list of good news: increased longevity; older workers enjoying jobs in which experience allows more autonomy; and enlightened employers valuing this experience. The world of work may be rather better than we feared.
Of course, this positive story cannot cover every employee in every workplace. The lower paid often work longer — or retire but then return to the workforce — to have even a basic living standard in retirement. This has been mitigated by the fall in male manual labour, so there are no longer large numbers of men physically unable to do their jobs, and that should persist as long as Donald Trump doesn’t get his way with a return to manufacturing roles.
The IMF showed increased cognitive faculties of older people over the last 25 years have been the biggest driver of the ability to work longer. As far as our brains are concerned, 70 really is the new 50, it concluded, so these trends can continue.
Further efforts to make jobs work for older people can mitigate three-quarters of the projected slowdown in global growth due to ageing in the next 25 years, the IMF predicted. I know this is another bold forecast from economists. But the positivity is new and striking.
Healthy ageing is a huge prize for our societies. We must grab it.