Supporting older workers in economic downturns: The role of labour market policies

Economic fluctuations have profound effects on older workers’ employment prospects. As economies face downturns, older workers often find themselves at a crossroads: some are pushed out of the labour market due to reduced job opportunities, while others delay retirement to recover lost savings. Understanding how labour market policies can mitigate these challenges is crucial for ensuring economic security and stability among workers aged 50 to 64.

Unsplash / Jose Antonio Gallego Vazquez

Key Findings from the Study

At the Mapineq project report “Regional economic downturns, older workers’ employment outcomes, and the moderating role of labor market institutions”, Thomas Biegert, Kadri Täht and Marge Unt (Tallin University) explored the role of labour market policies on older workers prospects. Their analysis is based on data from the European Union Labour Force Survey (EULFS) for 24 countries (1992–2021). 

Results indicate that rising regional unemployment leads to increased non-employment among older workers. However, the long-term impact appears to be limited, as employment rates generally recover within five years. The study also highlights that older workers may take on precarious jobs – such as part-time or temporary contracts – to compensate for income losses.

Gender differences are evident: men are more affected by economic downturns in the short term, while the effects on women vary significantly by age. Specifically, women in their early 50s are particularly vulnerable, experiencing higher rates of non-employment. Interestingly, active labour market policies (ALMPs) seem to offer benefits primarily to older women, improving their chances of remaining in the workforce.

Policy Implications

  1. Strengthening Employment Protection with Flexibility
    While strict employment protection legislation (EPL) can shield older workers from immediate job losses, it may unintentionally discourage rehiring, particularly for women. Policymakers should strike a balance between protection and adaptability by implementing gradual retirement schemes or incentivising businesses to retain older employees through subsidies and tax breaks.
  2. Expanding Targeted Active Labour Market Policies (ALMPs)
    Greater investment in ALMPs – such as retraining programmes, career counselling, and job-matching initiatives – can significantly support older workers. Gender-sensitive approaches should be prioritised to ensure that both men and women benefit from these interventions.
  3. Preventing the Rise of Precarious Work
    To curb the increase in insecure employment among older workers, governments should encourage employers to offer stable and flexible work arrangements. Strengthening social security measures for part-time and temporary workers can provide financial stability while allowing older employees to remain active in the labour force.
  4. Country-Specific Approaches
    The study underscores that labour market outcomes vary significantly across countries. Southern European countries, for instance, exhibit higher non-employment rates among older workers compared to Scandinavia. Tailoring policies to national labour market conditions and demographic structures is essential to maximising effectiveness.

A Call to Action

Policymakers have the opportunity to ensure that older workers remain active contributors to the economy rather than being disproportionately affected by economic downturns. By implementing well-designed labour market policies, we can foster an inclusive workforce that benefits from the experience and productivity of older employees. Investing in lifelong learning, re-employment support, and flexible yet stable job opportunities will be key to navigating the evolving labour landscape.