The Education and Employment Committee has agreed to the following Report:—

  AGE DISCRIMINATION IN EMPLOYMENT

Introduction

The extent and nature of age discrimination in the UK

1. Discrimination on the grounds of age is a complicated issue. It differs from other forms of discrimination in two respects: it can affect anyone and, in the UK, there is no legislative prohibition against it, as there is for discrimination on the grounds of race, gender or disability. It is also more difficult to identify than discrimination on other grounds. The definition of older and younger workers varies depending on the institution or industry in question—what is considered to be old in one sector may be considered young in another.[1]

2. It is difficult to determine the extent of age discrimination in employment in the UK. Research studies on the topic have "provided inconsistent figures on the proportion of older people being discriminated against in employment".[2] As it is difficult to identify a control group for comparative studies, most research projects rely on surveys to generate key data. Instances of age discrimination, however, may be under-reported in some surveys—either because employers are unwilling to report unfair treatment or, more likely, because discrimination may take place unwittingly. Employees may not be aware that they have been unfairly discriminated against or may be unwilling to report an instance of age discrimination unless they have solid proof that it has taken place.

3. There are some 18.9 million people aged 50 and over in the UK. They represent 40 per cent of the adult population. The statistics that are available suggest that older workers' experience of employment is significantly different from that of their younger counterparts. There are 5.71 million people aged between 50 and the state pension age in employment: the employment rate for men between the ages of 50 and 64 is 68.7 per cent and for women between the ages of 50 and 59 is 63.5 per cent.[3] This compares to an employment rate for all people of working age of 74.6 per cent.[4] Older workers are more likely to be in part-time employment.[5] The 2000 New Earnings Survey reported that the average hourly wage for people aged 50 and over is lower than that for those under the age of 50.[6] Older people in general have fewer qualifications than their younger counterparts and are twice as likely to have no formal qualifications at all. Older workers are more likely to experience long periods of unemployment. The proportion of older unemployed workers who have been out of work for a year or more, or for two years or more, is well above the equivalent figure for the population of working age as a whole. Long-term unemployment (two years or more) among older workers has been falling relatively quickly (18.6 per cent between June 1999 and June 2000) but not as quickly as the equivalent fall in overall long-term employment, which fell by 22.2 per cent over the same period.[7] These figures, however, give no indication of the cause of that difference. It may be due to discrimination on the grounds of age or to other factors.[8] Both older and younger people can be disadvantaged in the labour market. The lack of robust statistical analysis on the extent of that disadvantage does not undermine the thrust of the evidence we have seen which leads us to infer that age discrimination does occur in employment.

4. The Sub-committee noted a sharp contrast in the completeness and usefulness between the figures on detachment from the labour market and the statistics relating to age discrimination (see paragraph 17). The Carnegie Trust told the Sub-committee that there was a need for permanent research arrangements to enable rigorous assessments of the prevalence of ageism and to bring together much of the valuable, but piecemeal, research that already takes place.[9] We agree. Only if there is robust information on the prevalence of age discrimination can effective policies to combat it be designed and properly evaluated. The Government should commission research accordingly.

5. Older workers are not the only targets for age discrimination. For example, in a 1997 survey, Towards a Balanced Workforce, undertaken by the Employers' Forum on Age and Austin Knight, a "quarter of all respondents felt that they had experienced ageism in their career —over half because they were too young".[10]

Conduct of the inquiry

6. The Employment Sub-committee announced the terms of reference for its inquiry in October 2000.[11] It took oral evidence from Ms Margaret Hodge MBE MP, Parliamentary Under-Secretary of State for Employment and Equal Opportunities, and Mr Michael Richardson, Director of Employment Policy, Department for Education and Employment. It also benefited from an informal seminar held with representatives of the Carnegie Trust, the Third Age Employment Network, the Chartered Institute for Personnel and Development, the Trades' Union Congress and Professor Stephen Fothergill of the Centre for Regional Economic and Social Research at Sheffield Hallam University. In addition 23 written memoranda were received. We are grateful to all those who contributed to the Sub-committee's inquiry. We would also like to record our gratitude to Mr Dave Simmonds, Director of the Centre for Social Inclusion, the Sub-committee's specialist adviser for this inquiry.

7. The Sub-committee's inquiry was triggered by a desire to evaluate the impact of the Government's voluntary Code of Practice on Age Diversity in the Employment which was introduced in 1999. During the Sub-committee's inquiry, the European Union (EU) adopted a Directive on Equal Treatment in employment and occupation[12] which, among other things, obliges Member States to enact legislation against both direct and indirect discrimination in employment and vocational training on the grounds of age by 2006. The Sub-committee therefore also considered how best this Directive might be taken forward in the UK and how it would impact on the future of the Code of Practice. When the Minister appeared before the Sub-committee, she announced that the Government would be consulting widely on the implementation of the EU Directive. The results of that consultation will merit further Parliamentary consideration.

The Code of Practice

8. The Government is "committed to tackling discrimination and disadvantage" in the workplace.[13] It believes that "age discrimination is both unfair and wasteful, and makes no economic sense. Overall the economic cost is high ... the waste in human terms is equally high".[14]

9. The Government's Code of Practice was introduced in 1999 following a year-long consultation on the issues surrounding age discrimination and how best to tackle it. The Code was developed in co-operation with a range of relevant organisations including the Confederation of British Industry (CBI), the Employers' Forum on Age (EFA) and the Recruitment and Employment Confederation.[15] It is intended to help employers to improve personnel management in their organisations in six aspects of the employment cycle: recruitment, selection, promotion, training and development, redundancy and retirement. The Code is accompanied by guidance and good practice case studies. The Code is non-statutory and it is up to employers to decide to what extent they will comply with its provisions.

10. The Code of Practice, and the Government's strategy for encouraging employers to comply with it,[16] rely heavily on setting out the business case in favour of age diversity in the workplace. The Code states that:

"employers need people with skills and abilities which add value to their organisation. In an increasingly competitive marketplace for products and services, employees are one of an organisation's most valuable resources. A growing number of employers have already found that combining effective business policies with effective people policies gives them a competitive edge ... Employers who replace unnecessary age criteria with objective, job-related ones will: have a wider choice of applicants from which to recruit to get the best person for the job; manage resources more effectively by minimising staff turnover; be better able to build a more flexible, multi-skilled workforce; have access to a wider range of experience and expertise to provide business solutions that meet market needs; develop a better motivated workforce which feels valued and is willing to contribute to business success; reduce costs through increased productivity and reduced levels of absenteeism".[17]

11. The Sub-committee asked the Minister why, if the business case in favour of age diversity in the workplace was compelling, employers had failed to recognise it and why the Government needed to intervene. She said that employers were beginning to recognise the benefits of age diversity but that Government action was required to increase the rate of change.[18]

12. The Minister told the Sub-committee that the Government's desire to increase the rate at which employers are changing their practices on age discrimination was fuelled by two factors: first, its commitment to combatting discrimination in the labour market and, secondly, by an awareness of demographic factors that are changing the age profile of the work force. She told the Sub-committee that "the demographic changes that will occur within the labour market mean that the economy will not survive without using the talents and experience of older workers. The stark statistic is that at the moment, something like 35 per cent of our workforce is over 45. In 10 years time, that will be 40 per cent".[19]

Evaluating the Code of Practice

13. To measure the effectiveness of the Code of Practice, the Department for Education and Employment (DfEE) commissioned a programme of research. The research was designed to take place in three waves. The first, undertaken six months before the Code was launched, provided a baseline against which change could be measured. The second wave was undertaken six months after the Code was published. The preliminary findings of the second wave were published in June 2000.[20] The third and final wave took place in September 2000. The results of the third wave are expected to be published during the summer of 2001.[21]

14. The Government told the Sub-committee that "the wave 2 survey indicates some promising signs of change with more companies orientating their policies towards age diversity".[22] It cited the following examples in support of its analysis:

  (i)  the proportion of companies using age discrimination as a selection criterion fell by almost 50 per cent in the six months following the introduction of the Code;

  (ii)  the proportion of companies taking age into consideration when selecting candidates for promotion decreased from 18 per cent to 15 per cent between the first and second waves of research; and

  (iii)  the first wave of research found that 72 per cent of companies offered training and development opportunities to all staff. The second wave of research found that this figure had increased to 81 per cent.[23]

15. Other interpretations of the interim findings have not been so positive. During the seminar on age discrimination, both Mr Richard Worsley of the Carnegie Trust and Ms Dianah Worman of the Chartered Institute for Personnel and Development, suggested that the results to date had been disappointing, although they accepted that it was too early to draw firm conclusions. Their position is supported by independent research undertaken by the Employers' Forum on Age (EFA). The EFA said its "research reveals disappointing results on the Code's impact".[24] Its research shows that:

  (i)  only 25 per cent of employers knew of the Code;


  (ii)  of these, only 4 per cent claimed to be fully aware of the Code;


  (iii)  63 per cent of employers had no plans to change the way in which their businesses operated; and


  (iv)  among those who knew of the Code, there was widespread misunderstanding of its purpose: 50 per cent thought that it concerned age limits in advertisements; 5 per cent thought that it was about 'fast-tracking' younger workers. 30 per cent had no knowledge of its contents.

16. Other survey findings also suggest that the Code has yet to have a significant impact on employment policy. The CBI's Employment Trends 2000 survey revealed that, while 50 per cent of employers surveyed knew about the Code, only 9 per cent were using it.[25] Based on these results, the EFA argued that the Code is too focussed on older workers, has been insufficiently promoted and has failed to communicate the business case for age diversity. The Government's presentation of the business case is persuasive but has not been convincing enough to stimulate change on the part of employers. In view of the tight labour market conditions and severe skills shortages in some sectors, the Government has a unique opportunity to advance more powerfully the business case in favour of age diversity. We recommend that it does so with urgency.

17. One of the reasons why there is room for dispute over the effectiveness of the Code is the lack of robust data on the prevalence of age discrimination in employment in the first place. Professor Stephen Fothergill presented the Sub-committee with a thorough statistical analysis of the detachment of older male workers from the workforce and, on the basis of these figures, was able to argue convincingly that their detachment was at least as much a result of the loss of traditional job opportunities in former industrial areas as of age discrimination.[26]

18. There has been a marked increase in the number of economically inactive men over the last 25 years (see table) and this increase has not been uniform across the country. In the South East, 86 per cent of men between the ages of 16 and 64 are in employment. The equivalent figures for London, the North East and Wales are 77 per cent, 73 per cent and 74 per cent respectively.[27] Among those who are economically inactive, there has also been an increase in those describing themselves as long-term sick—from around half a million in 1981 to just less than two million currently. Professor Fothergill told the Sub-committee this upward trend had in fact levelled off in respect of men, but the number of women described as long-term sick was still increasing.[28] The number of those out of the work force claiming sickness benefit of one form or another is twice that of those claiming an unemployment benefit. Half of those claiming sickness benefit are over the age of 55. In some regions, particularly industrial areas, as many as 20 per cent of men of working age claim sickness benefit.[29] The figure for the Home Counties is much lower.

Source: Seminar on Age Discrimination, see Annex 1.

19. The Minister told the Sub-committee that "About half of the claimants on incapacity benefit are over 50 and about half of the over 50s are on incapacity benefit. There is a strong correlation but it is difficult to find an explanation for that ... People who are out of work tend to become iller. They move on to incapacity benefit".[30] There are some 2.6 million people who are locked into incapacity benefit. A million of those want to work and, out of that million, about 400,000 are ready to work.[31] We welcome the Minister's recognition of the roles of New Deal for the over Fifties and New Deal for the Disabled in tackling inequality in employment. We have, in a previous Report, emphasised the scope for better co-ordination between supply-side measures, such as New Deal, and demand-side measures which effect employers' behaviour.[32] Similarly, if age diversity in employment is to be achieved, there should be synergy between regeneration initiatives, employment assistance programmes and anti-discrimination measures. Tackling age discrimination and the increase in the number of those claiming incapacity benefits requires a co-ordinated approach which recognises the differences in competitiveness and gross domestic product per head between regions. We recommend that the Regional Development Agencies should include achieving age diversity as a priority within the regional employment action plans which it has been tasked to develop.[33] Regional Development Agencies however cannot be expected to provide the solution to a nationwide problem. The Government should address the multiple barriers to older people entering or re-entering employment. We recommend that the Working Age Agency should bring forward proposals, within a fixed time frame, to reduce those barriers.

The EU Directive on Equal Treatment

20. On 17 October 2000, EU Member States unanimously agreed a Directive on Equal Treatment. This Directive requires all Member States to have legislation on "the principle of equal treatment" in effect by December 2006. In practice this means that the Government has no choice but to introduce legislation to prohibit direct and indirect age discrimination in employment. The Directive covers both public and private sectors. It does not apply to benefits or welfare payments. Member States may choose to exclude service in the armed forces and membership of pension schemes from the provisions of the implementing legislation. (The Equal Treatment Directive also requires Member States to have legislation in place against discrimination on the grounds of gender race, sexual orientation, religion and disability. Where further legislation is required, it must be in place by 2004 except in the case of disability on which legislation must be in place by 2006.)

21. The Sub-committee asked the Minister why the Government had accepted the introduction of legislation against age discrimination in employment when it had previously favoured a voluntary approach. She said that the Government had always accepted that "that if the code was not sufficiently effective, then we would go further".[34] We welcome the Government's recognition that the Code of Practice on Age Diversity in Employment has not been sufficiently effective in combatting age discrimination and that further measures are necessary.

22. There are a number of advantages to a statutory approach, not least as a signal from Parliament and the Government indicating the importance attached to the issue, as the Chartered Institute for Personnel Development pointed out.[35] The Institute also told the Sub-committee that legislation was unlikely to provide a complete solution: the UK has had legislation against discrimination on the grounds of gender and race since the 1970s, yet research shows that 50 per cent of small and medium-sized enterprises are not aware of it.[36] The Minister accepted that "legislation on its own will not achieve all the benefits which we aspire to achieve" and emphasised the need for "a wider programme of intervention".[37]

23. The way in which the legislation will be implemented has not been decided. The Government has established a working group to help develop the legislation in terms that will promote best practice and retain business competitiveness.[38] Some witnesses suggested that the best way forward would be to create a single Commission, bringing together the UK's three existing anti-discrimination Commissions with a remit covering age discrimination as well.[39] The Minister was unconvinced. She pointed out, first, that there was nothing in the EU Directive which required the creation of a Commission and that, even if a Commission were to be created, merging it with existing bodies could have disadvantages.[40] In those countries which have opted for a single Commission, such as the United States of America and Australia, the focus of activity tended to be on ligation following alleged incidences of discrimination, rather than on promoting a cultural change to prevent unfair discrimination taking place. There is also a risk that activity would focus on the predominant issue of the day and that less vocal disadvantaged groups might not receive the attention they deserved. The Minister referred to the recently established Disability Rights Commission, suggesting that campaigners who had fought for its creation for a generation were not likely to welcome a merger.[41] We welcome the Government's commitment to consult widely on the terms of anti-discrimination legislation. We recommend that this consultation specifically invites consideration of the single commission model for implementing legislation.

24. The Sub-committee also asked the Minister why the Government had argued for six years to implement age discrimination legislation when legislation covering discrimination on other grounds, such as religion and sexual orientation, could be introduced within four years. In her response, Mrs Hodge emphasised the need to consult widely and to develop best practice prior to enacting legislation.[42] The extended implementation period makes it even more important to tackle age discrimination effectively in the intervening period. We recommend that the Government should redouble its efforts to promote the voluntary Code of Practice and extend the Code's influence in the period up to the implementation of legislation. The tight labour market and the changing demographic profile of the population makes this an urgent requirement. We recommend that the Government should report progress to the appropriate select committee in two years', in spring 2003.

Occupational pensions and retirement

25. Implementation of the EU Directive will mean that employer-imposed, compulsory retirement ages will become unlawful except in circumstances where they can be objectively justified.[43] The Government supports the concept of flexible and phased retirement. One of the factors that those considering early or phased retirement will take into account is the impact that it would have on their income: many of those who have taken early retirement have experienced a rapid and significant decline in their financial position.[44] Entitlement to benefits from occupational pensions could therefore be a significant factor influencing decisions.

26. The EU Directive on Equal Treatment allows Member States to make use of a derogation regarding the provisions relating to access to, and entitlement to benefits from, occupational pensions, and the Government has indicated its intention to make use of this facility.[45] This appears inconsistent with its desire to promote flexible and phased retirement, although we accept that significant changes to rights to occupational pension schemes may have implications for other pension fund members and pension companies. We welcome the Government's commitment to flexible retirement but are concerned that exercising the derogation relating to occupational pensions may undermine progress towards this goal. We urge the Government to remove barriers to financial stability in retirement.

Conclusion

27. We recognise the complexities inherent in identifying and tackling unfair discrimination on the grounds of age in employment. There is a need for more, and more co-ordinated, research to establish its prevalence.

28. If the Government is to combat age discrimination effectively, it will need to set a demanding agenda both in terms of developing legislation and in terms of increasing the effectiveness of the voluntary Code of Practice on Age Diversity in the Employment.

29. The changing demographic profile in the UK and the requirement to enact legislation by 2006 both add urgency to the need to eradicate unfair discrimination. It is important to ensure that all the aspects of the problem are thoroughly explored before legislation is introduced. We welcome the Government's commitment to consult widely and look forward age discrimination being part of a lively debate on social policy during the next general election campaign.

2  Ev. p. 2. Back

3  Department for Education and Employment, Age Diversity in Employment: Encouraging Age Diversity: A Code of Practice, Key Indicators for June 2000, hereafter "Age Diversity in Employment". This can be found at http://www.dfee.gov.uk/agediversity/index.htm. Back

4  Q. 2. Back

5  Q. 2. Back

6  http://www.statistics.gov.uk Back

7  Age Diversity in Employment. Back

8  Seminar on Age Discrimination, see Annex 1. Back

9  Seminar on Age Discrimination, see Annex 1. Back

10  Ev. p. 40. Back

11  http://www.parliament.uk/commons/selcom90/edepnt45.htm Back

12  Council Directive 2000/78/EC. Back

13  Q. 9. Back

14  Ev. p. 3. Back

15  Ev. p. 1. Back

16  Ev. p. 4-7. Back

17  Age Diversity in Employment, p. 5. Back

18  Q. 9. Back

19  Q. 7. Back

20  Evaluation of the Code of Practice on Age Diversity in Employment: Interim Summary of Results for Wave 2, RB 236, DfEE, June 2000.  Back

21  Q. 11. Back

22  Ev. p. 5. Back

23  Ev. p. 5. Back

24  Ev. p. 33. Back

25  Ev. p. 34. Back

26  Seminar on Age Discrimination, see Annex 1. See also Beatty, C. and Fothergill, S, Labour market detachment among older men, Centre for Regional Economic and Social Research, November 1999. Back

27  Seminar on Age Discrimination, see Annex 1. Back

28  Seminar on Age Discrimination, see Annex 1. Back

29  Seminar on Age Discrimination, see Annex 1. Back

30  Q. 3. Back

31  Q. 6. Back

32  Fourth Report from the Education and Employment Committee, Session 1999-2000, Employability and Jobs: Is there a Jobs Gap?, HC 60-I, paras 38-40. Back

33  Department for Education and Employment, Towards full employment, March 2001,Cm 5084, para 4.40. Back

34  Q. 11. Back

35  Seminar on Age Discrimination, see Annex 1. Back

36  Q. 17. Back

37  Q. 18. Back

38  QQ. 12, 22. Back

39  Ev. p. 3. Seminar on Age Discrimination, see Annex 1. Back

40  Q. 25. Back

41  Q. 25. Back

42  Q. 23. Back

43  Ev. p. 8. Back

44  Seminar on Age Discrimination, see Annex 1. Back

45  Ev. p. 7. Back