Select Committee on Economic Affairs Fourth Report



6.1. Age discrimination in the labour market can impose significant economic costs on individuals who may be prevented from undertaking paid employment, on employers who may inadvertently restrict the pool of workers from which they recruit, and on the economy as a whole because of a misallocation of labour. In this chapter we survey evidence on the existence and extent of age discrimination in the United Kingdom labour market. We then turn to consider the implications for employers and workers of the implementation by 2006 of the EU directive on age discrimination.

The extent of age discrimination

6.2. Discrimination in the labour market on grounds of age can occur both directly and indirectly (Q282). Direct age discrimination occurs when, for example, an employer attaches an upper or lower age limit to a particular job, or selects staff for voluntary redundancy on grounds purely of age, rather than work competence. Indirect age discrimination occurs when, for example, career progression is contingent on the possession of specific formal qualifications which have been in existence for only a limited period, and which therefore are unlikely to be held by persons over a particular age.

6.3. Age discrimination can be deliberate, but it is often unconscious. For example, if an employer adopts general employment criteria which have a differential impact on certain people because of their age, but which are not relevant to job performance, then age discrimination is likely to result (Q763).

6.4. Some jobs have formal age thresholds that are sanctioned by law for reasons of health, safety or morality - for example, minimum ages for employment in licensed premises, or driving heavy goods vehicles. These do not fall within conventional definitions of age discrimination.

6.5. Evidence about the existence or prevalence of age discrimination in the labour market is far from straightforward. As noted in the two previous chapters, there are many factors influencing both the supply of and the demand for workers which may affect the age structure of employment in a particular company or economic sector, quite apart from any conscious or unconscious discrimination on the part of the employer. The fact that persons of a particular age may be under-represented in a specific employment cannot, on its own, be taken as evidence of age discrimination in that employment.

6.6. Nevertheless, we have received evidence that large numbers of older people believe they have been discriminated against in the labour market because of their age. The Chartered Institute of Personnel and Development (CIPD) reported that its surveys consistently provide evidence of employer discrimination against older people. Ms Dianah Worman (Diversity Adviser, CIPD) described age discrimination as "pervasive" in almost all sectors of the labour market (Q754).

6.7. A CIPD survey of ageism conducted in 2001 found that 10 per cent of respondents aged 45-54 believed they had been rejected for a job they had applied for in the previous 12 months because they were considered "too old", though few had any hard evidence of discrimination. At the other end of the age range, 7 per cent of respondents aged 16-24 had been told explicitly that they were "too young" for a job they had applied for, while a further 6 per cent suspected age was the reason they were rejected. Thus age discrimination is perceived to exist among both younger and older workers (though the determination of who is viewed as "young" and who as "old" appears to vary across industries and sectors).[70] A subsequent survey conducted for the CIPD in February 2003 found that 40 per cent of persons interviewed believed they had been discriminated against at work. Significantly, age appeared to be the primary reason for discrimination, and was cited by one third of all respondents who believed they had experienced discrimination, compared to 14 per cent who cited gender, 5 per cent who cited disability and 2 per cent who cited race.[71]

6.8. Mr Ian Brinkley (Chief Economist, TUC) suggested that explicit age discrimination, such as when age limits are included in job advertisements, is now unusual. A larger problem is that within companies many managers are unaware that the processes and procedures they adopt may discriminate on the basis of age. He thought that awareness of age discrimination significantly lagged behind awareness of discrimination on grounds of race or sex (Q335). Dr Philip Taylor agreed that although there is evidence of employers actively responding to negative stereotypes of older workers there is also much evidence that age discrimination in the workplace is the result of unintended outcomes: employers "often have not heard of age discrimination and they would not know whether they were doing it or not" (Q1018).

6.9. Ms Susan Anderson (Director of Human Resources Policy, CBI) agreed that ageism exists among the employer community just as in society as a whole (Q611). She noted that some stereotypes about the ageism of particular employers have historical roots and reflect the fact that during the industrial restructuring of the 1980s there was frequent agreement among employers, trade unions and the Government to encourage older workers to leave the labour market and make way for younger workers (Q614).

6.10. The TUC queried whether the targeting of older workers for redundancy, which was common in the 1980s, has really been reversed. The offer of early retirement can still be an important way for firms to adjust the size of their workforce in both traditional and newer industries such as telecommunications.[72] Mr Churchill (Age Concern) believed that a shift of employer attitudes against older workers in the 1980s, which occurred for historically specific reasons, has still not been reversed. In the 1980s and 1990s, employers who operated occupational pension schemes often found it easier and cheaper to shed older rather than younger workers, because the pension fund could bear much of the cost of early retirement. The decline in investment values over the past four years has reduced or eradicated the surpluses that had accumulated in many pension funds, so this option is now less appealing to employers than in the past, but it continues to provide some scope for low-cost restructuring (Q282).

6.11. The Government have been active in raising consciousness of age discrimination within the employer community. In 1999, they issued a Code of Practice on Age Diversity. This appears to have increased awareness of age discrimination among the business community, and has helped to reduce the deliberate practice of excluding people from employment on the basis of age (Q763).

6.12. However, the Government's track record in countering age discrimination within the public sector is, at best, mixed. Retirement at age 60 is still the norm within the Civil Service, although the Government have stated that the normal retirement age for public employees should increase from 60 to 65 for new entrants, with protection for those who are within 10 years of retirement (Q1082). The Secretary of State for Work and Pensions noted that "in many respects the public sector has not been as flexible on these matters as the more enlightened people in the private sector" (Q1082).

6.13. Age discrimination in employment is deplorable in itself and harmful to the economy.

6.14. We conclude from the evidence available that there is significant age discrimination in employment, and that this discrimination occurs throughout the economy and in both public and private sectors.

6.15. We further conclude that few employers operate overtly ageist recruitment and retention policies (except in so far as they use fixed retirement ages). Age discrimination is frequently the unconscious outcome of an employer's more general human resource management policy and procedure.

6.16. The apparent infrequency of direct age discrimination through the implementation of overtly ageist recruitment and retention policies is, we believe, a positive signal that most employers have rejected the use of strict age thresholds as being inappropriate to the workings of a modern flexible labour market. However, the apparent extent of unconscious ageism in employment remains a major challenge, since the eradication of unconscious discrimination will require a fundamental cultural change on the part of employers and workers. We discuss this issue further in paragraph 6.46 below.

6.17. Evidence from the voluntary sector indicates that age discrimination affects participation in non-waged as well as waged work. Research conducted in 1998 by the Institute of Volunteering Research revealed that almost one in five voluntary organisations applied upper age limits to their volunteers. Many voluntary organisations cited the difficulty of obtaining insurance cover for older volunteers as the reason for their use of an upper age limit, though it is likely that in some organisations this is used as an excuse for not taking on older volunteers.[73]

6.18. We also investigated the appointment policies and practices of a number of non-governmental public bodies to determine whether participation in these organisations is affected by any form of age discrimination. Although participants in many such bodies receive allowances and out-of-pocket expenses, they are often not formally remunerated. Even when remunerated, for example as in the case of BBC governors, their service is conditioned by a letter of appointment rather a contract of employment. Thus participation in these bodies is not normally deemed to constitute employment.

6.19. Scrutiny of the available information on the ages of members of many public bodies such as the BBC, Sport England and the General Medical Council suggests possible age discrimination in appointments. Overwhelmingly, people appointed to such bodies are aged between 45 and 65, and being appointed at an older age or serving beyond the age of 70 seems to be virtually impossible.

6.20. We were concerned to find that there appears to be no common practice of recording and reporting on the age profile of participants in non-governmental public bodies. For example, no information is available on the age structure of those currently serving as special constables, whereas for the lay magistracy the Department for Constitutional Affairs was able to state that of the more than 28,000 lay magistrates, under 4 per cent are aged under 40 and almost 35 per cent are aged 60-69.[74]

6.21. We received evidence from Dame Rennie Fritchie, the Commissioner for Public Appointments, about the procedures followed by Departments in making appointments to public bodies. She noted that appointments are intended to be as inclusive as possible, and that age should not be a criterion for the assessment of suitability for appointment or reappointment. She reported that, in the case of magistrates, there is a statutory upper age limit of 70, and she suggested that this limit should be reviewed to determine whether it now has (or has ever had) a functional justification (Q1167).[75] We condemn such discrimination in the appointment of magistrates.

6.22. In response to the suggestion that there is a widespread belief among actual and potential applicants that in practice upper age limits appear to be applied to applicants for public appointment even when no formal age limits exist, Dame Rennie suggested that there may be procedural problems within Government Departments, where sponsor teams may have inadequate experience of managing the process of public appointments, and may be unaware of what may constitute either direct or indirect age discrimination (Q1170).

6.23. Age discrimination in public appointments should be condemned and brought to a halt. We note in particular the disproportionate impact on women, who tend, because of career breaks resulting from caring responsibilities, to become available for such appointments later in life.

6.24. We recommend that ageism in public appointments, whether directed against those considered too old or too young, should be brought to an end, and that an explicit commitment to age diversity in public appointments should be made by the Government and all sponsoring Departments. We believe that this can best be achieved by ensuring that the process of appointment to any public body complies with the terms of the forthcoming legislation on age discrimination in employment, even in those cases in which such appointments do not constitute formal employment.

6.25. We further recommend that the Commissioner for Public Appointments be given statutory authority to seek out cases of ageism in public appointment procedures, and should also have powers which would lead to the diminution and eventual eradication of ageism.

6.26. We were concerned to hear that the remit of the Commissioner for Public Appointments does not extend to all public bodies. For example, it does not include Privy Council nominations to various bodies (Q1194). We were also concerned to hear that appointments to hospital boards, which currently fall within the Commissioner's remit, will no longer do so in the case of foundation hospitals.

6.27. We recommend that in relation to ageism the remit of the Commissioner for Public Appointments be extended to include appointments to those publicly funded bodies which currently or prospectively lie outside this remit.

The legislative environment

6.28. Discrimination in employment on grounds of age is not at present illegal in the United Kingdom. However, EU Employment Directive 2000/78 provides a common framework of protection against discrimination at work on the grounds of sexual orientation, religion or belief, disability and age. The age strand of this Directive has to be implemented by December 2006.

6.29. The Government, through the Department of Trade and Industry, has been conducting an extensive consultation exercise since July 2003 specifically on the age clauses of this Directive, with a view to having legislation in place (but not in force) by December 2004 so that individuals and employers will have two years to prepare for changes to employment practices. [76]

6.30. In the absence of draft legislation, there appears to be considerable difference of opinion about the likely impact of the Directive for employment policies and practices in the United Kingdom. Dr Katherine Rake (Fawcett Society) was of the view that the legislation would prohibit employers specifying age in relation to any decision with respect to employment, recruitment or retention. On the other hand Ms Anderson (CBI) believed that differential treatment on grounds of age could be permissible, if appropriately justified (Q620).

6.31. These differences of opinion arise from uncertainty about how the Government will implement Article 6 of the Directive, which allows Member States' implementing legislation to permit practices that otherwise amount to direct age discrimination where they are "objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary."[77]

6.32. The Government will not determine how to incorporate the provisions of Article 6 into United Kingdom legislation until the recent Age Matters consultation has been assessed. However, the Secretary of State for Work and Pensions suggested that he thought the criteria for "objective justification" for discriminatory practices would be narrowly defined (Q1101). We therefore believe that employers should prepare for the forthcoming legislation on the assumption that direct age discrimination will not normally be permitted.

6.33. Particular concern was raised over the issue of "succession planning" in businesses which have a number of people approaching retirement at the same time (Q586). We note that the Government have identified this as one of a small number of specific circumstances which might justify exceptional treatment under the forthcoming legislation, as long as an "objective justification" is provided.[78]

6.34. We recommend that the Government should be as explicit as possible in providing illustrations of the circumstances in which exceptional treatment may be justified, in order to provide the clearest possible guidance to both employers and workers.

6.35. An additional area of uncertainty relates to the stipulation of a "normal retirement age". This is another issue that is being considered in the current consultation exercise, and it is one on which the Government note that there is no clear agreement about the best way to implement legislation.

6.36. In evidence to us, the CBI noted that its colleagues in other EU states believe that they will continue to be able to set and implement a normal retirement age. The CBI counselled the Government to ensure that the implementation of the EU Directive in the United Kingdom is not out of line with that adopted in other EU countries, since otherwise UK employers might be disproportionately burdened with complex and costly legislation (Q621).

6.37. Both the CBI and the EEF noted that the use of a normal retirement age can be advantageous to both worker and employer. For the employer, it provides certainty with respect to succession planning, and for the worker it provides an administratively simple and socially acceptable mechanism for withdrawal from the labour force. Mr Martin Temple (Director General, EEF) noted that "it is often a form of celebration when somebody has reached retirement and is moving on", and he expressed concern that the abolition of normal retirement age might replace a dignified and harmonious process of exit with conflict, acrimony and litigation (Q578). Mr Warman (Vauxhall Motors) felt that the abolition of a normal retirement age might particularly affect smaller companies, because they are likely to have less scope for redeploying older workers in alternative roles, and fewer resources in their personnel divisions to deal with issues specific to ageing workers (Q617).

6.38. Concern was also raised by the CBI that, in the absence of a normal retirement age, there might be frequent resort to industrial tribunals to resolve disputes over decisions about which workers should stay and which should go, particularly if the cost to the worker of initiating a tribunal claim were low (Q619). Professor Peter Warr noted that concern about potential legal claims against subsequent alleged unfair dismissal might discourage some employers from employing older people; thus it is conceivable that the anti-discrimination legislation could reduce rather than enhance employment opportunities for some older people.[79]

6.39. On the other hand, the point was forcefully made by the Equal Opportunities Commission and the Fawcett Society that for the new legislation on age discrimination to be effective, it needs to be backed by a powerful enforcing body (QQ374; 496). Enforcement is unlikely to be effective in the absence of clear legal sanction.

6.40. We recognise these concerns about the potential costs to all parties of extensive resort to litigation to resolve disputes arising from the legislation on age discrimination. We were reassured to hear the Secretary of State for Work and Pensions express the desire of the Government that this legislation should be carried forward "with large measures of common sense and a minimum amount of intrusive bureaucracy" (Q1104).

6.41. In order to minimise the cost to all parties of disputes relating to age discrimination, we recommend that the Government should incorporate in the forthcoming legislation on age discrimination the option of rapid and low-cost arbitration of disputes.

6.42. We also recognise the legitimacy of arguments for retention of a normal retirement age, but on balance we believe that any such retirement age may impose restrictions on the efficient functioning of the labour market in our ageing society. We believe it is for firms and their employees to devise their own retirement systems, and we further believe that these systems should be based on performance criteria rather than chronological age. We have taken note of the fact that in both the United States and Australia the introduction of legislation on age discrimination has proscribed the use by employers of a normal retirement age, yet this has had only a marginal impact on the employment patterns and retirement behaviour of older workers (Q995).

6.43. We therefore recommend that the Government should not permit the continued use of a normal retirement age by employers, whether at age 65 or 70 or 75, unless the employer can provide a reasoned and objective justification for the use of age rather than performance criteria in the determination of employability. We further recommend that the Government set an example of good practice by explicitly removing upper age limits in all public-sector employment in advance of the implementation of the forthcoming legislation on age discrimination.

6.44. We are concerned, however, that the implications of the legislation on age discrimination have yet to be fully appreciated by most employers and most workers in the United Kingdom. The proscription of the use by employers of age as a criterion for recruitment, promotion, training, redundancy or retirement will have a profound impact on employment practices. The Chartered Institute of Personnel and Development noted that this impact would be greatest on those "command-type organisations" in which mandatory retirement is a convenient device for easing the process of promotion and facilitating natural wastage.[80] We believe that many private-sector organisations, and much of the public sector, is characterised by this style of personnel management.

6.45. When age cannot be used directly or indirectly as a criterion for determining employment decisions, it will be necessary for employers to adopt clear performance criteria to determine which individuals should be recruited, promoted, demoted or made redundant. This will require the further development of worker appraisal throughout a person's working career, and other systems of worker evaluation. Baroness Greengross noted that difficulties will be encountered in developing more thorough-going appraisal systems, but that this was an inevitable stage of moving towards a more age-diverse labour market (Q112).

6.46. We conclude that a move from age-based to competency-based criteria for recruitment, promotion and retirement will require a profound cultural shift on the part of both workers and employers. Long-established conventions about seniority-based promotion and pay will have to be challenged, employers will have to operate transparent and justifiable personnel policies, and employees will have to accept regular monitoring and assessment of their job performance.

6.47. We are concerned that the time scale for the implementation of the legislation on age discrimination will allow employers and workers at most two years to revise their procedures and expectations to conform with the new legislation. This is a very short period, given the scale of the cultural shift required, and it may impose a particularly onerous burden on small businesses.

6.48. We therefore recommend that, as soon as the draft legislation on age discrimination is in place, the Government, in conjunction with both employer and worker organisations, should embark on a major campaign to raise awareness of the impending legislation, and of its likely effects.

6.49. We recommend that, just as legislation is now scrutinised for possible infringements of, for example, human rights, it should become routine for such scrutiny to cover the issue of age diversity, and for Ministers to certify that policy and legislation do not contain an ageist element.

70   Chartered Institute of Personnel and Development, Age discrimination at work, p 11 Back

71   CIPD, Age, pensions and retirement: Attitudes and expectations, p 11 Back

72   TUC, volume II, p 114 Back

73   Institute for Volunteering Research, volume II, p 448 Back

74   Department for Constitutional Affairs, volume II, p 441; Home Office, volume II, p 447 Back

75   We note, however, that the Commissioner's narrow remit does not cover the appointment of magistrates. Back

76   Secretary of State for Work and Pensions, volume II, p 404 Back

77   Secretary of State for Work and Pensions, volume II, p 404 Back

78   DTI, Equality and Diversity: Age Matters (2003) p 16 Back

79   Warr , volume II, p 486 Back

80   CIPD, volume II, p 269 Back

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