Some Thoughts on Adjustment for Older Workers

The expert panel on older workers appointed by the Minister of Human Resources and Social Development has released a short discussion paper.
http://www.ow-ta-sec.org/en/consultation/discussion_paper.shtml

The background to this panel (promised in the 2006 Budget) was a political push in 2005 for an income support program for displaced older workers – a particularly hot topic in Quebec and, increasingly, in Ontario given the loss of tens of thousands of manufacturing jobs since 2002 (over 250,000 in Ontario and Quebec combined since 2002.).

In 2006, the federal government announced a very small ($70 Million over 2 years) so-called “Targted Initiative for Older Workers.” Details are a bit murky but the focus is very much on training and employability supports for provincial (and community) initiatives, and emphatically not on income benefits. Most of the modest amount of money seems to be going to Quebec and, to date, no agreement has been signed with Ontario. The money is targeted to provincial programs (the province must kick in 30% of the cost) in high unemployment and/or single industry communities.

“Canada’s New Government” rather emphatically rejected a return to the long defunct POWA (Program for Older Worker Adjustment) which provided very modest income benefits to older laid-off workers who had exhausted their EI benefits during the previous wave of industrial re-structuring in the late 1980s and early 1990s, and instead appointed the “expert” panel. (In this context, “expert” means a combination of business representatives and orthodox economists.)

As the discussion paper briefly acknowledges, a high proportion of laid-off, long tenure, older workers face serious problems in obtaining comparable employment. Long-term unemployment rates are significantly higher for older workers. And, as confirmed by recent Statistics Canada research, it notes that many who do find new jobs experience a significant loss of income. (The recent StatsCan study shows displaced long-tenure older workers experience income losses in the range of 25%.) Adjustment difficulties are obviously most serious for those with dated skills who live in areas with few alternative job opportunities. As a group, older workers are less well-educated than average, and less able to move to new jobs. Geographical mobility is not a desirable or realistic option for many, and occupational mobility is often constrained by education and skill levels which do not meet those in demand in the job market. In addition, many employers are unwilling to hire displaced older workers. The paper does not touch on the very real issue of disablities among older workers.

Having briefly acknowledged these employability issues, the discusssion paper puts forward no policy options for discussion. Instead, it shifts the focus to the need for older worker retention in a labour market which will no longer be expanding due to demographic changes. The clear implication is that the welcomed focus for public input to the panel should be on active labour market measures to facilitate continued employment, and emphatically not on income supports.

The background paper is silent on at least two key differences between now and industrial re-structuring in the late 1980s and early 1990s – ability to access early pension benefits, and EI “generosity.”

Life was hardly great for the older industrial workers who lost their jobs in the last big wave of “downsizing”, but at least many had their paths to earlier retirement cushioned by pension plan surpluses which could be and were not infrequently used for buy-outs and early access to pensions (which in turn alleviated some of the impacts of the industrial crisis on younger workers.) Those pension surpluses have now pretty much evaporated.

As well, EI income support for displaced workers is much less “generous” than a decade ago – a decade in which the maximum EI benefit was frozen, and benefit duration was shortened in many regions. And training and employment supports on the ground are much less avaialable after a decade of federal cuts and devolution to provinces which have mainly failed to pick up the slack in terms of active labour market programs. (In fairness, there is a good deal of variation across provinces.)

At a minimum, we should be pushing this Panel to look at EI benefits and EI Part II (active labour market policy) measures which are squarely within the mandate of the federal government, and which have been ignored in the paper. Options such as work-share while learning – which would allow for re-training prior to layoff – should be on the table, along with proactive training policies to minimize layoffs.

The dominant policy discourse which comes from the OECD and HRSDC officials is that older worker adjustment programs should not breed “dependency”, especially in a context where older workers may be needed by employers. They are totally allergic to the kinds of programs which still exist in some European countries to smooth a transition from job displacement to early retirement for older workers (often in the form of a disability benefit with lax enforcement.)

I think this concern with simply pensioning off older workers with a very modest benefit is reasonable, to a degree. High levels of socially-compensated long-term unemployment among older workers in countries like the Netherlands and Germany are hardly the best choice. But the best alternative – to be seen to some extent in Sweden and Denmark – is a combination of decent unemployment and pension benefits, and a high level of investment in “active programs.” Few governments seem prepared to invest much in re-training of older workers given very real problems – often, rather low levels of basic skills, and a short pay-back period.

It seems to me that the other issue that should be on the table is compensation for job loss. Economists often like to talk about compensating the “losers” for big structural changes in the economy which supposedly make society as a whole better-off. Lip service is paid to making sure that workers displaced by trade deals are cushioned to some degree, since no respectable pro free trade economist would pretend that no workers are, in fact, displaced. Mulroney promised a major labour adjustment program as part of the original Canada – US Free Trade Deal (as recommended by the de Grandpre Report.) But his government never delivered, and nothing is now being offered to the thousands of older industrial workers now clearly being displaced by rising manufactured imports from China to North America.