The Grumpy Old Man

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....The Cost of Ageism in the Workplace....

Ageism is a silent killer, of opportunity, of experience, of ambition, of relationships and, for some, even life itself.......

The problem of ageism in the workplace goes much, much further than discussed in earlier grumps which look at the recruitment process and how it effects unemployment in the over Fifties.

Looking at Grumpy's own experience it is clear that a financial time bomb is growing for many over Fifties in addition to the mental and social problems caused by unemployment. It should also be recognised that this time bomb is not restricted to personal finances but goes much further and impinges upon national finances.

But let's look at exactly what is causing this time bomb.

From a purely numbers viewpoint, fifty-year-olds and above constitute over 30% of the potential working population. It seems incredible that the government with great fanfare should be introducing legislation (calling for at least one member of the ethnic minority to sit on the Board of Directors of FTSE100 companies) that will only benefit 100 people when nearly a third of the working population is being severely disadvantaged and sidelined as they have been for a number of years. Even if one accepts that half of this age group are in some form of self or other employment significantly below their capabilities and experience, it still represents a horrendous waste of resource.

In Grumpy's younger day (yes he was a youngster at one time, not always being a grumpy old fart!), youngsters were encouraged to remain in secondary education after the age of sixteen and secure the best education possible. The greatest accolade was to go to university and secure a bachelors or higher degree. Failing that, large numbers of late teenagers took up other forms of career training such as apprenticeships. (This can also be read as further education)

At that time, the plan for teenagers was to develop their life as follows.

Up to approximately the age of twenty-one; education or training

From age twenty-one to sixty-five; career development culminated in a "managerial" type position in a large company. This also include charges hands and similar positions where staff reported to a "section leader".

After age sixty-five; retirement.

In those days, it was a condition of your employment that you became a member of the Company's pension scheme. A percentage deduction was made from your salary which was paid into the firm's pension scheme. Most firm's pension schemes had an "avowed" requirement for the firm to match the employee's contribution. (Grumpy would ruefully comment: if the firm met hard times particularly regarding cash flows this obligation was sometimes not fulfilled, with the firm giving themselves what is euphemistically known as "a pension holiday". This was most certainly not available to employees). It is important to note that this type of scheme actually represented a type of personal savings scheme, where the employee was personally identified within the pension schemes accounts. Normally it was not legally possible, even if one left the employment of the company, to withdraw that money until one reached retirement age. The money was retained by the pension fund and continued to grow in accordance with financial market trends. Invariably this "pension pot" was used to buy an annuity (an income for the rest of one's life).

In addition to this you would be entitled to the State Pension which operated on a totally different system. The State Pension was very much a pay-as-you-go system in that people in employment "paid in" and their money was immediately used to pay the people who were drawing their State Pension. There was no build up of a personal pot that you and only you had paid into or had access to. Grumpy would observe that this type of scheme sounds very much like what is known as a "Ponzi". These schemes are defined by Wikipedia as "a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources" (for "operator" read "Government", for "returns to investors" read "Pension" and for "capital paid by new investors" read "workers national insurance contributions"). It is obvious that eventually these schemes are going to run out of money and go belly up. Does that not sound very much like the State Pension scheme? And would you believe, Ponzi schemes are definitely illegal!

A previous UK Chancellor of the Exchequer introduced sweeping reforms of pension legislation which allowed people to withdraw accrued finance from their private pension funds, this being promoted under the guise of pension freedoms. To Grumpy these pension freedoms seem to be a recipe for disaster. If private pensions are cashed in and used for various nebulous short-term schemes for which they were never intended, what does the pensioner live on when he reaches pensionable retirement age?

These above seemingly unrelated factors when taken together produce something of a time bomb just waiting to go off and, ironically, will affect most adversely the people within whose power it is to do something!

Or to put it more simply, what is being generated, in Grumpy's view, is a right bugger's muddle if you'll excuse the phrase.

In summary, up to the age of twenty-one we are financially supported by our parents, sometimes with grant or sponsorship assistance provided by the government or a private company.

For the next 44 years, with a third level degree or a developing "blue collar" position, we would be in work and totally self-supporting from our salary. That salary, relative to the cost of living, would be expected to progressively rise, thus reflecting time in the job and experience. Perhaps we would have a mortgage being used to purchase a home. This purchase being complete after about 25 or nowadays 30 years but certainly by the time we reach our late 40s. During this period a portion of our salary is also being set aside for pension provision usually through the firms' occupational pension scheme. The portion of salary paid in the latter days of a mortgage would usually be relatively small. If our salary has progressed ahead of the cost of living index, then the amount we are able to put aside for our pension would be significantly increased during the final 20 years that take us to age sixty-five. This phase, in the grand plan, would take around 44 years.

After that comes retirement. Within this particular illustration of a grand plan, retirement would be financially provided for by a combination of the Statutory State Pension and a Private (or firms) Pension (for which we have saved during our working life). The roof over our head is fully provided during our working years via the mortgage. For the sake of this illustration, it will be assumed that our life expectancy is 91 years. This would mean that this portion of our life is some 25 years.

In summary; 21 years is spent supported (largely by family but with some state assistance), 45 years is spent providing for our future together with the initial 21 years of your family's life. For the final 25 years our "support" is a combination of savings, a Firm's Pension (or annuity) and the State Retirement Pension. In simple terms nominally a half of our life is normally spent generating wealth. During the other half, we are actually spending it, a significant portion of which is provided by third parties in the "second" phase of their life.

But how does enforced early retirement (which is actually what lack of employment between the ages of fifty and sixty-five constitutes) affect this. During that period the bills don't magically stop coming in, you still have to find the resource to pay them. You are left with little option but to use your savings or rely on such agencies as the state to provide for you. In simple terms, the money ultimately originates from your own savings or from those still in employment. If you think more deeply about it, you will realise that this situation puts an increased demand on the "supporters" as the "supported" have used much of their resources in looking after themselves.

In numbers, this means as an employed fifty to sixty-five year old, you continue to generate wealth which is used by yourself and the state for the support of yourself and others. This nominally represents a half of your life.

If however we are not employed for the 15 years between the ages of fifty and sixty-five we are only providing for a third of our life. Ergo, we are being supported for the remaining two thirds.

This represents a huge demand on the providers. What is absolutely galling is that if we find ourselves in this position (of being supported), in the majority of cases it is not of our own choosing. And to rub one's nose in it we have already spent many years contributing to the system.

Somewhere down the line somebody will have to pick up the tab. In today's social security environment this regrettably and invariably falls on the government. Through this and previous government's historical financial mismanagement of this and other schemes, the status quo cannot be maintained. Age fifty is bad enough but knowing that the potential support mechanism that one has contributed to for all those years has been used up and the remainder crumbling around our ears is particularly hard to bear.

The problem is that the design of the government sponsored State Pension Ponzi scheme is actually coming home to roost. Not only are people living longer but they are being thrown out of work at a much earlier age. The government are really living in cloud cuckoo land as they raise the pension age and quite happily say you'll have to work for longer. As mentioned earlier not only are there a number of dichotomies but also a bugger's muddle to end all bugger's muddles.

This right bugger's muddle has been caused by progressive governments failing to come to grips with the problems associated with ageism in the workplace. Relatively speaking it is easier to identify and approve other "isms" and legislate accordingly. The continued failing to address this problem, and Grumpy would be the first to admit that proving this particular "ism" is far more difficult than proving other discriminations, but sooner or later the nettle must be grasped.