The think tank’s Live long and prosper? report shows that despite employment expected to remain at a record high this year, the amount of non-workers in Britain is set to grow by 350,000.
This is thought to be largely due to baby boomers (those born between 1946 and 1964) retiring, with the report arguing that if the UK had to support the expected pensioner population in 2060 today, it would have to find an additional £15bn a year.
Resolution Foundation senior economic analyst, David Finch, said: “2017 marks a tipping point in Britain as retiring baby boomers swell the ranks of the non-working population faster than our workforce.
“As this continues, our ageing society brings challenges for future generations of workers. If we had to cope today with the pensioner population we expect by 2060 it would mean a cost pressure equivalent to a 4p rise in the basic rate of income tax.”
The latest government review of the State Pension Age (SPA) suggests that it could reach 68 by 2030, rather than 2046 as under current legislation, however Resolution Foundation warns against too narrow a focus on just raising the SPA.
They argue that the government should look at additional ways to reduce the fiscal cost of longer living and boost individuals’ lifetime living standards, in particular through a renewed focus on securing full employment.
“The sheer size of the baby boomer generation – and rising longevity for everyone – brings economic challenges that must be addressed,” Finch continued.
“So far the solution to pay for our ageing society has focused on increasing the SPA to delay when people can draw on public support. But just as important is ensuring that more people are able to work up to that point through a renewed focus on full employment. That will boost the living standards of those working and reduce pressure on the public purse.”
The report highlights how life expectancy has risen and shifted the patterns of people’s lives, from staying in education for longer, to having children later in life and working to older ages.
This has resulted in workers aged 50 and above providing 66.4% of all net employment growth since 2010, with half of women from the baby boomer generation still working at 60, compared to just a third from the previous one, increasing the tax base and helping fund education, health and welfare provision.
However it is argued that there is plenty of scope to increase employment further through helping older and disabled people remain in work, with the Resolution Foundation calling on the government to introduce a 12-month ‘right to return’ for workers who suffer from a period of ill-health.
“Rising employment among older workers has been one of the biggest economic success stories of recent years and further progress can be made with government support,” Finch said.
“The huge strides we’ve made in life expectancy mean that we are set to see a big shift in the age profile of the UK population.
“A new right to return to work after ill-health would help more older and disabled workers to remain in employment. This would deliver a huge boost to living standards and reduce the economic cost of longer living.”