Could mismatch in desired and actual hours worked prompt early labour market exit?

The analysis was based on questions in the UK Labour Force Survey asking whether the respondent: 

• would like to work longer hours, at current basic rate of pay, given the opportunity 
• prefers to work shorter hours than at present in current job 
• would work shorter hours for less pay. 

From this combination we derive five mutually exclusive response categories:  

1. Don’t know 
2. Would like fewer hours for less pay (the most interesting category) 
3. Would like fewer hours but not willing to take a pay cut 
4. Wants neither longer nor shorter hours 
5. Wants more hours or a new/additional job.  

Early exit from the labour market 

Much has been written about early exit from the labour market and the need to extend working lives. The subject garnered increased attention post-COVID when many older workers left work and did not return. With rising life expectancy and pressure on public services, people will have to work for longer than in the past. Given low unemployment and high rates of economic inactivity restricting workforce size, there is a business case to helping people work longer.  

Organisations increasingly recognise the valuable skills and experience that over-50s bring to the workplace and the importance of providing opportunities to this demographic to have meaningful work that not only supports their financial security, but is also good for wellbeing and sense of purpose. There are likely many causes of early exit and therefore a myriad of solutions for extending working lives.

Who is most unhappy with their hours? 

The proportion of people who would like fewer hours and are happy to take a pay cut to do so increases with age (until 65+ at which point very few people are working and those that do, probably do so more on their own terms). If we include those who want to reduce hours but don’t want a pay cut, we get a third of older workers. The problem is we may be presenting older workers with a binary option - work too much and be unhappy, or retire early and don’t work at all. The third way is obviously to have more part-time working and phased retirement options making exit from work less of a cliff edge.

Desired hours by age

What’s interesting about the graph is that it shows the residual unhappiness. Many people can and do reduce their hours or retire early. With this in mind it is surprising that the figures are so high.  

Why can’t they just go part-time and accept a pro-rata pay cut? 

From 6 April, all employees will have the right to request flexible working from day one. This will affect few older workers, most of whom have significantly longer tenure and already have the right to request. However, having the right and using it are two different things. It may simply be that there is a status quo bias and norm towards a pattern of work that doesn’t serve the needs of older workers.

Nobel Prize winning economist Claudia Goldin came up with the concept of ‘greedy jobs’. These are big jobs, that take a lot from people in terms of time and energy but pay disproportionately well. In these jobs the pay increases with the hours worked (not linearly as with a wage rate, but disproportionately – that is to say, they reward long hours). Goldin suggest we need more flexibility in these jobs. This may make those doing the jobs happier, but also tempt those who have self-selected out of doing them, into doing them.   

What can we do about it? 

Though legislation is important, we must also work to change norms around flexibility. There is a business case to be made for flexibility, if the alternative is to lose (much needed) workers sooner than they might otherwise leave.