Age discrimination legislation: choices for the UK

The United Kingdom has committed itself to legislate against age discrimination in employment for the first time, by signing up to a recent European Commission Directive. A number of other countries already have such legislation. This study looked at what can be learned from those countries' experiences and analysed the options for the UK in designing age discrimination laws. The study identified legislation against age discrimination in employment in 13 countries, and looked in detail at three (Australia, Canada and the United States) where it has been established for some time. It found:

• Evidence of the overall effect of such legislation is in most cases weak. However:

- Legislation has had a positive effect on employment rates of older workers in the United States. This is mostly due to them leaving jobs at a later age, rather than to more of them being hired.

- Employer behaviour has changed in countries with legislation, to the extent that explicit discrimination, especially in recruitment, has reduced. However, society's and employers' attitudes to older workers do not yet appear to have shifted as much as towards groups such as women and people from minority ethnic communities, where legislative protection has, generally, operated for longer.

- Forbidding employers to set mandatory retirement ages may have made them a bit less likely to hire older workers, but there is no evidence that this has been a major disincentive.

• The international experience points to the importance of some key choices about how to design legislation in the UK. In particular, legislators must decide:

- Whether to deal with both age and other forms of discrimination in a single law and agency. To do so would show that age discrimination is viewed seriously, but age also risks taking a 'back seat' in a single agency.

- What powers to vest in the commission that will enforce the legislation: in particular, whether to give it proactive powers of investigation and regulation.

- Whether to permit employers to set mandatory retirement ages.

- What to exempt from the legislation. Human rights considerations must be balanced with economic efficiency and other objectives; but too many exemptions tend to discredit anti-discrimination laws.

Background

Discriminating against workers on the basis of their age can be unfair to individuals and harmful to the economy. In particular, the assumption that someone is 'too old' to be sufficiently adaptable to do a job as well as a younger person wastes talent and potential in many workplaces. At a time when populations are ageing, as they presently are in most OECD countries, the economic cost of age discrimination is likely to grow.

The UK government has adopted a voluntary Code of Practice on age diversity, and is now considering how to legislate against age discrimination, following its adoption of an EC Directive requiring it to do so (Council Directive 2000/78/EC). It can look for a precedent at the experience of several countries that have already adopted such laws. Although in most countries laws have only recently been enacted, nationwide laws date back some 30 years in the United States, 20 years in Canada and 10 years in Australia. These three countries were looked at in greatest detail, although the choices taken by other countries, in most cases more recently, were also considered.

Evidence

The evidence from Australia, Canada and the United States, though limited and uneven, shows that legislation has indeed made an impact on discrimination in these countries.

The most comprehensive evidence comes from the United States, where:

- Research comparing differences over time and across states with different levels of legislation shows that age discrimination laws significantly increase employment rates of older workers. This is mostly due to them staying on in jobs until later ages, rather than higher rates of hiring of older workers.

- There is some evidence that employers may be a little less likely to hire older workers because they are not allowed to set mandatory retirement ages.

- The legislation has also strengthened the relationship between employees and employers. Some US economists suggest an implicit understanding that workers in career jobs have low pay relative to productivity when younger, and are rewarded for loyalty with higher pay when older. Outlawing age discrimination prevents employers from reneging on the second half of this compact.

More generally, in Australia, Canada and the US:

- Legislation has had a marked effect on some forms of direct discrimination, for example in advertising vacancies or in the process of selection for promotion.

- However, there is no clear evidence so far of a significant shift in the attitude of employers and society to older workers. This is likely to be a long-term process. There is evidence that legislation can only help to change attitudes if it operates in conjunction with other policies to promote equal rights and educate employers and workers about their obligations and rights.

The EC Directive

In October 2000, the European Council passed a new Directive requiring government to introduce equality in employment legislation, including on age discrimination. The UK must introduce such legislation by December 2003, or at the latest by December 2006 if it applies for an extension.

The Directive sets very broad minimum requirements, obliging countries to prohibit age discrimination with respect to the labour market, including access to training as well as to jobs. It leaves many matters of detail up to governments.

The choices for UK legislators

Analysis of age discrimination legislation in different countries reveals that its impact depends to a great extent on how its conditions are designed and enforced. The UK has a number of important choices to make within the broad framework of the EC Directive. Specifically, legislators must take decisions about:

• Whether to put all anti-discrimination legislation into a single framework (or law). One option is to have a single act covering sex, race, age and other anti-discrimination laws, and/or to have a single commission enforcing them. An advantage of consolidation is to put new grounds such as age on an equal footing with sex and race, for which the need to counter discrimination is already universally accepted. Conversely international experience suggests that within a single agency, age discrimination risks taking a back seat relative to such grounds as sex and race.
• How prescriptive to make legislation. The Irish Republic has set down in considerable detail how employers must behave: this has the advantage of clarifying obligations and rights without relying on complex court judgements. Conversely, the United States has opted for a more flexible approach, relying on courts to interpret a general prohibition of "arbitrary discrimination". The EC Directive requires the UK to be more prescriptive than that, but leaves a degree of flexibility. The UK may opt to retain all or some of this flexibility since this has the advantage of permitting application of the law to evolve over time with changing conditions.
• How to balance the rights of individuals with economic considerations. In upholding the right of individuals in principle to equal treatment, it may nevertheless be necessary to make some exemptions where such treatment is clearly unwarranted (eg an acting job may require someone of an age to match that of the character) or imposes undue costs. Different countries balance economics and human rights in different ways. For example, the United States, but no other country, exempts businesses with less than 20 employees. Irish legislation permits a company not to train an older worker because expected returns are inadequate, but Canadian courts would most likely rule against such practices. The EC Directive recognises some arguments of economic efficiency as objective justification for allowing discriminatory behaviour.
• Whether to outlaw mandatory retirement. In some countries, employers are no longer allowed to set compulsory retirement ages. Although it is unclearly worded, the EC Directive seems to leave it to governments to decide whether to classify mandatory retirement as age discrimination. It may be the case, though the evidence is weak, that the abolition of mandatory retirement affects the willingness of employers to hire older workers. But legislation on retirement needs to be considered carefully alongside policy on pensions, which may need to be adjusted. There is some evidence that what older workers really want is an option of flexible retirement, requiring new pension arrangements. Legislation may also affect conditions encouraging early exit from the workforce. For example, two Australian states have found that it is discriminatory to offer improved redundancy packages to younger workers, but better terms for older workers are permitted by a federal Act (Workplace Relations Act 1996) as an acceptable form of "affirmative discrimination".
• What power to give enforcement authorities. Commissions set up to implement age discrimination legislation usually have the responsibility of investigating and referring individual cases. Most also have the duty to promote equal opportunities and to educate employers, workers and the general public as to their rights and responsibilities. But tougher powers can create a more proactive role of general investigation and advising Government where changes in legislation are needed. The Republic of Ireland's Equality Authority is a good example of a strong enforcement agency: for example, it can initiate investigations of individual cases or of industries, instruct businesses and produce codes of practice. In the United States, on the other hand, the relevant Commission deals only with individuals' complaints and complaints initiated by the Commission regarding individuals working for a specific employer.

Conclusion: taking age discrimination seriously

While each of the above choices on its own is important, the effectiveness of the new legislation will also depend on the internal consistency of the legislation and the overall stance of Government policies to promote, monitor and enforce non-discriminatory behaviour. The overall character of legislation and its enforcement needs to make it clear that age discrimination is being taken seriously. Too many exemptions and a half-hearted approach could instead send the signal that the UK is reluctantly signing up to a measure imposed by European legislation. Overseas experience has shown that changing hearts and minds on age discrimination is far from easy, and that it is only through doing so that equal respect and treatment of people of all ages will become possible.

About the study

Zmira Hornstein, an independent consultant and former civil servant, carried out this study between April 2000 and April 2001. The study assembled existing evidence, with the assistance of experts in different countries and with reference to written documentation, rather than involving primary research. In the three main countries, detailed papers (which are chapters in the final report) were produced, by Professor Sol Encel of the University of New South Wales for Australia, by Professor Morley Gunderson of the University of Toronto in Canada and by Professor David Neumark of Michigan State University in the United States.

A key part of the project was a workshop held in London in March 2001, which brought together

an international group of people specialising in this field. The group included economists, lawyers, sociologists, and people working in research, national governments, the European Commission and stakeholder organisations. They discussed the evidence as presented in the country papers, and considered the options available to the UK and other countries in the process of forming new legislation to combat age discrimination. The conclusions of the workshop fed into the final report.