CARL MORTISHED: The UK needs to make most of its middle-aged workers

When I was a junior business reporter on another newspaper, I had the good fortune to sit next to a living library of City stories. Most of the time, I couldn’t see him; over the years, his collection of ancient press releases, financial reports and takeover documents had created a wall, several feet high, that shielded him from view. Every afternoon, a cloud of smoke rose from behind the stacks, a signal that we were getting close to print deadline and Graham Searjeant had lit his pipe.

Smoking was later banished from the newsroom and many senior journalists were eventually let go to make room for younger, less expensive staff. But in the need to shed cost, sometimes other things went.

Once, when trying to dredge up a memory of a 1980s City scandal, Graham stuck his hand towards the bottom of a deep pile of papers to retrieve an original press release issued in the Guinness bid for Distillers. He then, from memory, gave me a detailed account of the event, the actors and issues in the notorious share support operation that led the rich and famous to jail.

Britain is good at creating lots of low-level service jobs but we are not very good at keeping middle-aged people in work. According to PwC, the UK ranks 21st in the OECD with only 64% of people aged 55 and 64 still in work.

New Zealand ranks second with 85% in employment (Iceland is first with 99% but it is regarded as a special case) but the UK still ranks far below Germany with 70% in work and Norway with 72% active.

There is an opportunity cost in failing to employ older workers. PwC reckons that Britain could boost national income by £180 billion if we raised our middle-aged employment rate to that of New Zealand. For the OECD as a whole the GDP boost would be $3.5 trillion.

But these numbers fail to recognise that employment is also about incentives. We are not going to capture that lost income by regulating. If Britain has a poor record for employing the middle-aged, it has a relatively good record in employing the young, compared with the rest of Europe.

In Italy, according to Eurostat, almost 30% of the 20-34 cohort are neither in work, education or training. In Greece, the proportion is similar and in Spain, it’s a fifth.

In the UK, the figure for idling youth is 13%, nothing to be proud about, but nowhere near the catastrophe of the Club Med countries.

Behind the rise of Italy’s anti-immigrant parties lies the anger of young people, out of work, languishing at home and resentful. Italy’s idle young are fodder for the anti-immigrant populist parties. No one bothers to explain the connection between the lack of employment opportunity for the young and the rigid protection of the right to employment of an older generation with jobs for life and comfortable pensions.

If Britain’s young people are not marching on the streets, it is because they are too busy trying to pay rent in low-end jobs.

Yet the Government still has a burgeoning employment problem. We are not creating enough jobs in the marzipan layer of skilled and professional workers who have the earning power to build up savings and capital to buy homes, sustain private pensions and invest in the economy.

In deregulating the employment market, the UK has opened a pressure valve that has saved us from an Italian disaster. Meanwhile, an older generation has walked meekly into early retirement, a transition made easier by swollen pension funds and the wealth accumulated in homes and savings deposits.

That won’t happen again. The pension fund nest egg that is keeping a generation off the employment rolls will be eaten away. The jobs created by our buoyant service economy will not generate sufficient income to replace the income lost from higher earners made redundant.

If, as is widely predicted, the artificial intelligence economy begins to replace skilled office work on a large scale, employment opportunities for the very young will diminish further.

If the world of work becomes a battleground between generations, there will be no winners, just empty desks. Google can tell you what the Guinness scandal was; it can’t tell you why you need to know.