Donald Trump turned 80 this week, a milestone that has reignited a fierce debate on both sides of the Atlantic about the economic viability and social implications of an ageing workforce. With the former US president still a dominant political figure, his birthday has become an unlikely catalyst for discussions on labour market participation among the elderly.
In the United Kingdom, government ministers have been quick to champion the cause of age diversity, pointing to a recent uptick in employment among the over-65s as a sign of a flexible, modern economy. The Office for National Statistics reported that in the last quarter, the number of people aged 65 and over in work rose by 3.2%, the highest increase in five years. This, the Treasury argues, is a testament to Britain's rejection of the 'use-by date' culture that pervades other developed nations.
But let's cut through the spin. The real driver of this trend is not some newfound respect for the wisdom of our elders. It is the cold, hard reality that pension pots have been ravaged by inflation and a decade of quantitative easing that has kept yields on government bonds at historic lows. The average income for a retired household has fallen by 4% in real terms since 2020, according to the Institute for Fiscal Studies. For many, the choice is simple: work or go without.
Market participants are watching the Boomerang Generation with a mixture of curiosity and concern. On one hand, a larger pool of experienced workers could boost productivity and keep wage inflation in check. On the other, it risks crowding out younger talent, exacerbating the intergenerational wealth divide that is already a powder keg for social unrest. Gilt yields have been volatile this week, with the 10-year yield touching 4.5% before settling back to 4.3%, as investors digest the implications of a workforce that is greying faster than the government's projections.
Meanwhile, across the pond, Trump's birthday has prompted a flurry of commentary about the fitness of elderly politicians for high office. Yet, the market's verdict on Trump's longevity is clear: the dollar barely moved, and the S&P 500 continued its relentless march upwards. The market, it seems, is more concerned with the 45th president's policies than his age. He remains the frontrunner for the Republican nomination, and his proposed tax cuts and deregulation are seen as a tailwind for corporate profits.
The capital flight narrative, however, tells a different story. High-net-worth individuals in the US are increasingly hedging their bets. Data from Knight Frank shows a 12% increase in enquiries about moving to jurisdictions with lower inheritance taxes and more stable political environments. Switzerland, Singapore, and yes, even the UK, are benefiting from this trend. The irony is not lost on me: a country that champions age diversity may soon see an influx of wealthy octogenarians seeking to shield their assets from the taxman.
If there is a lesson here, it is that the debate about older workers is a smokescreen for a much larger problem: the systematic underfunding of pensions and the failure of governments to address the long-term fiscal challenges posed by an ageing population. The OBR's latest fiscal sustainability report estimates that the cost of an ageing population will add 5.8% of GDP to public spending by 2070. That is a debt bomb with a very slow fuse.
So, as we celebrate Trump's 80th, let us not pretend that this is purely a story of social progress. It is a story of market forces, fiscal irresponsibility, and the quiet desperation of those who cannot afford to retire. The bottom line? If you want to understand why granddad is still working, look not at his passion for the job, but at the size of his pension pot.
