In discussions about the labour market, it is striking how strongly our thinking is shaped by age. Young people need help gaining work experience. Middle-aged people must remain productive. Older people must retire. Behind this approach lies an implicit assumption: that age determines the place a person should occupy in society. The reality is more diverse. A construction worker is likely to be physically worn out by the age of sixty-three. A professor, on the other hand, is more likely to still be standing in front of a lecture theatre with visible enjoyment at the age of eighty-two.

Yet the government attempts, through a maze of rules, benefits and pension schemes, to fit this enormous variation into a limited number of categories. This leads not only to bureaucracy, but also to undesirable side effects such as ageism. Strikingly, ageism is particularly prevalent in sectors such as technology, finance, marketing and the media. The financial sector, in particular, stands out in this regard. Whilst many financial providers have invested in diversity and inclusion (DEI) programmes in recent years, age often appears to be a forgotten dimension of diversity. Apparently, inclusion does not always apply to older people.

The artificial dividing line of retirement

Our current system creates a sharp dividing line between working and not working. From a certain age, people become entitled to the state pension (AOW) and a supplementary pension. Although it is often possible to continue working, the institutional message remains clear: a new phase of life is now beginning. For employers, this can be a signal to invest less in older employees. For employees, it can be an incentive to stop working altogether, even though they might well have wanted to remain active for a few days a week. As a result, experience is lost and human capital that is still perfectly employable disappears.

An ageing population only makes this issue more urgent. More and more people remain healthy and active well beyond their formal retirement age. At the same time, many sectors are struggling with staff shortages. It is therefore surprising that our system still assumes a rather abrupt transition from work to retirement. An abrupt transition is also often a psychological problem. For many people, work is more than just a source of income. It provides structure, social contact, status and a sense of purpose. When that is taken away from one day to the next, many older people find it difficult to strike a new balance.

Not the reason, but the income

A negative income tax (NIT) is based on a completely different philosophy. The starting point is not the question of why someone earns little, but the fact that someone earns little. Or to put it another way: the question is not why someone is poor, but whether someone is poor. That may seem like a small difference, but it changes almost everything. The curious thing about our welfare state is that the government first wants to know exactly why someone has insufficient income before it is prepared to help. Is someone unemployed? Then scheme A applies. Is someone unable to work? Then scheme B applies. Is someone retired? Then scheme C applies. Does someone pay rent? Then they go to counter D.

On top of that, we quickly find ourselves in a jungle of exceptions. A NIB turns this logic on its head. The government does not look at the category a person falls into, but at the income they actually have. That makes the system not only much simpler, but also more humane. It is particularly among older people that the power of this principle becomes apparent. Suppose a 70-year-old still wants to work two days a week as a consultant, mentor or teacher. Under the current system, that person becomes caught up in a complex interplay of state pension (AOW), pension entitlements, tax rules and supplementary benefits.

A weapon against ageism

With a NIB, the situation is much simpler. Those who earn enough receive no top-up. Those who earn less than the social minimum automatically receive a partial top-up. This creates a gradual transition from working full-time to retiring completely. People can phase out their participation in the labour market at a pace that suits their health, wishes and capabilities. Some will continue to work for longer. Others, on the other hand, will start working less sooner. Both choices are respected.

Furthermore, this creates a broader labour market for older people. Many employers do not need an older employee who is still available five days a week, but they do need someone with experience who can pass on knowledge, provide guidance or offer advice one or two days a week. The current system is heavily focused on either full labour market participation or full retirement. An NIB makes all sorts of intermediate options more attractive.

This has a second advantage. Ageism often arises because age is used as a proxy for productivity. Employers reason that an older employee is more expensive, poses a greater risk, or will only be of limited use. A system in which income support and work can be gradually combined lowers that barrier. Older people do not necessarily have to hold a full-time position to remain economically active. The aim shifts from ‘continuing to work until a certain age’ to ‘participating for as long as it is valuable to both parties’.

Away from group-based thinking

The welfare state is largely structured around groups. Older people, children, people with disabilities, the unemployed, students, those unable to work and single parents each have their own schemes, service points and exceptions. That system assumes that the government must first classify people before assistance can be provided. An NIB is based on a radically simpler premise: people are, first and foremost, individuals and families. The only relevant factor is whether their income falls below a certain level. Much of the administrative burden and group-based stigma is eliminated.

More freedom, fewer pigeonholes

Ageism will never disappear completely. People will probably always judge one another on characteristics such as age, appearance or background. Policy can either reinforce or weaken that tendency. Our current system does the former. It emphasises differences between groups and attaches varying rights and obligations to them. A NIB takes the opposite approach. The focus is not on age, health, family circumstances or employment history, but on a person’s actual income. This shifts the focus from groups to individuals and significantly reduces ageism.

This article contains a personal opinion by Harry Geels

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