People reaching the age of 65 will no longer be forced to retire from October 2011, under plans announced on Thursday (29 July) by the government.

Currently, an employer can force an employee to retire at the age of 65 without paying any financial compensation. The only obligation on the employer is to hold a meeting with the member of staff to discuss plans six months before their 65th birthday. At the end of that meeting, it is down to the discretion of the employer as to whether or not the employment is terminated.

What are we to make of the government’s proposal?

On the plus side, the change could help inculcate a culture of respect for older people. In Eastern societies, special respect is paid to one's elders. This can include standing when older people enter a room, always greeting them before others present (even if they are better known to you), standing when speaking to them and serving them first at a meal table. In the West, by contrast, there is an all pervasive cult of youth.

The abolition of the retirement age could prove to be a real win for companies. Shakespeare wrote that 'Youth's a stuff will not endure'. It's striking that staff at companies like B&Q are increasingly likely to be over 60. Why? Older workers tend to be more conscientious, enthusiastic and better with people than their younger counterparts. In 2006, 1.1 million people over pensionable age were working - or about 10% of the pensionable age workforce. Two-thirds were women. And that trend is growing.

There are also economic factors to support the change. The population is ageing and the current pensions situation is simply unsustainable. Axing a fixed retirement age is likely to encourage people to work for longer. That could ease the strain on public finances as more people continue to pay tax, although they will also be entitled to claim the state pension.

In terms of older employees, there is a basic liberty question. If employees want to - and can - work, it seems unfair to force them out at 65. Rachel Krys of the Employers' Forum on Age describes retirement ages as 'blunt discriminators.' Work is important to human dignity. To lose your job is a blow to self-respect, an essential element of human dignity. In the words of Lord Sacks of Aldgate, the Chief Rabbi, 'Work means independence, which is at the core of human dignity. Even in Eden, said the sages, God gave Adam the dignity of work, placing him in the garden "to serve and protect it".'

If that's the positive side, are there any downsides to the change? The answer is: there could be.

The change could complicate the job of managing a workforce and add to overall costs for employers. And the additional demand for jobs could result in increased unemployment for younger people trying to enter a crowded jobs market. It could also have an adverse affect on community and the ‘big society’ idea the government is seeking to promote. What will the impact on volunteering be? Will older people spend less time with their families and more time in the office?

Whatever side of the argument we end up on, it's important to avoid framing the question in the utlilitarian terms that have shaped political debate in recent years (the world of Charles Dickens' Hard Times). Contrary to the prevailing wisdom, the value of a person is not defined by the job they undertake or the size of their pay cheque but by the strength of their character and their contribution to the common good. Ultimately, the success of the government's proposal will depend on the extent to which it promotes these values.

Paul Woolley is Director of Theos.