Is Raising Or Lowering The Pension Age Really The Key To Economic Prosperity?
The UK pension age is already set to rise incrementally to 68 by 2046 but the state pension qualifying age should be raised further according to Conservative think tank, the Centre for Social Justice — and the age is 75.
But how might this impact the wider economy?
Not everyone will be fit to work until they’re 75, and of course if your job includes heavy manual labour, chances are you’re unlikely to be able to cope with working at the same level into your 70s. Another factor is the arrival of the Fourth Industrial Revolution. Just how much heavy manual labour will there be in the workplace by 2046?
In Italy Parliament backed lowering the retirement age and the introduction of a new basic income. The government’s spending plan was approved by MPs amid concern in Brussels over the populist government’s expensive policies
The Italian parliament approved the government’s 2019 budget days before the 2018 year-end deadline. The idea was that an earlier retirement age would free up more jobs for those entering the job market.
But will it?
There is evidence that keeping older workers in the workforce longer not only doesn’t harm the employment prospects of younger workers, but it might actually help both.
René Böheim, an associate professor at the Department of Economics, Johannes Kepler University, Linz, shares a different view of the pros and cons of raising the retirement age and what an ‘effective’ retirement age looks like.
Pros There is no trade-off in the employment of young and old workers: Higher employment for older workers coincides with higher employment for younger workers. Increasing the retirement age increases younger workers’ wages. Younger and older workers are complements for each other rather than substitutes.
Cons Reducing the employment of older persons does not provide more job opportunities for younger persons. Increasing the employment of older persons neither reduces the employment, nor does it lead to more unemployment, of younger persons. Lowering the retirement age decreases the incentives to train and to invest in additional skills, and therefore leads to lower economic growth.
Effective retirement age The average effective retirement age is the mean age at which older workers withdraw from the labour force to retire. In most countries, it is lower than the official retirement age. For example, in 2011, the official retirement age for men in Germany was 65 and the effective retirement age was 62, according to the OECD. In most wealthy countries, the trend toward a lower effective retirement age dating back to the 1970s has been halted if not reversed. However, retirement ages are still generally below the levels of the 1970s. Life expectancy is rising faster than increases in the effective retirement age, which implies a longer time in retirement, raising concerns about old-age poverty and the sustainability of public pensions
So there are no easy answers and the world of work is changing rapidly. Perhaps new age retirement will simply see a very different way of working?
