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Debate: Raising the retirement age

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Should the state retirement age be raised?

This article is based on a Debatabase entry written by Jacqueline Rose. Because wiki document can be modified by any registered user of this site, its contents should be cited with care.

Background and context

Developed countries are suffering from the phenomenon of aging populations; partly due to temporary demographic booms, but also due to vast increases in life expectancy. Concerns, particularly in European countries, are therefore focusing less on the size of populations and more on the ‘coverage ratios’ – the relative proportions of those in work, who contribute to government income via taxation; and those retired citizens who are dependent on government spending. The OECD estimates that only 50% of 55 to 64 year olds are in work (and in the EU the figure is as low as 39%), compared to 75% of 25 to 54 year olds. The effective age of retirement in Germany is 60.5, whilst Russia has the fastest falling coverage ratio. The majority of countries, with a retirement age of 65, are estimated to have severe problems in c.2011, although in France (with an age of 60) this will come as soon as c.2006. By 2050 the EU 27 will have suffered a 6% fall in population, with especially rapid declines in Italy, Spain, and Germany. Spending on pensions, health, and related issues will then rise from a current level of 15% of GDP to an estimated 22%. The British age of retirement was set in 1925; life expectancy has increased by 5-6 years since that time. But the length of foresight needed for changes is demonstrated by the United States, which in 1983 mainly outlawed compulsory retirement ages of 65-7; an action that takes effect between 2002-27. Alternative solutions might be shifting to private pension schemes (which are more prevalent in Britain and the Netherlands than the rest of Europe) or moving from defined benefits to defined contributions (as in Sweden), with state ‘notional accounts’ (as in the 1990s in Latvia and Poland). The US Pension Benefit Guarantee Corporation acts as insurance; this is thirty years old and in deficit; in June 2003 the British Pension Protection Fund was established to provide compulsory insurance for defined benefit schemes. This debate mi

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Economics - Does a lower retirement age cause lower economic productivity?

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Yes

  • Too low an age of retirement damages economic efficiency, and thus decreases individual and national prosperity: The demographic timebomb means that the state simply cannot sustain spending on pensions and healthcare for an aging population without frightening high levels of taxation.
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No

  • Decreases in national wealth, and economic inefficiency, are not merely caused by an aging population. Improving national prosperity comes from shifting from a manufacturing to services economy, and from improved technology, education and training, not merely employing people longer.
  • People may work harder during their lives if they know that an early retirement age waits for them:
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Yes

  • The current retirement age is anachronistic; designed to cater for a very different time and job market, when people could be expected to die only a few years after retirement. Not only have expectations of career paths changed, but the shrinking size of state intervention has also shifted expectations away from the era of welfare state pensions.
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No

  • Even a minimalist state must still be recognized to have a duty of care to its citizens: Those currently nearing the age of retirement do, and rightly do, still have the expectation of a state safety net rather than private pension schemes.
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Stamina - Are workers performing fewer and fewer physically demanding jobs, making it possible for them to work for more years?

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Yes

  • Physical strength is now less necessary, so one’s working age becomes extended. Some companies are increasingly seeing the advantages of recruiting older workers: they are experienced, more reliable and responsible, and less likely to quit after only a short time.
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No

  • Many jobs are still blue rather than white collar forms of employment. In such cases, there are still significant physical demands on employees, which older workers may not be able to cope with. Such demands are even increasing, e.g. in the form of travel, in an era of globalisation. Slower reaction times and lapses in memory could make older workers dangerous to themselves and others in some areas of employment.
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Yes

  • An aging population is not necessarily a less healthy one: The quality of life of a person in their sixties is now such as to allow them to continue working longer. As the effective retirement age is often several years lower than the official one, raising the official age would maintain higher rates of employment for those in their fifties and sixties.
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No

  • Early retirement is often an alternative term for forced redundancy. There is still a climate of ageism in the job market, with older job seekers less likely to be readily employed, either due to higher pension costs, or to ingrained perceptions about ease of retraining. Raising the official retirement age will remain a paper solution unless cultural expectations alter.


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Impact - Does setting a state retirement age even really matter?

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Yes

  • The state retirement age sets an informal benchmark for the private sector: The state cannot coerce the age of retirement with regard to private companies, but it can influence the expected age, for the state age of retirement sets an informal benchmark for the private sector.
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No

  • Vast proportions of the population are employed by private companies with their own rules on retirement ages. Especially after the privatisations of the 1980s, the state retirement age has remarkably little impact on the workforce as a whole.
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Retirement savings - Do workers want to work longer to save more money for retirement?

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Yes

  • A high quality of life after retirement is now expected by many pensioners: As insurance and living costs rise, a longer working age is necessary to maintain the same level of pension contributions.
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No

  • Quality of life cannot be measured in merely monetary terms: It is wrong that people should spend the entirety of their active healthy lives working – they should be able to retire with a period of time to enjoy the benefits of better healthcare and relaxation.
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Entering work force - Are people entering the workforce later in their lives, possibly making a higher retirement age an appropriate adjustment?

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Yes

  • People are starting to work later in life, meaning that a higher retirement age might be appropriate in maintaining a consistent level of years actually worked: As more of the population enter university, and increasingly undertake postgraduate qualifications, the age at which a person’s working life begins becomes later. Precisely because changes are so long in taking effect, action must be taken now. To maintain the same level of (increasingly private) pension contributions, it is logical for this demographic cohort to stay in work later in life.
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No

  • Such a view is accurate, but only with regard to recent demographic cohorts and for those who do delay starting work in this way: Any alteration to pensions systems has to be carried out long in advance of demographic pressures; the proposition’s solution is too little too late.

Motions

  • This House Believes That Seventy is the New Sixty-Five
  • This House Would Increase the Age of Retirement
  • This House Would Keep Working
  • This House would ask; will you still need me, will you still feed me, when I’m 64?

This debate in legislation, policy, and elsewhere

See also

External links and resources

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