The latest demographic complexities as well as reduced returns from investments are posing a major threat to keeping employees who have reached their retirement age longer at their jobs. This realization has hit major first world governments.
These governments have reacted swiftly and are proposing to increase the retirement age. Ironically, the retirement age is currently at 63, which is one year lower that the 1970s. This means that the governments see the need to raise age of retirement as the best means to keep the cost of pension affordable.
The increase of retirement age may not be such a problem to countries struggling with an aging work force provided the countries balance the supply of the work force with the rate of retirement. However, this may be a problem because latest statistics indicate that life expectancy and fertility rates are declining.
Therefore, the said governments are facing the challenge of having an increasing population but which has a reduction in fertility and productivity. The economies of these countries are therefore less productive than they should.
There are advantages though of rising the retirement age of employees in these countries. Governments get to benefit on two ways. Firstly, these employees add to the government revenue in form of taxes.
Secondly, and as mentioned earlier the governments get to keep their pension bill down. While people argue that working for longer increases the countries productivity, economists have raised the concern at the quality of their production by such an old aged work fore.
The agreement is build on he fact that older people cannot be expected to be optimally productive at demanding jobs. Actually this amounts to paying a significant percent6age of employees to do nothing that is of value to the economy (Thomas para 1-6).
The debate to increase the retiremen6 age began in the early 1980s in developed counties especially USA. The idea was informed by the fact that citizens were living longer than expected. To keep theme economically productive the countries proposed the increase in retirement age.
Suffice to say that the experience of age is also another factor that makes the aging population marketable at the job place. However there was a worry about the rising cost of pension (Schulz 164).
While the argument was met by a quick response that the cost would be met by encouraging some of the employees to retire early, the argument does have various shortcomings.
The argument does not consider those employees who retire involuntarily especially due to such factors as poor health, unproductivity or even retrenchment. This argument does not answer the question whether an older workforce will be able to meet the productivity demands.
Rising the retirement age is purposed at ensuring the retired population becomes self sustaining; that they will have something to0 live on in their sun set year. While it is vital to focus on the aging population and make it self sufficient, countries risk several things.
To begin with countries raising the retirement age risk overburdening the young working population. This is happens in two ways; reducing the number of jobs available and using more of their taxes top pay of their older and aging working colleagues.
Several government have notice these risk and have also opted to focus on the young population. Several pension schemes are used in a number of countries. They range from automatic enrollment into saving schemes.
These mean that a citizen is automatically enrolled into the pension scheme upon attainment of a certain age. Some other countries opt for compulsory enrollment, and use a tax incentive to motivate the younger working population to save fro their old age.
Record show that when the young have earned a tidy sum they may either spend it recklessly upon retirement (Morgenstern paea 1-4). This proves that the government should not merely focus on making the young ones save for their old.
The savers attitude and knowledge upon retirement is crucial. Governments should focus a little more attention to educating the people on how to manage their pension upon retirement.
Thus the success of a sustainable pension scheme is not just the government’s efforts to save but also how the people manage their retirement benefits. For instance saving for life and then only to use pension to pay for debt accumulated over the period of ones life is not economically sensible.
Those in support of the efforts to raise the age of retirement assert that it will boast and stabilize the social security of a country. This will be achieved through stabilizing the pension industry as fewer employees will be pensionable in the foreseeable future. Furthermore, a reduced pensions bill will reduce the raising national budget deficit created by t ever increasing need to take cater of the aged population in a country.
Raising the retirement age is also seen as one of the options of for reducing national budget deficits (Mckinnon , Boles And Vaughan Para 9). This is usually a valid reason at face value. It prep supposes that no one wants to retire and that all professions will be bound by this rule.
However a clearer look at the situation presents a more complicated picture. Stability of the pension industry is just a future dream. This is because the changing demographic dynamic makes it impossible to have an accurate estimation on pension needs in the years to come.
Furthermore it is also difficult to estimate on average when the current generation of retiring employees will die. Such complexities present glaring hard truths about the uncertainties of the future especially for the aging population.
The idea of rising the retirement age has been mooted by those who think that it is an effort to provide money for retirees to spend. This is hoped to ramie the spending level of the entire nation and as such will provide enough business for the younger generation. (Altmann para 6). Furtyrmore efforts to estend the working life is seen as a way of retaining essential profession skills necessary for economic development (para 8). This therefore implies that the baby boomers are the key pillar for economic growth and sustenance.
Will be able to be of economic benefit both to the economy as well as to themselves. Te assumption is this case is that all retirees will be wise spenders of their retirement benefits. Furthermore this argument also assumes that allowing the elderly to continue working does have an overall positive effect on the economy.
As in deed mentioned earlier, the argument also asserts that the aging population can actually be able to maintain economically productive levels. By not letting the baby boomer not to work the economies will be negatively affected.
While there have been plan set to let this group of people to work on part time basis, the over emphasis on allowing them to work is not the key to supplementing the inadequate governments pension schemes.
Critics of this theory argue that what modern economies need is a young and vibrant worker who van understand the dynamic needs of the modern day job. Furthermore, the number of unemployed people aged 55 and over is alarmingly high.
Therefore increasing the retirement age simply has a negative impact on the economy. This is due to the fat that it raises the unemployment are as well as makes longer the year that this people spends looking for a job (Geewax para 3-7).
This in effect raises poverty levels especially in this group of citizen. Furthermore it increases the number of years that the spend without being able to access social welfare benefits for retirees. This has an effect on the poverty index too.
The age at which people retire is a complicated matter. This is because it has a direct effect on the economic set up of that country. Governments need to reign in and control the raising pension bills, which are resulting to national budget deficits.
Various ideas have been put forward to reign in on the increased level of national budget deficits. Rising the retirement age is one of them this view sees a job as more that just a means to earn a decent salary.
For these brand of economists, having a job is necessary toward national and economic development. However as debate continue of the need to raise the age of retirement, government pensions schemes continue to feel the pinch of an increasingly aging population
Works Cited
Altmann, R. “Scrapping the default retirement age will benefit the economy.” The Guardian. 2010. Web.
Geewax, M. “Raising The Retirement Age: Can It Balance Budgets?” npr. 2011. Web.
Mckinnon, J., Boles, C. And Martin V. “Deficit Panel’s Leaders Push Cuts.” Wall street journal. 2010. Web.
Morgenstern, M. “A special report on pensions: A nudge and a wink”. The Economist. 2011. Web.
Thomas D. “Pensions: 70 or bust!” The Economist. 2011. Web.
Schulz, J. The Economics of Aging. West Port, CT: Auburn House. 2001. Print.