Tuesday, March 26, 2013
Like an ocean liner slowly but surely making its way to shallow water, Europe’s pension system is
on a collision course as the EU’s work force ages and enters retirement.
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| Photograph: Max Rossi/Reuters |
The import of the global financial crisis from the US to
Europe has led to the near evaporation of many private and public retirement
funds. This has pushed older workers to stay
in the workforce out of necessity and led governments to up statutory
retirement ages, or seriously consider doing so. This argument is rightly justified by
demographic statistics that highlight a younger workforce that won’t be able to
support the jump of baby boomers over the retirement cliff, but also the fact
that longer, healthier lives need a means of support.
There are a number of realities, however, that need to be taken into
consideration before changing the legislation on retirement age. First and foremost is the
labour market. As demonstrated in recent years, the first workers affected by
any contraction are those at the extreme ends of the spectrum. Increasing the
mandatory retirement age that workers qualify for pensions does not take into
consideration the fact that employers may not want to hire older workers for
any number of reasons (need for younger, more flexible workforce, cost-cutting
and therefore hiring less experienced workers, etc.). Increasing the retirement
age without incentivizing the job market to hire or keep older workers leaves
those depending on pensions in economic limbo.
So what is to be done? For starters, governments can start by
addressing the gap between statutory retirement age and exit retirement age. Simply
because a government employee, for example, qualifies for pension benefits at
age 55 doesn’t mean that they should take that as a cue to stop working. Additionally,
younger employees should be hired with the understanding that older employees
will inevitably retire. Government and businesses cannot be caught with their
proverbial pants down and need to prepare not only address the needs of an
aging generation but also those entering the labour market. Otherwise, they not only risk the welfare of upcoming retirees but of the younger generation as well.
