Raising the retirement age is a popular way to pay for the bankers’ crisis. Voters may not like it, but it’s delayed pain for most of them and if done smart enough it won’t trigger much resistance. But is it a good idea to raise the retirement age outside of this context? John Quiggin says yes, at least for Australia:
There are two main factors that should influence the age at which we retire. First, improving productivity means that any given standard of living can be achieved with less work, and we would expect at least some of this benefit to take the form of an increase in leisure, including more years spent in retirement. Second, and going in the opposite direction, we are living longer and (because of higher education levels and increased difficulty of entry to the workforce) starting work later[1]. So, with a fixed retirement age, the number of years out of the workforce is increasing, while the number in the workforce is decreasing.
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Those who think employment conditions reflect voluntary bargaining might argue that this apparently unsatisfactory outcome must reflect the preferences of workers and employers. I don’t buy this, at least as far as workers are concerned. But even if it were true, preferences are affected by policy settings such as pension ages. Leaving the pension age unchanged when life expectancy changes pushes people to work harder since their required savings increase. This is, on the face of it, a bad outcome. So, it makes sense for public policy to encourage later retirement, and discourage ultra-long working hours.
In short, retirement schemes have been designed at a time when life expectancy was much less; now that we’re living longer and be able to enjoy our pensions for longer as well they are unaffordable, or so we’re told. Hence the choice John talks about: either work harder now to pay for the same pension, or retire later. But it is a restricted choice, one that in each case puts the burden on the worker, rather than e.g. cut into profits to pay for it. Raise employer contributions rather than employee contributions; after all productivity has risen as well, so we are making more money for our employers. These options are never on the table but instead this crisis is used yet again to wage class war against the working classes.
We spent approximately sixty years of our lives in study and work, from when we turn four of five and go to kindergarten, to sixtyfive when we finally get to enjoy retirement. That’s long enough. If more money is needed to keep our pensions safe, get it from those who can miss it, not those who have had to work hard their entire lives already.