Work Longer and Live Better: an Argument for Increasing The Retirement Age

Something that will come as no great surprise to people living in the more developed countries is that we are living longer; with the global economy threatening to melt down around our ears, however, we’re not necessarily living better.

Living Longer But Not Necessarily Better

The average age in the United States is approaching 67, but the fact is, with modern medicine, many of us will surpass that by a margin that, unless we have a better source of economic succor, will not be all that comfortable.  Life expectancy, according to actuaries, continues to rise; a little less than a month a year in the richer countries; and this means that in order to have a comfortable life style, we really need to work longer than we currently do.

In the United States at present, with declining birth rates, by 2050 according to an article in the April 9-25, 2011 issue of The Economist, there will be fewer than three active workers for every person on a pension.  The U.S. currently has plans to raise the retirement age from 65 to 67, but with increasing life spans, this won’t do much to redress the imbalance.  With even lower birth rates, the situation is worse in western European countries.

Bandaid Solutions Won’t Solve the Problem

This tentative action on the part of governments is a bit like piling pebbles in the path of a rising river in hopes of stemming the coming flood – too little, and already too late for those facing imminent retirement.

If the developed world is to avoid a crisis there is an urgent need for governments, companies, and workers to bite the bullet and admit that the developed world’s current retirement systems are unsustainable in the long term.  Instead of taking the incremental, bandaid approach to retirement, we need to drastically change the way we look at work, retirement, and living standards.

There are a number of significant advantages to raising the retirement age above the current planned levels and allowing people to be active in the work force longer.

     Workers would be able to earn wages longer, thus, lessening the burden of having to support inactive people.

     Companies would have the advantage of the increased years of experience.

     Governments would collect more in taxes than they do under the current systems.

     With more people working, economies would grow faster.

Raising the retirement age, though, is not an easy task.  There is, of course, the problem of creating enough jobs to accommodate a larger work force.  This fallacious reasoning, known as the ‘lump of labor,’ is viewed by many as a disincentive to younger workers.  While longer working years might not be practical for arduous jobs, in the United States, given that the bulk of work is in knowledge management rather than manufacturing, it should be less of a problem than is commonly thought.  In many firms it can be handled by splitting tasks or sharing jobs.  It will require some creative thinking on the part of government as well as industry, but it is certainly better to attempt this than to cling to the belief that an economy can prosper by encouraging large numbers of its citizens to be idle.

Thanks to modern medicine we are living longer.  It is now time to apply our brains to ways to live better.  Not everyone will chose or be able to work much beyond 65.  The physically disabled, for instance, will need assistance.  But, people who are physically and mentally capable of working, and who wish to work, should be allowed to work as long as they are able.

The Pension Bubble

One solution might be to apply the principle used by Social Security.  Have a flexible range of ages for retiring workers, with those choosing to retire at the earlier ages getting a greatly reduced pension as compared to employees deciding to work longer.

Instead of worrying about the ‘lump of labor,’ we should be concerned about the ‘pension bubble’ that, if not attended to, will one day burst.