Toiling More as Others Opt Out?

Toiling More as Others Opt Out?

In a society grappling with an aging population, a shrinking workforce, and strained public finances, the debate surrounding increasing the retirement age to 70 has taken center stage. However, a thought-provoking article argues that this approach may be too simplistic, both from a social policy and economic perspective.

The crux of the argument lies in the potential contribution of the working-age population currently out of the labor market without objective obstacles. Employing this group could significantly bolster the pension system, relieving pressure on social funds. A moderate increase in their employment rates would yield positive fiscal effects, surpassing those achieved by merely delaying retirement.

The article raises concerns about the inequality and unfairness that extending working lives without simultaneously activating all working-age people creates. It questions why some should work until they're old and frail, while others permanently opt out of the labor market.

Alternative solutions to pension reform are proposed, emphasizing increasing employment rates among working-age individuals. These alternatives focus on boosting labor market flexibility and creating retirement systems that encourage longer and more sustained participation of working-age people.

One such solution is targeted labor market reforms. Instead of mandatory retirement policies, addressing rigid employment and wage regulations directly can promote higher employment. This includes making wage-setting and dismissal procedures more flexible, reducing mismatches between wages and productivity, and easing the dismissal of underperforming workers to encourage continued employment among older and working-age individuals.

Another solution is modernizing retirement plans. Expanding access to defined-contribution plans for public employees offers portable retirement benefits, helping mitigate long-term pension risks and encouraging more sustained labor market participation by providing attractive and flexible retirement saving options.

Encouraging labor force participation through behavioral and financial incentives is another approach. Research shows that raising early retirement ages leads to increased employment partly due to credit constraints and behavioral factors such as social norms and signaling. Policies addressing these could increase employment among working-age individuals without necessarily pushing the retirement age higher.

Lastly, providing retirement choice offers workers options between defined-benefit and defined-contribution plans or allowing phased retirement. This can motivate working beyond traditional ages by aligning benefits with individual circumstances and preferences.

Many employees struggle to reach the current retirement age of 67 in good health, particularly those in physically or mentally demanding jobs. The article suggests that a more nuanced approach is necessary, focusing on work motivation, state incentives, and societal co-responsibility, rather than solely on extending working lives.

Germany faces a skills shortage, suggesting that focusing on untapped labor potential could be more beneficial than continually raising the bar for the working population. The reasons for this include lack of qualifications, lack of motivation, and a long-standing dependence on the welfare state that in some cases amounts to work refusal.

In conclusion, the focus should shift from increasing the retirement age to addressing the issue of the working-age non-working population. Those who can work should work, and those who have worked all their lives deserve a pension that respects their effort. A more balanced and fair approach is needed to ensure a sustainable pension policy that benefits all members of society.

1. To alleviate the burden of an aging population, strained public finances, and a shrinking workforce, the article proposes focusing on boosting employment rates among the currently out-of-labor working-age population, arguing that this could significantly bolster the pension system and reduce pressure on social funds.
2. The article questions the fairness of extending working lives while others permanently opt out of the labor market, expressing concerns over the inequality created by such a situation.
3. As an alternative to raising the retirement age, the article suggests targeted labor market reforms, such as making wage-setting and dismissal procedures more flexible, reducing mismatches between wages and productivity, and easing the dismissal of underperforming workers, to promote employment among older and working-age individuals.
4. The focus should shift from increasing the retirement age to addressing the issue of the working-age non-working population, with the aim to ensure a sustainable pension policy that benefits all members of society, respecting the effort of those who have worked all their lives.

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