What if, instead of believing that the graying of the developed world is going to cause economic chaos and ruin, we looked at retirement through a different lens -- one that made it invisible?
This is the basic premise of a recent Brookings post by World Bank Senior Economist Johannes Koettl -- and it makes sense to Little Layperson me.
The silver tsunami scenario -- the one where there are too many retirees and not enough younger workers contributing to Social Security to support them -- is based on what is known as the "old-age dependency ratio." This ratio defines how many retirees a worker has to sustain. With too many retirees and too few workers, there are serious concerns about what will happen to the world's current pension systems, including U.S. Social Security, when the ratio gets too out of whack.
(On a more personal note, this ratio is why younger people say older folks are after their money and questioning why retirees' lack of savings should be their problem.)
But the old-age dependency ratio we rely on has a big, glaring weakness: It assumes that at age 65 everyone will become an "old-age dependent" -- meaning retire and leave the workforce. And the reality is, that isn't the case now and certainly won't be true in the future.
"In the future, we may all be able to work forever," wrote Koettl. OK, I hope he's wrong on that part; life should be about more than what you do for a living.
But the truth is, our work lives and the concept of retirement have already begun to shift. Older people today are healthier than in any previous generation. Our life expectancy has increased and that has translated to the fact that many of us are staying on the job longer. Also contributing to our reluctance to leave work is the lingering damage of the recession when we lost our jobs and drained our savings; our kids who need help paying down student loan debt and buying homes; and our own fears about outliving our retirement savings, what there is of it.
But if we -- as a society -- adjusted the threshold of the old-age dependency ratio from age 65 to 75, we're in a different old-age dependent ratio ballgame.
Koettl goes a step farther: What if we erased the concept of a retirement age altogether? Why artificially constrain our productive potential to any fixed age anyway? All it does is force some workers to stop working before they are physically, emotionally or financially ready.
Granted, not everyone will want to work until 75 or 85 or 105, but keep in mind that historically, retirement was a 10- or 15-year end-of-life event. We traveled a bit, we spent time with our grandkids, and we got our financial affairs in order. We didn't hang around twiddling our thumbs for 20 or 25 years, which is what happens now when you retire at 62.
Koettl says that eliminating the artificial retirement age could be "a magic bullet" to save Social Security: People will contribute longer to the plan and be retired and drawing benefits for a shorter time.
So what's stopping us from working beyond 65? A couple of things. The statutory retirement age for one. It's around 65 in most countries. Perhaps a bigger roadblock is the perception that older workers aren't as technologically capable or productive as their younger counterparts. Ask anyone over 60 why they aren't working and a lot of what you'll hear is that no one wants to hire them. Older workers struggle to find employment and if unemployed, stay so for longer than any other age group.
As Koettl noted, those companies who have invested in keeping older workers on the payroll have proved their worth. BMW, for example, started a successful experiment some years ago where they introduced a 'pensioners' assembly line' in one of their plants. Through a series of interventions, ranging from physical exercise to soft floors and larger screens, the older workers' line became just as productive as other assembly lines.
Koettl also dismisses the argument that says older workers take away jobs from younger workers. "We labor economists call this the 'lump of labor fallacy'," he told The Huffington Post. All evidence points actually to the contrary, he said. "In countries where many old people work, more younger people work as well. Work is not a fixed pie: The more people work, the bigger the pie for everyone, the more income in the economy, the more consumption, the more growth and so on...."
So yes, older workers and physically and mentally capable of working beyond 65. And if we let them, we all might be better off.
Earlier on Huff/Post50:
