As populations age, it’s essential to rethink pension systems, but meaningful reforms hinge on a deep understanding of older workers.
The dialogue surrounding pension ages in Europe is both necessary and contentious. With rising life expectancies comes an increased ratio of pensioners to the working population, which places significant pressure on government budgets.
In nations where retirement reforms have led to heated debates, a recurrent argument surfaces: adjusting the state pension age cannot be a ‘one-size-fits-all’ solution. Variations in wealth, health, and job nature mean that extending working lives can disproportionately impact certain groups. For example, individuals with lower incomes, health challenges, or demanding jobs often bear the brunt of these changes when exemptions aren’t considered.
Thus, when aiming to close the productivity gap, it is crucial for governments to analyze the profiles of older workers. Grasping the diverse motivations behind choices for early or late retirement is fundamental to enhancing output, promoting equality, and improving employee wellbeing.
Health Considerations
For many who must exit the workforce before reaching retirement age, health is a critical factor. Individuals unable to work due to health issues can typically access their pensions early in numerous countries. Therefore, investing in healthcare is a vital strategy for governments seeking to extend the working lives of their citizens.
Moreover, health-related challenges often correlate with the type of work individuals do. “Generally, white-collar positions have higher participation rates into old age compared to blue-collar roles,” noted Arthur Seibold, an assistant professor of economics at the University of Mannheim. He attributes this trend to the “physically demanding” nature of many blue-collar jobs, although mentally intensive professions can experience similar issues.
Countries such as France, Italy, and Spain offer additional pension benefits to numerous jobs deemed hazardous or arduous. For instance, in France, employees who work night shifts or in extreme weather may qualify for early pension access.
While longer working lives can adversely affect health in certain roles, some research indicates that delaying retirement can lower the risk of cognitive decline in individuals.
Financial Considerations and Incentives
In many European nations, employees can usually afford to cease employment at the statutory retirement age thanks to public pension schemes. However, more affluent individuals have the option of retiring earlier.
Barret Kupelian, Chief Economist at PwC, discussed the Golden Age Index with Euronews, a ranking of OECD countries based on older worker employment levels. “We observe that in the UK, significant increases in house prices often lead to older workers exiting the workforce,” he shared. “This suggests that potential retirees feel secure in their financial situation due to property appreciation, allowing them to retire sooner than originally planned.”
Even when financial means allow for retirement, motivations to remain in the workforce persist. Many European countries permit workers to continue accumulating pension benefits beyond the statutory retirement age, while some offer tax incentives for older employees. For example, Belgium’s ‘flexi-job’ system enables retirees to return to work and earn a salary without incurring taxes.
Moreover, fostering flexible working arrangements and a supportive workplace environment can encourage older employees to postpone retirement. “Older workers desire flexibility in terms of both work hours and location, particularly as many have caregiving responsibilities for aging parents,” Kupelian added.
Job Satisfaction
Edward, a recently retired chartered accountant who preferred to remain anonymous, shared his experience of returning to work at the age of 72.
“One day while strolling through my local high street in south-west London, I encountered an acquaintance who inquired about my activities. When I revealed my retirement status, he remarked that I was ‘too young’ to retire and invited me to his office. A week later, I began working with him. I stayed on, enjoying my role with a young, welcoming team that rejuvenated my spirit. Learning about different generations kept my job engaging,” he recalled.
Janie, who also wished to use a pseudonym, discussed her professional switch and ongoing employment past retirement age. Transitioning from a fund manager to a role in luxury sales, she expressed, “Being self-employed has been fulfilling for me both financially and personally. I thrive on the excitement that comes with closing a sale, and I see no decline in this enthusiasm as I age. Occasionally, I contemplate full retirement but often wonder what I would do with my time.”
Removing Barriers for Older Employees
Janie acknowledged that while ageism has not hindered her career, she occasionally feels ‘dismissed’ due to her age.
Jelle Lössbroek, a postdoctoral researcher at the Netherlands Interdisciplinary Demographic Institute, emphasized that “older workers often encounter little resistance in retaining their jobs.” He pointed out that such workers typically enjoy robust employment protections, sometimes even superior to those of younger employees.
However, older employees may face challenges in re-employment, as they often command higher salaries than younger counterparts. In the Netherlands, Lössbroek remarked, a specific labor law could complicate the extension of employment beyond retirement age. “Employers can terminate staff upon reaching retirement age, unless they provide alternative grounds for dismissal if the employee continues working,” he explained. Consequently, many employers may prefer to issue temporary contracts to older workers.
Technological advances also pose hurdles for employees nearing retirement, as younger colleagues often possess greater digital skills. Governments and organizations can offer training programs to bridge this skills gap, although older workers might feel less motivated to pursue digital proficiency.
Whichever direction policymakers choose, discussions around retirement will undoubtedly intensify in the future. Professor Seibold posits that “in several European nations, long-term labor shortages are already evident in various sectors, elevating the importance of retaining older workers.”
The pressing challenge for governments lies in facilitating these changes in a fair and efficient manner, often in the face of political opposition.
Photo credit & article inspired by: Euronews
