The well-known economist John Maynard Keynes once said that by the year 2030 people in developed societies would be wealthy enough to devote most of their time to leisure rather than work.
Keynes was right about many things – but with 20 years to go, this forecast looks amiss. If anything, people in rich countries are working longer.
Joy of (longer) life
People are living longer, especially in wealthy countries, thanks to better diets and more advanced medical treatments and cures. According to projections from the Organisation for Economic Co-operation and Development ( OECD), 22.7% of men in its member countries will be aged over 65 by 2050, more than double the 10.9% in 2000. For women, the share is expected to rise to 27.1% from 13.9%. Likewise, a report in medical journal The Lancet forecast that the majority of babies born in 2009 in the developed world were likely to survive into the next century, such is the pace of increase in life expectancies.
Longer lives tend to put a greater burden on people of working age to pay taxes to fund healthcare costs – unless people work longer.
Hi ho, hi ho, it’s off to work we go…
Instead of finishing work at an official retirement age, a greater number of people are continuing to work into their golden years. OECD figures say that in Korea the average man clocks in until he’s over 71 (or more than 11 years beyond retirement age). A poll in the United Kingdom by an insurance company this year found 70% of people intended to work beyond the traditional retirement age, with one in 10 expecting to work until they died. The main reasons those surveyed planned to work longer was to maintain their financial well-being.
Age limits are going up
Governments around the globe are tackling the financial impact of ageing populations by raising state pension ages. Spain recently announced plans to raise its official retirement age from 65 to 67. The country is not alone, with the UK government’s State Pension Age Review reporting almost all developed countries plan to raise the state pension age to 67 or 68 – or to cut the benefits in some other way.
While effective at cutting costs, raising the state pension age is not popular. In an eZonomics poll in November 2009 that asked whether governments should be raising the state pension age, 60% responded “no” and a further 8% were unsure.
Grey is the colour
Older people in the past faced obstacles to securing jobs. The OECD set out reforms needed to raise the employment rate of older people in its Live Longer, Work Longer report, issued in 2006. It suggested:
- Providing strong financial incentives to carry on working and eliminating subsidised pathways to early retirement
- Adapting wage-setting and employment practices to ensure employers have stronger incentives to hire and retain older workers
- Giving older workers help and encouragement to improve their employability
- Shifting attitudes of both employers and older workers.
It seems that however old you are, there's a question around when you can finally hang up your boots – making it more important to plan for your golden years.
Clarity Economics’ lead consultant