This is why we’ll probably have to work longer than our parents did

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: John Letzing, Digital Editor, Strategic Intelligence, World Economic Forum

• China is moving ahead with a plan to raise its retirement age.

• Many countries face similar issues and are also raising retirement ages.

• The changes are in response to ageing populations and declining birth rates.

China’s plan to “gradually delay” the country’s legal retirement age has managed to unify a wide variety of people around a single sentiment: they don’t like it.

As a country looking for ways to address the fact that it may not have enough workers paying into its pension system to support an ageing population, however, China is far from alone.

In more than half of the 38 OECD member states, some of the most prosperous nations on Earth, normal retirement age is expected to increase by the time young people now entering the workforce depart during their silver years, according to one projection.

In some cases the step up may be stark; young men in Turkey can plan on retiring at 65 instead of the mandated age of 52 as of 2020, for example, while in Denmark men whose grandfathers could retire at 65.5 years of age may have to wait until they’re 74.

In March, China took its first step towards raising its current retirement ages – 60 for men, 55 for white-collar women and 50 for blue-collar women – by enabling people in one eastern province to start voluntarily applying for delayed retirement.

What’s happening here? Did these places just fail to plan ahead?

For one thing, lives have generally gotten longer and more comfortable. And, as people become more financially comfortable, they seem to produce fewer future members of the workforce.

Birth rates have been in decline in much of the world; one study projected the global population will peak in 2064, then decline by nearly 1 billion over the next 36 years. At the same time, progress has been made on reducing poverty, and the global middle class has been adding about 50 million people every year (at least, pre-pandemic).

These trends are great if you want to buy a car or an iPhone now, but not so great if you want to be able to collect benefits to purchase blood pressure medication, or a scooter to navigate your assisted living facility, in the future.

OK boomer, enjoy your retirement

For some people, the overall dwindling of working-age contributors to retirement schemes, and paycheck contributions potentially inadequate to support their own relatively long post-work life, may seem like just another way prior generations had it easier – on top of having been able to obtain wealth-creating assets like homes at comparatively cheap prices.

Still, it wasn’t so long ago that the concept of “retirement” didn’t even yet exist. Its creation is generally attributed to the 19^th-century German Chancellor Otto von Bismarck, who was born at a time when average life expectancy where he lived was probably less than 40 years.

By the 1960s, thanks in no small part to the efforts of unions, American auto workers were being encouraged to retire with benefits at 60. In much of the industrialized world, the average age of retirement was on the decline.

In the midst of that downturn, and on the cusp of decades of stunning economic growth, China rolled out its one-child policy in 1980.

Yet, in China and elsewhere people were starting to live longer, and populations were becoming heavily weighted towards retirees. In 2016, China scrapped the one-child policy. Last year, the country registered its slowest rate of population growth in six decades.

Years of life expectancy at birth in China jumped from 71 to 77 in the first two decades of this century alone – not quite as high as the 85 years reached by Japan (up from 81 in 2000), but needle-moving, nonetheless.

Despite its recent declines in life expectancy, the US also has an ageing workforce; last month, a particularly-dedicated National Park Service ranger retired a few months shy of her 101^st birthday.

Not everyone can be as passionate about the work they’re often compelled to do in their silver years for financial reasons.

One study found that older workers in the US are now performing tasks that are “surprisingly” physically demanding and put them at risk of injury, and the number of Americans over the age of 65 taking relatively low-paid jobs in fast food restaurants is on the rise.

More reading on retirement and ageing workers

For more context, here are links to further reading from the World Economic Forum’s Strategic Intelligence platform:

• The hidden costs of incentivizing later retirement – many countries are trying to induce workers to retire later for fiscal reasons, but this study found that the “overall welfare” effects of doing so aren’t very well understood. (VoxEU)

• When will you retire? This infographic breaks down some of the key elements driving increases in retirement ages around the world. (Raconteur)

• In the UK, the state pension age was recently raised from 65 to 66. According to this analysis, the change disproportionately forced the less-prosperous to continue working longer, and led to a record number of 65-year-old women on the country’s payrolls. (The Conversation)

• The many lives of the Bolivian private pension system – countries in Latin America have increased the government’s role in providing pensions since the mid-2000s, according to this piece, which takes a closer look at Bolivia to illustrate broader regional trends. (LSE)

• Canada as an outlier – a study of high-income countries found most have either already increased the age of eligibility for public retirement programs to above 65 or are doing so, yet the Great White North is not. (Fraser Institute)

• Hardly any political topic is treated as gingerly as pensions, according to this interview with an academic who says it’s a “necessity” to link the retirement age to life expectancy and not an outdated benchmark. (Max Planck Society)

• In the US 90% of the highest-paid workers have access to an employer-sponsored retirement plan, compared with just 30% of the lowest paid. This analysis suggests expanding the availability of “automatic” individual retirements accounts to address the issue. (Brookings)

On the Strategic Intelligence platform, you can find feeds of expert analysis related to Ageing and Longevity, Employment and hundreds of additional topics. You’ll need to register to view.