South Korea: Government To Seek to Encourage Earlier Retirement to Boost Younger Workers

Writing in the JoongAng Daily, Jung Ha-won reports that the South Korean government is intensifying pressure on state-run companies to shed more employees before they hit retirement age to open the door for younger workers. part of its efforts to prop up the job market. The Finance Ministry is expected to unveil guidelines to discourage state-run enterprises from taking advantage of the current system to keep all their older workers on the payroll, instead of keeping only a select few senior workers deemed absolutely necessary.

“Extending the retirement age for all employees can block new employment opportunities for youth and deal a blow to the labor market,” said one Finance Ministry official who declined to be named. “We are preparing guidelines to fend off thoughtless attempts to extend retirement ages.”

Source: JoongAng Daily "Gov’t to tighten older worker policy" (February 25, 2010)

Europe: Expert Encourages Labor Market Reform in Advance of Aging Workforce

The European Union needs to undertake far-reaching labour market reforms if it wants to be able to safeguard its social security system, according to a Policy Brief written by Fabian Zuleeg and released by the European Policy Centre. Otherwise, it is not clear that Europe's social security system "will be affordable with fewer payers and a disproportionate rise in the number of recipients of, in particular, pensions and health care."

At a briefing on the issue, as reported by Jochen Luypaert, Zuleeg said that employment rates need to increase, especially among women, older people, ethnic minorities, people with disabilities and low-skilled people.

The EPC expert proposed to get rid of early retirement schemes, raise the retirement age and introduce policies that engage older workers in the labour market.

One of the proposed ways to avoid companies laying off older workers is to make sure that their wages correspond to their productivity, even if this means that older workers are paid significantly less than is currently the case.

Source: European Policy Centre Policy Brief (November 16, 2007)

Additional Source: EUobserver "EU labour market reform 'urgent'" (November 29, 2007)

Canada: Recommendations in Quebec To Stop Encouraging Early Retirement and Pushing Normal Retirement Age to 67

According to an Economic Note published by the Montreal Economic Institute, economist Norma Kozhaya, ending the encouragement of early retirement right away and gradually pushing back normal retirement age from 65 to 67 are among the measures needed to reduce the impact of aging on Quebec's public finances as well as to ease labour shortages. The Note--"The retirement age in Quebec: A worrying situation"--concludes that “it is essential to start the necessary reforms right away before demographic phenomena lead to lower economic growth that will reduce wealth creation in Quebec.”

The focus of the Note was the fact that the aging of the population and the impending mass retirement of baby boomers are already starting to create labour shortages and will soon cause weaker growth in the economy. The goal of the recommendations was to suggest a number of moves that could be considered to raise the participation rate of older people on the job market and to reduce the negative economic effects of aging while helping maintain the viability of existing retirement plans.

Source: Montreal Economic Institute Media Release (June 18, 2007)

Commentary: Global Economy and Early Retirement versus Working Longer

Philip Taylor, professor of employment policy at Swinburne University of Technology, offers up thoughts on why Australia has been increasing its employment of older workers, while at the same time companies in other parts of the world are continuing to offer incentives for early retirment. Thus, he contrasts positive signs that suggest that Australian business has woken up to the potential of older worker, with indications from other countries that raises the question whether "much of industry, wishing to remain globally competitive, will dare employ ageing workforces."

He concludes that a "cautious view would be that global competition will continue to reshape the contours of older workers' employment in uncertain ways. There will be some winners, but there are likely to be many losers. An adequate policy response will to encourage economic activity while recognising the need for a dignified exit."

Source: The Age "Job prospects on rise for older workers" (May 25, 2007)

Commentary: Early Retirement Trend Reversing in Australia

Ross Gittins, commenting in the Sydney Morning Herald on the sharp increase in the number of older workers staying in employment, observes that the rise has been caused by men staying in full-time jobs--that is, it represents "men staying in employment and not retiring, rather than men who'd formerly retired being enticed back into the workforce." Women is a different story, as participation by women aged 55 to 64 has been constantly rising as part of the general trend for women to return to or stay in the workforce.

In looking at various explanations for the reversal, Gittins notes that, in earlier times, a lot of the supposed early retirement was involuntary, while more recently there's been a lot fewer involuntary departures from the workforce. In addition, he notes that "the now ageing baby boomers are healthier and better educated than the generation that preceded them" so that "they may have higher expectations for retired comfort than could be satisfied by just the proceeds of the age pension." Finally, while he believes that prejudice against older workers is dissipating rapidly, this is "less because of the sermons than because of the shortage of experienced, steady workers. Market forces strike again."

Source: Sydney Morning Herald "Another myth bites the dust" (February 7, 2007)

Portugal: Pension Reforms Will Penalize Early Retirement

News reports indicate that Portuguese state pensions are to be indexed to the country's economic performance and average life expectancy under new pension and welfare reforms announced Tuesday. While the official retirement age is to stay at 65, any increases in the country's average life expectancy will trigger a reduction in the amount paid out so the entitlement can be spread over a longer period. In addition, anyone taking early retirement will have their pension cut by up to 6%.

According to the Associated Press report on the changes, "workers can choose to offset possible reductions by increasing the amount they pay into the social security system while still in employment or by working beyond 65." In addition, business confederations representing industry, agriculture, services and tourism that had initially balked at employing older workers agreed to the changes as the government warned that the alternative was higher corporate taxes.

Source: Business Week Online "Portugal pension system to be reformed" (October 10, 2006)

China: Encouraging Retirement?

According to China Daily, the weekly magazine Liaowang (Lookout) recently carried an article in which some scholars suggested that China should alleviate its social welfare financial burden by making more people retire at an earlier age. "However, some experts objected to this suggestion. In their opinion, in order to reduce the pressure adding on China's welfare system, the most important task should be getting rid of all those abnormal 'early retirement policies'. In some specific areas, the work units could set a time range for retirement age so that people could arrange their life in a better way."

The article also notes that Secretary-general of the Social Policy Research Center from the Chinese Academy of Social Sciences, and researcher from the Social Research Institute Tang Jun said that in China, aging problem is not as serious as in the West. Among other things, China has a large base number for labor resources--even in 2015-2020 when China's labor resources would reach its lowest point as some people predicted, there would still be 750 million working population available in China then.

Source: China Daily "More people encouraged to retire" (July 11, 2006)

McKinsey Survey Finds U.S. Workers Retiring Early

Despite growing financial pressure to stay in the workforce, a report by McKinsey & Co., based on a national survey of 3,086 people, shows that American workers are far more likely to be forced into an early retirement than many expect. Writing for the LA Times, Jonathan Peterson reports that 40% of retired workers left their jobs sooner than they had planned, usually because of health problems or the loss of employment, and that while 45% of people currently employed planned to keep working past age 65, only 13% of polled retirees had done so.

McKinsey's data do not mean that the trend toward a later retirement age is changing, experts say. But the facts counsel caution to those who discount the challenges of working into their late 60s or beyond, and they suggest that many who assume they will work late in life may be mistaken.

Source: "Many Forced to Retire Early" Los Angeles Times (May 15, 2006)

Rising Health Insurance Costs Pressuring Employees Considering Retiring Early

John O'Neil, writing in The New York Times, reports that the evaporation of health benefits for younger retirees will be playing an important role in the final career trajectory of the baby boom generation. "Even more than pensions, they say, retirees' access to health insurance may determine whether the next decade sees an outpouring of late-in-life energy and entrepreneurialism or whether offices will be clogged with workers stuck in their cubicles until they turn 65." In particular, workers need to contemplate having $50,000 to $100,000, or more, to cover health insurance until they qualify for Medicare, assuming they are healthy enough to qualify for insurance at all.

After discussing many aspects of the problem, O'Neil does conclude by pointing out that there are some signs of new alternatives emerging. For example, some states have extended COBRA coverage. In addition, some companyies are exploring the idea of adding or extending health insurance for pre-Medicare retirees, as they try to manage the departure of their baby boom work forces--discovering that a lot of people are hanging around, ready to retire, but they just don't have the benefits."

Source: "Want to Retire Early and Hang a Shingle? It'll Cost You" New York Times (April 11, 2006)

Linkages Between Early Retirement and Poorer Health

Following up on recent findings of a recent study published in the British Medical Journal that leaving the workforce at age 55 doubled the risk for death before reaching age 65, compared with those who kept working beyond age 60, James Pasternak seeks further confirmation. According to one of the authors of “Age at Retirement and Long Term Survival of an Industrial Population: Prospective Cohort Study,” failing health might have played a role in the younger retirees' higher mortality, but data were not available to assess directly whether poor health was a significant factor and it is not clear why continued employment led to longer life, the researchers wrote.

Pasternak reports that a Social Development Canada study released in May 2001 seems to conclude that health, the age of retirement and life expectancy might be intrinsically linked, with the planned age of retirement increasing by 2.5 years for persons who report their health as fair, rising to 3 years for persons who report their health as excellent. However, "[s]peaking anecdotally, Larry Berdugo, a certified financial planner of Toronto-based Independent Financial Concepts Group Ltd has found that early retirement without a road map can lead to malaise, indifference and reduced life expectancy."

Source: "Early Retirement May be Dangerous to your Health" CARP Online (February 2006)