The Economic Advisory Council to the Prime Minister has recommended increasing the retirement age saying an increase in life expectancy is expected to continue due to better health infrastructure and allow aged people to work longer than any previous generation. The Council said the retirement age needs to increase in a phased manner as India is a young nation with a high working population.
Globally, the increase in senior populations and rising life expectancy have ignited policy level discussions to identify sustainable solutions to tackle the growing financial stress on social security systems. As global access to healthcare facilities improves and becomes more affordable in low-income countries, life expectancy might increase even further. While this will be largely seen as the success of neo-liberal economic policies and social welfare schemes, it is likely to bring forth a unique set of challenges for governments.
Now, the question is that whether the government will consider this recommendation? The government had last raised the retirement age in 1998 to 60 from 58 years. The proposal, that would benefit a large number of central and state government employees. One of the significant positive impacts due to hiking the retirement age is postponing the government's pension liabilities by the years hiked. This will be a huge saving for the government. There are a lot of other benefits also.
Studies carried out indicate that the performance of older workers was more consistent over time compared to their younger peers, making them better at problem-solving. Their experience enables them to create more effective strategies, make better decisions, are more capable, and take fewer uncalculated risks. Also against the general belief that older learning new things, the fact is that they have higher motivation rates, good attention spans, and tend to retain information longer than young people.
Countries around the globe are attempting to raise the state pension age in the face of increased longevity. The UK announced its decision to accelerate raising the state pension age to 68, seven years earlier than planned. Finland has also increased its flexible pension age and linked it to life expectancy. Ireland, the Netherlands, Russia and Spain are all to increase the state pension age, while Denmark tried to increase the pension age from 67 to 67.5.
However, there are arguments against it also. The main one is that any such move will be a non-populist one especially in a country where unemployment is an important issue. By extending the working life of those already employed, in a scenario of low job creation given already-sluggish growth getting hit by the pandemic, the employment prospects of the young will be further hurt. A better idea, also suggested for Aspirational Districts by the EAC-commissioned study, would be to have universal pension income for the elderly.