Re’tire’ment: Who is tired?

June 24th, 2010

The French government’s decision to raise the retirement age for those employed in public and private service to 62 years earned the ire of a majority of the worker unions there. This seems a rather boorish reaction on part of the French, considering France itself, along with several other member countries of the European Union, is under a deluge of debt.

France, whose budget deficit is currently 7.5 per cent of its GDP, however, is at a marginally better position than other EU countries such as the UK, Spain, Greece, Portugal and Ireland. The euro crisis has sobered sentiments across the European continent. Spending has trickled. Governments are trying hard to resuscitate their respective economies, but their efforts seemed to have yielded naught thus far.

France’s pension reforms, analysts say, are a welcome move. The French government proposes to raise the retirement age bar from 60 to 62 years over an eight year window. With a low percentage of the youth entering the workforce, and an ever-increasing ageing population, a constructive action such as this will enable France to answer at least some, if not many, of its fiscal infirmities.

An annual pension deficit of approximately 32 billion euros threatens to burden the French bourses further, with projections estimating that this amount will touch nearly 114 billion euros by 2050.

Upping the retirement age in France signals a positive trend, irrespective of the resistance generated by labour unions there. The advantages can be enumerated thus: first, France’s pension liability will be reduced to a certain extent, facilitating a quicker return to acceptable fiscal statistics.

Second, there will be a greater utilisation of human capital. An aged, or, rather, experienced population can bring more to the table by way of sound knowledge and a mature skill-set, which can benefit public and private organisations alike, because experience is a highly-valued asset across the board.

Third, at a psychological level, the aged will have avenues to make their lives more secure, because an increased retirement age will also mean better post-retirement facilities provided by the government, due to improved public finances.

The Indian government, too, is contemplating increasing the retirement age, from 60 to 62, for those who are employed in the public sector. In the private sector, the retirement age bracket is 58 to 62 years. However, considering the rate at which the Indian economy is growing, it would make sense for the government to mandate a higher retirement age in the private sector at least.
Given the fecund service sector in the country, if companies allow for a retirement age bracket of 65 to 70 years, it would translate into a golden opportunity for senior professionals and firms alike. Today, the mature population seldom wishes to retreat from an active professional life. By provisioning softer taxation policies and simple, safe and profitable investment opportunities, the government can encourage senior professionals to contribute significantly to the growth mechanism of the country.

Given a chance to work post-retirement, most service-sector professionals would lap it up. Sentiments in this regard have been strong. If insisted upon by the service sector, a higher retirement age could soon translate into reality. This move, in turn, would indicate a developmental trend in the growth dynamics of the economy. Although a far way off, if this idea is mooted at the right time and place, by service-sector and industry oriented bodies like the CII and Ficci, it would herald an important socio-economic development in an otherwise unpredictable economic growth story.

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