Raising, scrapping retirement age 'has social, political costs'

It can help boost labour supply, but also increase inequality: Expert

As Singapore considers raising or scrapping its retirement age to cope with an ageing society, a Swiss scholar has warned that policymakers should consider the social and political consequences of such moves.

Raising the age may help increase labour supply, and does not necessarily increase unemployment or take jobs away from younger workers, said ageing issues expert Monika Butler at a talk here on Thursday.

But it may increase inequality between the rich and the poor, said the economist from Switzerland's University of St Gallen.

For one thing, the rich can more likely afford early retirement and live longer.

But the poor may have to take on physically demanding jobs that they cannot keep up with when they age, forcing them into de facto retirement without the payouts.

And it is not clear if raising the retirement age will encourage or dissuade employers from hiring older workers, she added.

Instead, an ageing society's primary focus should be to get healthy individuals to work at least to the current retirement age or even beyond, she told about a hundred students and academics at the Singapore Management University.

"A smoother transition from work into retirement would benefit most individuals as well as the system," said Prof Butler, who spoke about the role of governments in an ageing society.

She noted that for individuals, early retirement may lead to poorer health if they stay idle all day; for society, a smooth transition into retirement helps the economy even if people nearing retirement do just light work.

In Switzerland, a third of those aged 65 to 70 work - mostly part-time - on consulting or light tasks like house-sitting.

Singapore, too, requires employers to rehire 62-year-olds for three more years if they are fit.

Like many European countries, Singapore is a fast-greying society, Prof Butler noted. By 2030, one in five here will be 65 years or older, according to government projections.

Earlier this month, former NTUC secretary-general Lim Boon Heng and economist Lim Chong Yah argued that the retirement age should be raised to 70 from the current 62.

MPs also exchanged views in Parliament this week on whether to do away with it altogether.

Prof Butler also discussed the political implications of demographic change.

For instance, people tend to vote for things that benefit their children, but those without family ties might vote against the interests of younger generations.

And while migration can make up for low fertility economically, it cannot compensate for the absence of family ties, she added.

She also called for policymakers to be transparent about potential reforms of old-age policy and to plan for the long term.

"We should first discuss what kind of guarantees we can and want to give people in old age, and these should be communicated along with the potential gaps," Prof Butler said.

"And we should not forget the social protection of the young."