With labor shortages prevalent in modern economies, raising the retirement age can be a solution to the problems of employers and the problems of public retirement plans. Japan is ahead of the game.
Soon it will not be possible to work for shorter and shorter periods of time and retire for an extended period due to the increase in life expectancy, the Organization for Economic Co-operation and Development warns in a recent analysis of the state of public pension systems in developed countries.
The OECD stresses that while public systems emerge relatively unscathed from the pandemic, their financial viability is increasingly threatened as countries become ever more indebted and the population ages.
In many countries, difficult decisions will have to be made, as the OECD reiterates. Contributions should be increased, retirement age raised, or pensions reduced. These are the kinds of decisions that are usually controversial and take a long time to implement, except for a few countries that have a mechanism to automatically adjust pensions.
The legal retirement age is on average 65 years. However, it varies from a minimum of 57 years in Indonesia to a maximum of 67 years in Greece. But the legal age does not reflect the reality in most countries.
The decision to retire or not depends on several factors, the most important of which is the possibility of obtaining sufficient allowances to support himself. According to the comparison of general plans for 43 countries implemented by Mercer, the best plans are located in Denmark, the Netherlands and Iceland.
Three evaluation criteria
Mercer evaluated the plans based on three criteria: their suitability for the income they replace, the sustainability and quality of their management. Canada ranks third in the rankings, behind the best, but is ahead of France and the United States.
France does not have the best pension plan in the world, but in this country retirement lasts the longest. The average retirement period in France is 27 years for women and 23 years for men, five years longer than the average for OECD countries.
Conversely, in Japan, retirement can be very short. Although the official retirement age may be 65, many Japanese stay in the workplace until they are 75 or older.
Japanese companies have their own retirement rules, and some have canceled so they can hire the 80’s. Working conditions are adapted to the special needs of this workforce, with shorter working weeks and shorter working hours.
This suits both companies that have long dealt with the impact of an aging population on the available workforce, and workers unable to live decently on their retirement benefits, especially in cities like Tokyo, where life is expensive.
The challenges posed by Japan’s elderly population for a long time have become the challenges of the entire industrialized world, which can be used as inspiration to mitigate the impact of labor shortages.
It is not a question of keeping everyone at work longer on their own or by force, but rather a matter of encouraging long working hours for those who want it for various reasons: because they love their work. Or because they are bored or because they need money.
It is also necessary that work pay more than retirement, which is not always the case. In Quebec, for example, where the problem of labor scarcity is most acute, it is not interesting to continue working after the age of 60, according to a calculation by the Council of Quebec Employers (CPQ).
CPQ believes that with taxes and regulations, it is possible to attract more potential retirees to continue working. We could also suggest that companies do their part by adapting working conditions to attract older workers.
It can be helpful to try the Japanese recipe before you hit the wall.
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