Author : Ramanath Jha

Expert Speak Urban Futures
Published on Dec 05, 2019
As India faces an inevitable downturn of its demographic graph over the next few decades, it must adopt a nuanced strategy to keep the ageing, but fit to work, population meaningfully engaged without restricting job opportunities for the youth.
Upping retirement age in India debate

On 12 Nov 2019, newspapers reported a statement by the Chief Minister of Bihar, Nitish Kumar, arguing for raising the age of retirement beyond 60 years. He said, “Now-a-days people remain physically fit to work even after completing the age of 60 years. The retirement age of employees should be increased”. At the same programme and venue that the Bihar CM was speaking, a counter view was expressed by a former Bihar Speaker, Prem Verma, exhorting that all retired government servants should contribute part of their retired period and pension to the cause of the society.

Interestingly, the issue of more prolonged employment by upping the retirement age was hinted earlier in the Finance Ministry’s Economic Survey of India 2018-19. This was in the light of the prospects of a reversal in population trend in the future. The Economic Survey pointed towards demographic projections that India’s population growth will continue to decline over the next two decades, growing less than one per cent during 2021-31 and under 0.5 per cent during 2031-41. At the same time, the under-19 population was expected to decline from 41 percent in 2011 to 25 percent by 2041.

Earlier in 1998, the superannuation age in India had been hiked from 58 to 60. Similarly, in 2017, Government of India decided to increase the superannuation age of central government doctors to 65 years. This step was forced on account of a large number of existing vacancies and a further future depletion of doctors that was threatening a deterioration in the quality of health care. Various states at different points of time have also been in favour of raising retirement age. In 2017, the West Bengal government raised the age of superannuation for doctors teaching in medical colleges to 70 and non-teaching doctors to 68. Similarly, and in the same year, the Kerala government raised the retirement age of doctors under the Directorate of Health Services from 56 to 60 and those under the Directorate of Medical Education from 60 to 62. The Chief Minister said that the decision was triggered by the shortage of experienced doctors.

Raising the retirement age has been a global phenomenon. The United States has set in motion retirement reforms that will gradually increase the retirement age to 67 by 2023. The United Kingdom, Australia, Austria, Czech Republic, Denmark, Finland, France, Germany, Netherlands, Norway, Spain and UAE have all over the last decade been raising the statutory retirement age. Many of these countries that retired women at an age sooner than men are in the process of equalising retirement ages for both sexes over time.

The decision to raise retirement age has not always been popular. For instance, in June 2019, the Telengana government’s decision to raise the age of teaching doctors in the state from 58 to 65 was met with stiff resistance from the Telengana Junior Doctors’ Association (TJUDA). The TJUDA members boycotted elective medical services and organized protest marches. They saw the move as detrimental to the interests of the younger doctors whose opportunities of employment would be blocked by the state’s decision. Outside India, in 2018, Russians protested against Government’s plans to hike pension age. The French in 2010, Spaniards in 2011, Brazilians in 2017 and British women and Croatians in 2018 did not approve longer working years and postponement of pension. The principal reason for peoples’ opposition to raising retirement age in the western world is that they would like to have the pension that they have earned earlier than later and enjoy a peaceful and quiet vacation life. This is especially so in jobs where the physical strain and long hours of work are onerous, dissuading citizens from working harder and longer.

However, governments all over the world are a worried lot on account of certain developments that have falsified the premises on which retirement ages were fixed. Experts believe that human beings have been increasing their longevity by three months per year over the last 150 years. As a consequence, people live much longer. Combined with this is the significant drop in fertility rates leading to ageing with a smaller number of young people to replace the old. There are, therefore, more people eligible for pension benefits, simultaneously raising social and health care costs and fewer people paying taxes. By the 1980s, serious doubts were being expressed in many countries about the long-term affordability of the state pension scheme on account of a surfeit of pension beneficiaries and a shortage of tax contributors. These fears are being further fueled by the advances being made in molecular medicine and stem cell research that may discover mechanisms of slowing down ageing and allowing humans unprecedently long lives.

Governments are, therefore, obliged to search for ways to reduce the long-term rate of growth of public pension liabilities. A convenient and logical method is to raise retirement age. This slows the rate at which old age dependency ratios deteriorate. And by shortening the pensionable portion of individuals’ lives, future pension expenditures get reduced.

India would be no exception to this strategy.  Although its demographic trajectory is at a different level from the west today, ageing is bound to catch up replicating the current situation of the west. However, a strategy in regard to retirement needs to be more nuanced. It is possible to categorise jobs on the basis of physical and mental stress on the one hand and the value of long experience on the other. Work related stress could, inter alia, arise out of long hours, heavy workload, tight deadlines and repetitive work. Field officers in the police and fire services, for instance, may not be able to bear the stress of their jobs beyond a certain age. Among doctors, surgeons may start faltering at a certain age but physicians could go much longer. These obviously are jobs where the experience quotient is significantly important. Retirement ages could then be accordingly fixed.

One would also have to be wary that the entry of young people into jobs is not blocked. In a situation of high unemployment, further exacerbating the situation would not be wise. The view that increase in superannuation age reduces the number of jobs available to the young has not found favour with professional economists, who have criticised the so-called “lump of labour fallacy”. The fallacy is to assume that the total number of jobs is fixed. If they are, raising retirement age must imply lower youth employment. However, with more money in the hands of the workforce, there is more spending, a bigger economy and the creation of more jobs. It is also a fact, however, that in organisations where the number of positions is fixed, hiking superannuation age would very likely constrict the entry of newer people.

A better way of managing such situations was shown by Japan and Singapore. They discovered a mechanism of re-employment after retirement, with different working hours and wages akin to part-time employment. Such re-employment is voluntary and could be negotiated by the employee and the employer. This allows both of them to set the bar of work and pay at a mutually convenient scale. This also allows to weed out the non-performers rather than rewarding them if the superannuation age is universally raised. At the same time, it allows employees to invest in skill upgradation and job redesign for older workers. Overall, this leads to higher productivity and a healthier economy.

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Ramanath Jha

Ramanath Jha

Dr. Ramanath Jha is Distinguished Fellow at Observer Research Foundation, Mumbai. He works on urbanisation — urban sustainability, urban governance and urban planning. Dr. Jha belongs ...

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