Work, Retirement Age, and Fiscal Sustainability in an Aging World
Publish Date: July
July 23, 2012
Speakers: Christian Toft, University of Kassel, Germany, and Richard Jackson, Center for Strategic and International Studies, Washington, DC.
Discussant: Sandy Mackenzie, AARP Public Policy Institute
Speaker: Christian Toft
Upping the Retirement Age: Pension Reform and Labor Supply in the United States and the European Union, 1950-2060
Professor Toft talked about retirement-age policies in the United States and EU15 since 1950 and the impact of those policies on labor force participation at upper ages. His work provides a 60 year look at trends in pensionable age policy, at how policies have impacted labor supply and at the labor participation of older people. Prof. Toft showed a comparison table of retirement ages in several European countries and the United States, and explained that while in the U.S. the last major public pension reform was in 1983, in Europe there has been a permanent state of reform since 1980. Prof. Toft discussed recent increases in the statutory pension (or "normal" retirement) age in the United States and EU15 and how labor force behavior is changing as a result. He indicated that the trends of changes in participation rates are similar in the United States and EU15, but that they are more pronounced in Europe. Finally, Professor Toft concluded by saying that the EU15 will continue to have higher dependency ratios in the years to come.
Speaker: Richard Jackson
Pension Reform, Solvency, and Global Competitiveness
Dr. Jackson explained the CSIS Global Aging Preparedness (GAP) Index, which reviews the adequacy and sustainability of retirement savings systems in 20 key countries, and provided illustrative examples of other approaches to pension reform, solvency, and old-age income protection. The GAP index is composed of two sub indexes: the fiscal sustainability index, and the income adequacy index.
Dr. Jackson discussed some of the dilemmas policymakers face in implementing reform to entrenched pension systems while providing a decent living standard for older people and not imposing a crushing financial burden on the young. Finally, Dr. Jackson indicated that the GAP index country rankings show that there appears to be a trade-off between fiscal sustainability and income adequacy across countries.
Discussant: Sandy Mackenzie
Dr. Mackenzie commented on Professor Toft’s and Dr. Jackson’s presentations. He explained that changes in pension regimes can have an effect on labor participation rates depending on their elasticity, and that the income effect should also be considered since, past a certain income level, changes in pensions might have no effect on labor participation rates. Thus, further analysis is needed to assess whether the response of people’s labor participation will change with any particular pension reform. Regarding Dr. Jackson’s presentation, Dr. Mackenzie said that the GAP index is a brilliant way to asses aging issues since it not only focuses on fiscal expenditures, but it also considers elderly income. Regarding the projections, he indicated that it seems hard to believe that increases in public expenditures will fund public pensions since it the burden of payroll taxes in many countries is already high. The answer lies in longer working lives, higher rates of private savings, and other reforms.
For more information, please contact Edward Johns, AARP Office of International Affairs, email@example.com, (202) 434-2395