Retirement age 'poses economic threat'

Mon, Jun 25, 2007, 01:00

Failure to retain fit and healthy older people in the labour market poses a serious threat to the Irish economy, a conference on ageing has been told.

Professor Brendan Whelan, research director of Tilda (The Irish Longitudinal Study on Ageing), warned that too many obstacles are put in the way of people remaining in the workforce at older ages.

In an address to the Active Ageingconference in Trinity College, Dublin, today Professor Whelan warned that an enormous pool of talent and experience may be lost to the economy by the failure to introduce policies geared to the needs of older workers in the areas of pensions, healthcare and social welfare.

Policies to raise labour market participation need to be much broader than just changing the state pension age
Professor James Banks of University College London

He cited forecasts from the Economic and Social Research Institute (ESRI) that the current ratio of about four working people for every one person over 65 years will fall to 2.5 within 20 years and to 1.5 by mid-century.

"That represents a two-pronged threat in the form of the cost of meeting increased social welfare costs from a smaller working population and also the shortage of labour that will result," Prof Whelan said.

We cannot assume that immigrant workers will automatically make up the labour shortfall," he added.

The conference was jointly organised by Tilda and Aspen, the Active Social Policies European Network.

Ashgar Zaidi of the European Centre for Social Welfare Policy Research told delegates that there is already some international evidence that the effective retirement age is on the increase.

"Results suggest that the increase in the employment rate of older workers is stronger for women than for men, and also there is a bigger rise for the more highly educated", Mr Zaidi said.

Professor James Banks of University College London said that the fact that many future retirees are less likely to have defined benefit pensions may lead to an increase in labour market participation by older people.

Prof Banks said: "Policies to raise labour market participation need to be much broader than just changing the state pension age.

Professor Michael Hurd from the Rand Corporation in the USA warned, however, that once workers become eligible for pensions, this tends to accelerate the move towards retirement.

"The implication is that any public policy which encourages firms to provide pensions should be carefully framed lest retirements lead to an excessively reduced workforce", Professor Hurd said.

The conference also heard an address on the implications of ageing for the pensions industry by Donal Casey, chief executive of Irish Life Corporate Business.

"Ireland has a comparatively young population and we are in an immeasurably better position than countries such as Germany and Japan which are already suffering the consequences of an ageing population," Mr Casey said.

"We have time to prepare for the pension funding challenge, initiatives such as the National Pensions Reserve Fund have been taken by the Irish government while the pensions industry itself is also taking initiatives that should ensure this country does not suffer from any 'pensions time bomb' down the line".

Mr Casey added, however, that Ireland cannot be complacent about the future and agreed that policymakers should enact policies that will make it easier and more attractive for older people to continue to make a contribution by working beyond retirement age if they wished to do so.