The European Union Studies Center

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Living Longer, Working Shorter?

• The European Union Studies Center
• The Graduate Center, CUNY
• European Union Center of New York
• EUSC Lecture Series 2008

Toward the Limits of Sustainable Welfare Bernd
Marin European Centre Vienna CUNY Graduate
Center, Skylight Conference Room February 14,2008
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The UN-European Region
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Longevity, Ageing, Rejuvenation

• Longevity does not imply ageingVienna 1995 -
  2012 as a case in point
• Individual longevity, collective ageing - and
  collective rejuvenation
• Different forms of increasing life expectancy
• Chronological, socio-cultural, psychological,
  biometric and prospective age

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Longevity 1960-2000 From Convergence To
Divergence ?
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Why doe we currently age only 2 years within 3
years time?

• Most recent gains in life expectancy 1995 - 2005

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Further Cohort-Specific Life Expectancy at Age 65
by Generations (Austria 2005)
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Living Longer, Working Shorter?

• Sustaining Unsustainable
• Out-of-Work Patterns

• Extending Working Life (EWL) as an unachieved
  policy goal
• Widespread though not universal failure in UNECE
  region, single dimension of regress even since
  2002 in some MS
• First small EWL achievements much behind
  increased longevity and population ageing
  reqirements
• First small turnarounds between 1993 and 2001,
  but activity levels still far below 1970s/1980s -
  and far below Lisbon, Stockholm, Barcelona
  targets and MIPAA / RIS Madrid / Berlin
  commitments

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Living Longer, Working Shorter?

• Sustaining Unsustainable
• Out-of-Work Patterns

• Age exclusion or ongoing reduction of working
  life - both in relative (lifetime allocation) and
  absolute terms (work years)
• Age exclusion is generally considered
  unacceptable, undesirable, unfeasible, and
  unsustainable
• Prevailing facts ever later labour market entry,
  much earlier workforce exit, ever tighter
  compression of working life during early / middle
  adult or prime age 25-54 - contradicting both
  ageing and longevity
• Reducing active working lifetimes, mass early
  exit, age discrimination and forced retirement
  not yet stopped

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Living Longer, Working Shorter?

• Predominance of non-working status during
  lifetimes majorities of - adult - resident
  populations out-of-work
• Widespread predominance of household (non-SNA)
  production over market (SNA) production, of
  unpaid work over paid work
• Massive labour slack (inactivity or
  non-employment, unemployment and long-term
  unemployment, long-term sickness and invalidity)
  among the main barriers to more UN-European
  economic growth, competitive-ness, prosperity and
  rising living standards for all ages
• Massive out-of-work patterns also main barrier to
  social integration and cohesion, health, mental
  health and well-being, happiness and life
  satisfaction

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Living Longer, Working Shorter?

• Inactivity or non-employment - not unemploy-ment
  - as the single most significant component of
  labour slack or out-of-work status
  (non-em-ployment 5 times higher than
  unemployment)
• Above the age of 50, the ratio of non-employed to
  unemployed increases to 18 and rises even more
  sharply with age, as the risk of disability and
  other forms of early exit increases while the
  risk of unemployment decreases (!)
• For the mature or post-prime-age group 55-64
  non-employment is 30 times higher than
  unemployment (10 times for men, up to 90 times
  for women).(E.g. in Austria, Italy, Hungary,
  Slovakia, Belgium 81-89 non-employment vs.
  0.3-1.5 unemployment)
• Unemployment - considered to be a major problem
  in public discourse - is disproportionally low in
  the age group 55 - 64

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Living Longer, Working Shorter?

• The end of the demographic bonus -
  periodization for EU-27 and a majority of UNECE
  member states
• 2007 - 2011 last window of opportunity for
  structural reforms
• 2012 - 2017 population of working age starts
  shrinking, but rising employment - and
  immigration - may temporarily offset this trend
  (required LF immigration 2-9 times the numbers
  projected?)
• After 2018 ageing effect will become dominant
  throughout region
• Projected economic growth to shrink significantly
  - and to be driven by innovation and
  productivity, not employment growth after 2018
• High intra-regional UNECE diversity in starting
  conditions and RIS implementation

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When will the Ageing Process Reach its Peak?
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Living Longer,Working Shorter? End of the
demographic bonus/2

• Employment increase projected mainly through
  cohort effects - only marginally through pension
  reforms (e.g. rising LFP rates 50 and
  simultaneously falling effective or actual
  retirement age)
• Employment increase indispensable but
  insufficient impact on pensions
• Highly different longevity achievements (up to 20
  years in life expectancy), ageing paces and
  timing (up to 30 years time lag country
  differences in baby boom timing and respective
  ageing peaks) in UNECE region
• By conclusion diverging adjustment requirements
  and corresponding policy time frames between
  early movers and laggards in universal population
  ageing

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Living Longer, Working Shorter?

• Determinants of Early Exit
• Pre-Retirement / 1

• The reluctance of employers to hire and retain
  older workers
• Age discrimination and negative attitudes towards
  older workers
• Steep age-wage profile outpacing productivity
  increases over the working life
• Strict job protection may fire back as hiring and
  retaining barrier
• Insufficient training and life-long learning to
  compensate for de-skilling weaking employability
• Widespread preferences for leisure early exit
  have emerged

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Living Longer, Working Shorter?

• Determinants of Early Exit
• Pre-Retirement / 2

• Inadequate placement services weakening
  employability
• Poor, unsafe and unhealthy work environment and,
  above all, demoralizing working conditions
  explain most of early exit
• Morale much more important than health respect,
  esteem, basic flexicurity and quality work - or a
  lack of - are more important than health, work
  load and stress, pay and other economic rewards,
  pension incentives, etc.
• Work environment more important than employment,
  employment and non-employment more than
  unemployment, pension rules and work satisfaction
  more than health

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Living Longer, Working Shorter?

• Some Policy Conclusions

• Making work pay through fairness and actuarial
  neutrality
• (or even increasing pension rights with age)
• Lifetime indexing linking work and pension
  duration to life expectancy (analoguous to
  pension indexation to inflation)
• Increasing opportunities and choices for flexible
  retirement
• Repealing early retirement options and pathways
• Combatting age discrimination and eradicating
  forced retirement
• Changing employer attitudes and practices by
  eliminating employment barriers and improving
  employability

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Living Longer, Working Shorter?

• Some Good Practices / 1

• Guiding Principles work first, making work
  pay, raising overall, in particular post-prime
  age employment rates, lifetime indexing, fighting
  age discrimination and forced retirement
• Lifelong education Occupational
  training
• Work safety Health promotion
• Professional Job rotation,
• rehabilitation upgrading, and
  enrichment
• Late career measures Mobility support
• Age-specific adustments Personal (family) of
  the work environment time-off
• Lifetime banking accounts
• Partial pension schemes Phased, flexible
  retirement schemes

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Living Longer, Working Shorter?

• Some Good Practices / 2

• Adjusting legal and first eligibility retirement
  age to rising (residual) life expectancy
• Restrictions on early exit pathways and
  disability pension awards outpacing disability
  prevalence patterns
• Introducing or strengthening actuarial
  adjustments in order to encourage later
  retirement
• Improving the terms for delaying retirement by
  increasing accrual rates beyond certain ages
  beyond actuarial neutrality

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Living Longer, Working Shorter?

• Some Innovative Good Practices 3

• Lifetime Indexing automatic adjustment of early,
  normal, and reference retirement age to rising
  survival rates, prospective age, residual life
  expectancy and / or disability-free, healthy life
  expectancy
• Experience rating or age-risk rating of social
  security contributions over the entire life
  cycle, making the compound non-employment and
  unemployment risk by age the yardstick for
  differentiating all social security contributions
  according to age-specific (and other major)
  out-of-work risks
• Tax credits or subsidies for recruiting or
  retaining post-prime-age (mature) workers.
• All measures need to be experimented with and
  rigorously evaluated.

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Living Longer, Working Shorter?

• Some Good Practices To Dos / 4

• Fully integrate foreign-born residents and
  citizens who may significantly differ in their
  work and retirement behaviour.
• Promote self-employment self-employed, small
  shop-keepers, and liberal professions work
  several years and up to decades longer than waged
  workers and employees. Assisting the transition
  to self-employment for middle-aged employees
  could be a major step towards effectively
  extending active working life.
• Pension rules should always be universal, fully
  transparent, fair. Corporatist privileges are
  costly, demoralizing, and legitimize resistance
  to change and reform. Pension justice must not
  only be done, but also seen to be done.

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Quality Work andSelf-Employment asEarly Exit
Immunizers?
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Living Longer, Working Shorter?

• Some Proposals for Future Monitoring / 5

• Establish regular long-term national
  sustainability and Monitoring RIS reports (e.g. 5
  year intervals with review and appraisal cycles)
• Establish regular long-term joint UNECE
  sustainability and Monitoring RIS reports
• Externally assess, corraborate or question
  national and UN-European reports
• Discuss discrepancies between EUROCOM, OECD, IMF,
  World Bank, UNECE, European Centre Vienna and
  academic assessments, synchronise databases and
  test models externally
• One best guess projections vs. stochastic
  forecast modelling and quantifying demographic
  uncertainties, in particular sensitivity analyses
  on longevity gains

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Living Longer, Working Shorter?

• Some Bad Practices Not To Dos / 1

• When it comes to early exit basic social safety
  nets, never confuse old age security (which can
  by definition apply above working age only) with
  unemployment, accident, work injury, sickness,
  invalidity insurance, disability benefits etc.
• Never (ab)use pension policies for labour market
  - or any other supposedly good - purposes
• Never award lifelong disability pensions
  instead of temporary benefits
• Never allow for special pension schemes for
  special interest groups (regimen speciales,
  however strong their corporatist pressure or
  noble the causes underlying their claims)

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Living Longer, Working Shorter?

• Some Bad Practices
• Not To Dos / 2

• Do not any longer allow for different retirement
  age by gender (i.e. do not longer ignore the
  European Court of Justice rulings)
• Do not give an unlimited autonomy or veto power
  to social partners regarding retirement practices
  and the implementation of pension schemes
• Do not be generous to early retirees as such as
  it will force you to be non-solidaristic or less
  generous to the poor, to sick people, to persons
  with disabilities and all others disadvantaged
  and in need - thus, order your generosity
  priorities.

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Living Longer, Working Shorter?

• Some Practices / Institutionsto Rethink?

• Just for thought Could EU-27 within UNECE-Europe
  56 remain the only (con)federation worldwide
  without converging labour markets, social
  security, social protection and pension systems ?
  Not only without unitary and harmonized
  institutions, but even without easy portability
  of social rights? (in contrast to to the US,
  Canada, Australia, Russia, China, India and
  Brazil)

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Living Longer, Working Shorter?

• Some Remaining Uncertainties / 1

• How to fairly and effectively differentiate
  eligibility ages of earnings-related vs.
  guaranteed minimum pensions ?(the latter
  available many years later than the former ?)
• How to make work-retirement decisions more
  flexible and widen corridors (age spans in which
  one is entitled to retire) without encouraging
  ever earlier exit ?
• How can collective bargaining agreements be
  prevented from fixing mandatory retirement age
  for specific occupati-onal groups (pilots,
  military, railway, opera singers, ballet dancers,
  bull-fighters, etc.) below the legal one ?

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Living Longer, Working Shorter?

• Some Remaining Uncertainties / 2

• How can the outflow rates for the two-digit
  millions of people on disability benefits be
  increased from currently less than 1 ?
• Who should be supported in order to create the
  most effective work incentives, and how can it be
  guaranteed that simple age-targeting will not
  miss ist goals ?
• How can age discrimination legislation be made
  more effective ?
• Why has the great majority of governments from
  UNECE member states still not yet implemented a
  ban on mandatory, forced retirement ? What are
  existing plans to do so within what time frame?
  And if not, why ??

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Living Longer, Working Shorter?

• Public Opinion Poll
• Survey Findings / 1

• A vague sense of problems and doubts about the
  future viability of mandatory systems
• Little confidence in government policies
• Largely unchanged attitudes regarding current
  retirement practices and little popular support
  for rising pension age
• Widespread belief in lump-of-labour fallacy
  that elderly workers should give up work to make
  way for younger and unemployed
• In countries such as Denmark, Finland, Ireland,
  the Netherlands, the UK public awareness and
  sensitivity has been raised by governmental
  campaigns to undo the lump-of-labour myth

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Living Longer, Working Shorter?

• Public Opinion Poll
• Survey Findings / 2

• A growing opposition to forced retirement at any
  age fixed for all (with great differences between
  the North-Western and the South-Eastern parts of
  the UNECE region)
• Broadest support for contributory conceptions of
  social justice (including the view that later
  retirement should lead to higher pension and that
  pensioners should be allowed to earn freely on
  top of their pension)

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