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New-age solutions to old age problems?
Are social security systems in industrialized countries really heading for financial collapse due to a "grey time-bomb"? If so, what can be done about it? This is one of the major questions on the agenda of the Second World Assembly on Ageing, taking place in Madrid from 8 to 12 April 2002. The following article is adapted from a special report by Ali Taqi, appearing in the International Social Security Review.1
GENEVA - The industrialized world is facing an ageing gap. As people live longer, produce fewer children and retire earlier, the ratio of older people to those working is growing rapidly. The result: an imbalance in the replenishment of pension funds and other social security schemes as more people take out and less people pay in.
Continuation of this imbalance, experts say, poses a risk, in 15 to 20 years, of a serious pension crisis, the so-called "grey time-bomb".
How to defuse this looming crisis is one of the key issues on the agenda of the Second World Assembly on Ageing, convened by the UN General Assembly at its 54th Session. The meeting will review the situation since the first World Assembly held 20 years ago in Vienna and consider a revised long-term strategy on ageing in the light of recent developments.
How to defuse the "grey time-bomb" is likely to be a contentious issue. The most widely advocated response is to increase the number of people working beyond pensionable age, or at least beyond the age at which people actually retire, which is often lower. This would increase the ratio of those earning to those relying on pension support and, it is argued, take the pressure off social security systems.
Indeed, many governments have proposed increased participation rates of older people as a solution. The G8 Summit of Labour Ministers held in November 2000, argued that in order to lessen the economic impact of the increasing ratio of older citizens, "the employment rate of all working-age people must be raised as much as possible".
A subsequent report of the OECD in late 2000, echoed the sentiment: "A critical challenge in many countries has been to slow, and eventually reverse, the trend towards a shrinking portion of life being spent in employment and ever longer periods spent in retirement..." 2
Ageing and working
In the past few years a number of countries have decided to raise the age of eligibility for a basic public pension, most implementing them on a gradual basis. Japan, for example, is raising the pensionable age from 60 to 65, and the Untied States from 65 to 67. Belgium, Portugal and the United Kingdom are all raising the age for women to that of men.
Among most industrialized countries a consensus appears to be emerging: the best way to tackle the supposed "grey time-bomb" is to increase the pressure on older people to remain in the workforce. Yet, this omits the demand side of the labour equation; namely, encouraging employers to retain and recruit older workers.
In a specially prepared paper for the World Assembly on Ageing, Ali Taqi has argued that increasing retirement ages is not enough, saying, "In the cases of a sharp economic downturn, or of fundamental restructuring, or of a company downsizing, or of large-scale redundancies, the availability of early retirement plans can be a vital tool for governments, employers and unions to cope with the consequences of labour force reductions."
Without lowering the obstacles older workers face to gaining employment, moves to coerce people to stay longer in the job market may be considered unfair and could prove counterproductive.
Yet improving opportunities for older people will require progress on three fronts: strengthening the position of older people in the labour market, countering preconceptions and stereotypes, and making age discrimination unlawful.
Increasing older workers' skills
Improving the employment position of more mature workers is said to require the widespread use of training and lifelong learning. This is not a problem of age as such, it is a question of keeping up with technology and skill requirements, or of having formal qualifications which many men and women could not easily obtain 35 or 40 years ago.
As well as training, making work and the work environment friendlier to older people should help boost the attraction of employment to older workers. Increased opportunities for part-time work is one such measure, as is greater general flexibility in work practices. However, Taqi does sound a note of caution: "Implementation may depend upon a degree of intervention by the public authorities or institutions which is not in the tradition of many countries." For him, the second front - countering preconceptions and stereotypes - is likely to be the most important of all.
Stereotypes of older people are numerous. Among others, Taqi cites the "fact" that they are said to be less productive, more vulnerable to illness and injury, less intellectually curious and resistant to change.
Most such stereotypes are myths. Even those which have some foundation are often irrelevant to job requirements. Many concern areas in which variations among individuals are more important than generalizations about a category.
Several government, employer and union initiatives are trying to tackle the misconceptions. In the United Kingdom, for example, the Employers Forum on Age - an employer sponsored organisation - provides businesses with information and services aimed at promoting age diversity and overcoming age discrimination.
Ending discrimination
Legislating to protect older workers is still controversial in many countries and very few states have laws banning age discrimination. Of those that do, the United States has the best-established provision. The principal federal legislation - the 1967 Age Discrimination in Employment Act - prohibits discrimination in recruitment, termination and most other aspects of employment, with only very limited exceptions and exemptions.
At present, however, most countries do not provide legal protection against age discrimination. Yet, ideas about appropriate age patterns tend to be widely held: entry level jobs or apprenticeships are for the young, mid-level jobs are for the middle-aged, training is not worthwhile for older employees because they will soon retire.
Taqi suggests that the experience of outlawing discrimination on grounds of race and sex has shown that legislation can change behaviour. The law is a deterrent.
Planning the future
Tackling discrimination, promoting training and workplace flexibility, and changing attitudes through education and information, are all possible strategies to try to improve the labour market position of seniors, and boost participation rates.
Debates over the role of such solutions are heavily contested and these are undoubtedly controversial issues. What is generally accepted though, is that - if continued - the trends of the last few decades will lead to increasing pressures on social security provision, notably pensions and health services.
At the moment this is predominantly a problem in industrialized countries, as several of the phenomena fuelling it - very low birth rates, early retirement ages and increased longevity - are less marked in other nations. However, in time that may change.
The World Assembly on Ageing is a prime opportunity for all those involved - governments, employers, workers, and older citizens - to re-examine the scale of the problem and discuss possible solutions.
If the pessimists are right, and there really is a "grey time-bomb", then the sooner action to defuse it can be taken, the better. The clock is ticking.
1 Older people, work and equal opportunity, Ali Taqi, International Social Security Review, Volume 55, 2002.
2 Reforms for an ageing society, Organisation for Economic Co-operation and Development, 2000.