4
GOOGLE HANGOUT ON EXTENDING WORKING LIVES OF OLDER WORKERS
IN EMERGING MARKETS
(2014.06.17)
Widespread unrealistic expectations about retirement may be
the most important challenge facing emerging market countries
experiencing rapid population aging, concluded a panel of experts
on aging and labor in Eastern Europe, East Asia, and from the
World Bank.
In a Google Hangout organized by HKUST IEMS and the Institute
for Structural Research in Poland, the online panel discussed
the challenges of extending working lives in different national
contexts. The event was moderated by
Piotr Lewandowski
,
President of the Institute for Structural Research (IBS) based in
Warsaw. The panel of experts included
Albert Park
, Director
of HKUST IEMS;
Maret Góra
, Professor at the Warsaw School
of Economics (SGH), and Dr.
Truman Gregory Packard
, Lead
Economist at the World Bank’s Regional Office for East Asia Pacific.
As global populations age, it is important that workers have the
opportunity to extend their working lives to help their countries
sustain economic growth and to be able to realize a high quality
of life for themselves.
Across Asia, aging is occurring rapidly, as pointed out by Prof. Park.
While a quarter of Japan’s population is over 65, China is expected
to see 30% of its population reach the age of 60 by 2015, and
must deal with the aging challenge at a much earlier stage of
development than many other countries due to its strict one-
child policy. Situations in Eastern Europe are more diverse. The
challenge there, as Professor Góra argues, is how quickly people
can adapt their skills in order to stay employable as they age.
As demographics change, so should institutions and attitudes. Dr.
Packard pointed out that societies must reexamine the middle class
expectation of retirement, which will be essential in implementing
the institutional changes needed to address the aging challenge.
In America and Europe, the voting middle class generally expects
to retire when they reach age 55 to 65. Such expectations were
formed after World War II, and haven’t been updated since then.
Employers also have not adjusted to rising life expectancy, and
generally do not hire people over age 60, resulting in a lack of jobs
with flexible schedules for retiring or retired people. On the other
hand, people expect to end their working life abruptly at a specific
age. Even when they find out they need to work beyond that
age in order to support their living costs, they often don’t have the
skills needed to remain employable. Similar expectations are also
prevalent in Latin America and East Asia, where current institutions
reinforce around such expectations.
The problem is that the reality of work and life expectancy has
changed, but the social contract has not yet caught up. Prof. Góra
thinks that current institutions are actually both new and outdated,
because only in recent generations have people not worked until
death. In contrast to many people’s expectations of an abrupt end
to working life, more and more people are withdrawing gradually
from a full-time working mode. Even the way young people
enter the labor market has been changing. Many young people
start their working lives with more than one job. The actual labor
market is more fluid than what is reflected by many key institutions.
Dr. Packard argues that economists should communicate to the
public, especially voters, about the reality of the situation, so
that they can push politicians to update policies appropriately.
Professor Góra believes the key message to the public should be to
help people to prepare themselves, taking into consideration their
skills and health, so that they can make a rational choice to work
longer to support their expenditure needs as they age.
These efforts are necessary to make it politically feasible for policy
makers to start rolling out gradual, incremental changes such as
increasing statutory retirement ages, and to help convince people
and employers to change their behavior. Dr. Packard suggests that
small- and medium-sized enterprises (SMEs) will play an important
role in extending working lives, as many old people want to work
in less rigid employment arrangements or even set up their own
businesses to increase flexibility. Therefore, institutions should be
more accommodating toward such SMEs.
More generally, jobs that better fit the needs of retirees will
be necessary, so institutions and policies need to encourage
employers to offer such jobs. Prof. Góra posits that because there
will be fewer young people in the future, employers will need
to hire more elderly, and will need to be open to new ideas on
how to employ older workers productively. It’s worth noting that
education aiming to change people’s perception of retirement
often emphasizes the macro-economic benefits of extending
working lives. But Prof. Park and Prof. Góra both feel that a more
effective approach is to appeal to individual self-interest to realize
better and more secure lives at older ages. Both employers and
employees will respond if they realize that institutional changes
supporting healthy aging and longer working lives are actually
good for everyone.
In China, explained Prof. Park, there exists a duality where, in rural
areas, people work until they drop, whereas most urbanites retire
promptly when they reach retirement age and enjoy generous
pensions provided by the state. In fact, the ability to retire
shouldn’t be considered a bad thing. However, the retirement
age was set based on assumptions of life expectancy which are
long outdated. On the other hand, surveys in China reveal that
most of today’s elderly persons have low human capital and
relatively poor health, so it is not obvious that employers will
consider them productive enough to hire, even in the absence of
a mandatory retirement age. This is why it is important to invest in
the health and skills of tomorrow’s elderly, and to promote flexible
arrangements that enable both employers and employees to enter
employment relationships that are fair and mutually beneficial.
Prof. Park also suggests that Asian countries should look upon
the USA and UK as models of pension design that don’t provide
disincentives to work at older ages. The UK approach to increasing
the mandatory retirement age by announcing small changes
years in advance can serve as a useful model. He cautions that
politicians often don’t respond until there is an emergency, but is
optimistic that Asian countries are starting to do so. In fact, China
has reached the point where the dependency ratio is rising, which
will hinder future growth, making policy changes more urgent.
Extending the working lives of older workers as the population
ages in emerging markets is a multi-dimensional challenge. People
need to change their expectations, which will aid them in making
rational choices in updating their job skills and planning their
retirement lives, as well as pushing politicians to make changes
to policies and institutions to accommodate new models of
retirement. Institutional changes will in turn drive changes in
expectations. Ideally, this can create a virtuous cycle that can help
tomorrow’s elderly in emerging markets live more fulfilling lives.
The full video recording can be viewed on
Truman Gregory
Packard
Maret Góra
Albert Park
