- April 12, 2014
- Posted by: essay
- Category: Term paper writing
Necessity of legislation changes conditioned by population ageing and associated trends
First of all, the natural ageing of the population influenced by a high standard of living in developed countries and other above mentioned factors, and therefore, long life expectancy is a major cause of the need to raise the retirement age. The interest in the issue of raising the retirement age which emerged in the world in the last two decades is associated with its functions in the pension system and the labour market, and is caused by the incipient ageing resulting in reduced labour supply of the young, and elderly living in retirement much longer than century ago, when the state first took over the duties of social protection for people who have lost their ability to earn a living.
In general, countries with higher life expectancy have higher thresholds of generally established retirement age (OECD, 2008). In developed countries life expectancy is greater than 75.5 years, and retirement age is no smaller than 60 (OECD, 2008). In addition, in an era of democratization (forcing laws to change (Selznick 1980)), as well as due to the earlier mortality of men, most developed countries have set the same retirement age for men and women. With the increasing trend of ageing, many developed countries have decided to raise the retirement age. Thus, the minimum retirement age in France is 60 for both genders, but in 2017 it will be raised to 62. Other countries are also going to increase it by 2-3 years, and if the women retire earlier – to extend their working activity by 5-7 years and equalize it to the retirement age of men. In Sweden, where people finish working career at the age of 67, the Prime Minister insists on raising the age limit up to 75 at once, which exceeds even the rate in the country of long-livers, Japan, where it is currently 70 years. Currently, Germany, UK, and the USA are in the process of increasing this parameter of the pension system (Doron, 2010; Vanhuysse and Goerres, 2011).
In recent decades, a lot of approaches to the reform of pension systems have been generated. However, we see that even in those countries where the retirement age was originally set at a relatively high level, an intensive process of ageing of the population forced the government to consider the question of changing age limits for retirement. After all, if retirees do not work, and, accordingly, are dependents (with the amount of the pension often exceeding 50-70% of the average wage), regardless of the method of financing pensions, ageing of population with fixed retirement age means the increase of the share of national income consumers (Doron, 2010). Accordingly, the increase of the retirement age reduces the number of consumers of the national income, reduce expenditure on pensions. A the same time, the working age population is growing, which can lead to an increase in employment, which in turn leads to an increase in production and the total income of the pension system through insurance premiums (Doron, 2010; Ervik, 2005).
These factors allow considering the increase in the retirement age as the most effective mechanism of distribution pension system adapting to population ageing, because it is associated neither with the reduction in pension sizes nor with the increase of contributions. Due to the crisis, many European countries had to go this way and developed the strategy for the slow pace increase of the retirement age. Vanhuysse and Goerres (2011) estimate that the legislative increase in the retirement age by 2-3 years would ease the loading on the budget by 2 times.
The issue of raising the retirement age is a painful one for the population of any country, as it involves the change of the previously accepted social contract between the state and its citizens regarding the starting time of the well-deserved rest. Indeed, the construction of pension systems, and hence, the establishment of the age of retirement means the appearance of exact legal boundaries of senium age, marking the moment when an individual turns from a payer of pension contributions (taxes) into a receiver of pension payments (Doron, 2010). As a result, at the macro level of modern economies, the retirement age turns to be one of the main regulators for the ratio between the number of taxpayers and pensioners, affecting economic balance and financial stability. To the extent that the old age pension supposes the cessation of work, the retirement age is also the upper boundary of employability, affecting the aggregate labor supply (Vanhuysse and Goerres, 2011; Ervik, 2005).
Thus, in addition to the modifications aimed at changing the legal age for senium start, the societies facing the problem of population graying’ are forced to care about the promotion of greater integration of elderly people into the economic, political, social and cultural life of the society, develop and stimulate programs and activities aimed at providing social guarantees for elderly people, work out training programs for specialists of services related to the needs and interests of the third age population (Vanhuysse and Goerres, 2011). With the further increase in life expectancy, these tasks are becoming more urgent.
However, not only the public and potential financial difficulties of existing pension systems dictate the need for their reforming. As it is spotted in OECD General Economics & Future Studies (2008), one important reason is also the need for improving the competitiveness of national economies in the globalizing world, including by measures of reducing the cost of labor and slowing down or stopping the growth of social expenditures by the states.
Thus, the first step in changing current laws for addressing the tendency of population ageing is the current increase of the retirement age already adopted by many countries. The second step which needs to be done, no matter how unpopular it may seem today, the coming up to the appointment of pensions for health reasons, pensions after a certain age, or without the regard for age at all. In the latter case, the development of a single standard for defining the biological age may help. In general, the states may prevent the crisis of the pension system legislation base caused by population ageing by solving problems in such areas as the development of private pension insurance, encouraging the creation of new jobs and thus the number of taxpayers, taking care of the health of the younger generation as future taxpayers, etc.
The processes of old population rejuvenation, as opposed to general population ageing, produces new emphasis for different social processes: engages changes in the age stratification and employment structure, education and family institutions; influences the development and demand for medicine and innovative technologies in the field of health, as well as changes the traditional way of life of the contemporary elderly people.
However, the decreasing number of working population means the increasing number of national income consumers and the increasing burden on the budget and working population, as well as the fact that elderly people thus become at risk to remain without adequate pensions and health care even more; and with the growth of aging population, these problems will increase by several times.
In general, the increase in the average age of population has far-reaching and serious impact on planning and implementation of activities in the field of social policies. Already now, governments have to introduce changes in their pension legislation, policies in the field of health insurance and services, and develop training systems for the third age. In Bourdieu’s (1987) understanding of law, to fulfill the function of maintaining social order, new pension legislation is forced to be developed on the basis of the relationship between the current life expectancy and retirement age.