In common with other G-8 countries the UK is feeling the effects of bailing out the international banking industry. The bailout has been too expensive, long live capitalism. One of the measures recently announced in order to save government money is to raise the retirement age, currently 65 for men and 60 for women. A plan has been developed wherein over a period of time the retirement age will be raised such that a person now of 15 years old will retire at age of 70.
The initial raise will be in 2016 when the retirement age will be put up by one year, and then one more year every five years. The raising of retirement age will be in line with expected rises in life spans (now 86.3 years for men in the UK compared to 77 in 1950).
The savings brought about to government (in saving pension payouts) by raising the retirement age one year are estimated at five billion euros (P349 billion) by a population 66% the size of the Philippines. This saving grows to 15 billion euros (less than P1 Trillion) if national insurance and extra tax payments are factored in. The UK plans which also include massive reductions in public expenditure have apparently been much admired at the recent G-8 and G-20 meetings in Toronto.
Sounds good, but from an academic perspective only perhaps? One has to wonder if the private sector has the capacity to provide the extra jobs that are needed in order to support an extra year’s work.
Government are in fact going to remove the provision of jobs by cutting back public expenditure (so government saves there) and they are going to increase the retirement age by a year initially and more later, (so they save again).
The private sector therefore has to make more jobs when it is the private sector’s general strategy to make less jobs. Less jobs equals higher returns, more financial efficiency. The creation of more jobs by the private sector, in the UK or elsewhere is a big challenge. The financial meltdown means that there is now generally significantly higher unemployment, due to lack of credit than was the case in say 2008, so the challenge for the private sector is bigger than it was before the financial meltdown. For governments to cut back on public spending, encourage people to work longer, all in the wake of a worldwide financial crisis that has raised unemployment levels —is asking too much. I strongly suspect that whilst the proposals may sound attractive politically and when being “shown off” at high level G-8 or G-20 meetings, that they will not provide the solutions claimed. Add to this the clear reluctance of the private sector to prefer over 50’s to under 30’s in their workforces and you have a recipe for disaster, in the UK the amounts paid out in social security (unemployment) benefits will probably exceed the proposed savings on pension payments.
Yes, it is a good idea to raise retirement ages, people don’t need to sit around with nothing much to do for up to 20 years, they should be occupied where heath permits and doing something useful, but this pre-supposes an infinite supply of jobs and the opportunities for employment in the developed world are just not going to be there in sufficient numbers particularly given withdrawals of government spending.
For the private sector to create the sort of numbers of jobs that are required will require a lot of ingenuity (more I think that it possesses), a financial sector which has the capacity and intellect to support business and much greater mobility of labour, as well as a few other things. I think the challenge is just too great, just watch the unemployment statistics. Shades of Mrs. Thatcher’s policies I think.
But here in the Philippines with a lower life expectancy than UK, no credit, no meaningful social security system, massive un/underemployment and a captive private sector, then I guess the UK model would not apply anyway! –MIKE WOOTTON, Manila Times
Mike can be contacted at mawootton @gmail.com
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