Retirement age is one of the most important topics when it comes to Social Security, as any modifications or new legislation on this matter could impact millions of beneficiaries and the pension system overall. According to recent debates and news about full retirement age, it seems everything we know about retirement might soon change, forcing beneficiaries to rethink their working life.
In developed countries, people will retire approximately two years later than current retirees. Moreover, in several countries, the retirement age will significantly increase. Denmark, for example, plans to raise the retirement age to 74 by 2070.
The relevance of retirement age could disappear and affect social security
Despite significant changes in society, labor markets, education, and retirement policies over the past 70 years, the working age has remained between 15 and 64 years. This age range facilitates government spending planning and retirement planning for both individuals and organizations. However, the fact that this age group remains the standard reference is surprising.
Many people over 64 continue to contribute formally and informally to the economy. In OECD countries, despite the official retirement age, an average of 23% of people between 65 and 69 years old still work. This demonstrates why it is problematic to discuss working life only in terms of chronological age. The idea of working age as we know it today will become less relevant as the retirement age increases. Societies need a more creative and adaptable strategy.
What is functional age?
The concept of functional age, which measures specific physical and mental abilities, is used in some countries as an alternative. However, this only applies to a limited number of occupations, such as police officers, firefighters, and pilots, where specific skills like vision, physical fitness, cognitive ability, and decision-making are emphasized.
While using functional age as the primary measure is not always the best option, it shows that there are viable different approaches. Additionally, factors like disability and caregiving responsibilities can prevent people of “normal” working age from working.
On the other hand, other groups, such as immigrants, have unique incentives, passions, and opportunities to work. In many ways, ageism in work and society is exacerbated by the fact that most social and economic norms are based solely on age. This has clear social and financial implications.
Older people are often seen as frail and less productive, receive more pensions and Social Security benefits, are more vulnerable to layoffs and hiring discrimination, and are often considered difficult to train. Current economic and social systems perpetuate ageism, assuming that chronological age is the best measure of older people’s utility in society and the economy.
The need for a new structure for social security
The concept of working age emerged in the 19th and early 20th centuries, during the Industrial Revolution and the development of the modern labor economy, when understanding the age structure of the workforce became crucial for effective economic planning during the transition from agrarian to industrial economies.
The British Factory Act of 1833 and the Education Act of 1918 established a formal structure to combat child labor exploitation and improve workers’ conditions. The age range plays a crucial role in economic projections, welfare systems, healthcare, and employment policy.
This classification is used by major international organizations, such as the World Bank, IMF, and ILO, to ensure consistent data collection and reporting across national borders and periods. An unbalanced population, with too many older or too many younger people outside that age range, can pressure the nation’s income and resources, as fewer people can work and support the public sector and welfare systems.
The current age structure creates an artificial division between young and old, leading to generational tensions and competition for resources.
Toward a more flexible approach to age in social security
Even adjusting the upper age limit to match the state pension age will still be arbitrary due to increasing longevity trends. The current structure of society requires complex and prolonged changes, but a step towards a more balanced approach is gradually eliminating structures based on chronological age.
This holistic change, which decouples age from economic measures, will lead societies to rethink the value of chronological age and eliminate the artificial age divide. What is needed is a dynamic and fluid approach to age that considers both economic and non-economic needs and individuals’ contributions.
The retirement age and working age structure as we know them are changing. To address the challenges of an aging population and changes in working conditions, it is essential to adopt a more flexible and adaptive approach that recognizes older people’s ongoing contributions and values their skills and experiences, regardless of their chronological age. This will not only help maintain the sustainability of Social Security but also enable a more inclusive and equitable society where the experience and capabilities of all individuals are appreciated and fully utilized.
