Assignment
Carry on working! In industrialised countries around the world, official projections of life expectancy are being revised upwards. In the UK in 2004 the government actually lifted its estimates of life expectancy for those now in their sixties and eighties by between 10% and 13%, even though the previous estimates were published only two years ago. This shift, coupled with falling birth rates, means people will need to have longer working lives and to save more during them to pay for their retirement. Longer working lives will, however, require a profound cultural shift that both employers and employees have barely begun to grasp. A report from the House of Lords warned in January 2004 that if compulsory retirement ages are to go, then job assessment will have to be based on competency, not age. This will mean challenging some long-established ideas about promotion and pay being based on seniority. Employers will have to operate transparent personnel policies, justifying who is recruited, promoted, demoted or made redundant. And ‘employees will have to accept regular monitoring and assessment of their job performance', the report says. Employees across Europe, where early retirement has become entrenched in the past 20 years, will face a significant challenge to the widespread aspiration to finish work early, says Philip Taylor of Cambridge University's Interdisciplinary Research Centre on Ageing. Longer working lives also imply that an individual's last job is likely not to be his or her most senior one.
‘That is not something many people feel comfortable with yet,' he says. ‘It is not just about how people feel about themselves and their status. It is about how your co-workers relate to you.' ‘Not a lot of men will feel comfortable after working their way up to middle or junior management to have to take a job in a more junior position, as they move beyond 65 years. It is a big culture change that is required.' This is equally true for companies, many of which will find that the shrinking supply of younger workers as birth rates fall means retaining people longer. ‘Employers are going to have to scramble to find the talent they need,' says Jeff Chambers, vice-president of human resources at SAS, the privately owned US software company. The average age of SAS's 5,000 employees is now 41. Within the next five years, a quarter will become eligible for retirement. For the first time in its 27-year history, the company is having to work out how to retain older employees.
‘I think a lot of employers will introduce phased retirement programmers. Major corporate employers will have to come up with a value proposition (to older employees) that offers reduced hours and more flexibility,' says Mr. Chambers. Phased retirement plans come in many forms. Toyota allows its production line workers in Japan to return to work on annual contracts after retirement at 60. One suggestion that has surfaced in the UK is that pensions should be based not on final salary but on a percentage of career-average earnings. That would not only make company pensions cheaper to provide, it would make it easier for people to work fewer hours, or in a less senior job as they near retirement, without taking a big hit on their pension. Longer life is also putting pressure on the age at which state pensions should be paid.
Sweden has become the first country to make its state pension age actuarially adjusted - so that as life expectancy rises, the state pension age will rise in line. Japan is raising state pension age from 60 to 65, and the UK is doing the same for women. Elsewhere the debate is over whether current state pension ages can hold in the face of greater longevity. But in all this, for both state and private provision, there is a silver lining. While individuals may have to work longer they will not necessarily have to work for that much longer, according to Donald Duval, president of Britain's Society of Pension Consultants. ‘If people work on just an extra two or three years, there is a gain both ways,' he says. ‘They are reducing the length of time their pension has to fund them, and they are paying taxes which helps with state provision, and quite small changes in state pension age can have big effects on the costs.'
Question
1 How will working longer have implications for:
(a) Employees;
(b) Employers;
(c) Government?
2 Why might working only a few extra years make an important contribution to resolving the pension problem?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.