Prolonging working life, that is, delaying the retirement age “supports” the sustainability of the public pension system and the Welfare State. In addition, it helps to take advantage of senior talent, complementary to that of young people, and boosts productivity, according to a study by BBVA Research, which argues the reasons why workers should delay leaving the labor market.
As is known, the pension system has triggered the deficit and the Social Security debt during the Government of Pedro Sánchez, despite the fact that he has disguised them by transferring that debt to the general administration of the State. The 8.5% rise in pensions this year and the limitations on productivity and employment in the Spanish economy are the main causes of this deficit, which has also been reached with contribution income at all-time highs. Which makes it even more worrisome.
The report, prepared by Alfonso Arellano, Rafael Doménech and Juan Ramón García, stresses that, according to the OECD, the number of people of working age for each person over 64 years of age fell from 6.9 in 1960 to 3.0 in 2021 and will continue to decline until stabilizing around 1.7 in the mid-1940s.
This means that the current pay-as-you-go system will be unsustainable due to a mere demographic question, beyond the policies of the government on duty. To which is added, in addition, the greater life expectancy (more years collecting the pension). Among the measures cited by the experts to try to alleviate this problem, there is always a delay in the retirement age that the BBVA research unit is now proposing.
“In this context, prolonging working life is revealed as a necessary resource to safeguard the sustainability of the Welfare State,” say the authors of the study.
The report confirms that the life expectancy at birth of the Spanish population has grown 7.6 years since 1980, to exceed 83 years in 2021. This advance in longevity coincides with the five-year delay in joining the labor market and the low participation in the labor market of the elderly population.
Thus, although the employment rate of the Spanish population between 55 and 64 years of age has grown since the mid-1990s to 55.8%, it is still below the OECD average (61.4%). In this sense, the authors warn that “the growing importance of a longer-lived inactive population makes it difficult to finance the public pension system.”
The authors point out that Spanish workers are among those with the least labor skills within the OECD. In addition, participation in training actions for adults is low in Spain (43% of the population between 25 and 64 years), especially for people between 55 and 64 years (29%).
Another argument used by the study to advocate for the extension of working life is the need to take advantage of senior talent, since the employment rate of the older population is “positively related” to that of young people.
«When a veteran employed person chooses to leave the labor market, their non-market production increases. If this is a substitute for market production, employment is destroyed. On the contrary, if the older worker continues to be active, their higher income and less leisure time will contribute to replacing non-market services with market services provided by other population groups (particularly young people), which it will increase the level of employment,” the report states.
In addition, according to BBVA Research, extending working life boosts the productivity of young people, since they are more productive when they work in companies in which veterans are more represented, both due to the possibility of learning and their abilities.
Thus, a positive “bidirectional” effect is produced, since not only is it produced from workers with more experience towards young people, but older workers are also more productive when they work with people under 35 years of age.
Likewise, BBVA Research points out that, according to numerous scientific studies, extending working life reduces the risk of dementia and delays the onset of Alzheimer’s disease in those who suffer from it (six months for each additional year of work).
According to the authors of this study, although for decades inclusion and diversity have been proactively promoted based on individual characteristics such as gender or race, there is a dimension in which the objective of inclusion “seems to be further behind : age discrimination.
According to data from a 2020 OECD survey on the reasons for discrimination at work, age was by far the leading cause of exclusion for any age group, but especially over 50s.
“The evidence also shows that participation in the labor market falls abruptly between 55 and 60 years of age. Voluntarily or involuntarily, an important part of the productive potential of our societies is being wasted”, denounce the authors.
This fact, they stress, is coexisting over time with phenomena such as digitization and robotization, globalization, aging, and environmental and social sustainability.
«Many of them constitute a challenge for the inclusion of people with more advanced ages. But at the same time, incentivizing and promoting the extension of working lives represents an opportunity to address these big megatrends with greater chances of success, “concludes the report.
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