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Is raising the retirement age a good idea?

Sandip Ghose | Updated on July 17, 2019 Published on July 17, 2019

The next generation of HR managers may have their work cut out as India’s demographic profile changes

Japan has been in the news recently for an odd reason. Burdened with an ageing and declining population it is contemplating relaxing immigration laws to allow foreign workers into the country.

Approaching the age of superannuation, just as I was daydreaming about moving to Japan post retirement — (cab drivers are in demand, especially in up-country small towns, I read in a magazine) — came the Finance Ministry’s Economic Survey of India 2018-19 . Notable among its contents was a hint about the need to raise retirement age in India.

A nation conditioned for decades on theories of population control, with politicians still talking of the need for “two-child policy” was suddenly shaken up by the prospects of a reversal in trend. The Economic Survey pointed towards demographic projections that India’s population growth will continue to decline over the next two decades, growing less than 1 per cent during 2021-31 and under 0.5 per cent during 2031-41.

Viewed together with statistics of increasing life expectancy, it makes the spectre of an ageing country appear closer than we thought. The under-19 population has already peaked. From a high of 41 per cent in 2011, it is expected to decline to 25 per cent by 2041, according to reports. India’s demographic dividend is beginning to taper off, it seems.

Parallels are being drawn with countries like France and Germany in the developed world. Plummeting fertility rates have increased the age of the working population —putting pressure on pension funding.

Implications

While the Chief Economic Adviser has done well to give a heads-up about the future, the Survey highlights the issue primarily from an economic and fiscal angle. The concern appears to be the burgeoning social security obligations that are likely to come upon the State. It has, therefore, signalled pushing back the general retirement age from the present 60 to 70 as a real possibility.

So far, the idea has only been broadly articulated. There is no concrete proposal on the table. It will, no doubt, have to be fleshed out, with the t-s crossed and I-s dotted before putting up for a country-wide debate.

But the implications of this demographic change on society and the labour market can be mind-blowing.

Since it is the government that has raised the topic first, let us start with what it can entail for the State. Unless it is able to control the intake, it will lead to an even more bloated establishment and public sector. In the West, it has been seen that people make a conscious switch to government jobs towards the end of their careers for greater job security and delayed retirement. In India, where “sarkari” jobs are assumed to be guarantee of “life-time employment” this can be a bigger problem. Besides, an extended lifespan does not necessarily mean a “working fit” population. India is already home to many lifestyle-related and genetic ailments, from diabetes to cardiac malfunction. And then, given our climatic conditions and a plethora of vitamin and immune deficiencies that afflict even the affluent strata of the population, the older population may not be as productive as in developed countries.

Transitions

The bigger issue, however, will be the changing nature of work with the arrival of advanced technology like AI and Robotics. It will cause a tectonic shift at the work place that will make many jobs redundant and demand new skills and competencies for what will remain.

This will affect private and public sector jobs alike, cutting across shades of white, grey and blue.

Organisations will have little option but to become leaner and be on relentless pursuit of headcount reduction to improve efficiency. The average age of employees will keep going down in all establishments — small or large. That trend is irreversible and will only pick up momentum each passing day.

Yet, new jobs will emerge. The informal sector will grow. Demand for individual skills will increase. Telecommuting and remote working will pick up.

The challenge, therefore, will be on how to transition the older workers and employees to newer jobs — that may be less paying but at the same time will also not be as demanding and come without an “end date”. Many of these jobs will be in the “self-employed” category and the government is doing well to systematically extend the social welfare net beyond the organised sector.

The armed forces manage this transition well. The next generation of HR managers and policy planners will have to institutionalise the process at a national scale.

Sandip Ghose has held senior leadership positions in Consumer Goods and Media industries. He is an executive coach and blogs on leadership and people. He tweets at @SandipGhose

A delicate balance

 

The directional thought to bring up the causative demographic patterns from 2020-2040 and why life expectancy and TFR will play out to impact retirement age is realistic. We will have no choice but to follow other countries going through that shift today.

But how and when the retirement age needs to shift northwards is a delicate balance that needs to be brought in thoughtfully as some types of jobs and sectors will get impacted in terms of supply-demand gaps and employment and employability.

James Thomas, Country Manager India, Kronos

 

Not a zero-sum game

 

Raising the retirement age will help us benefit from the experience and wisdom of seniors, especially since there is a skill deficit in many areas.

At the same time, this need not be seen as a zero-sum game as far as opportunities for youth are concerned. Increasingly, there will be creation of new jobs for which youth should acquire the skills relevant to those jobs.

In fact, the moment we take this issue beyond the formal employment model into the gig model, we start seeing this as a natural trend, driven purely by variables of skill, physical fitness, compatibility and availability.

D Prasanth Nair, Managing Partner, Inhelm Leadership Consulting

Published on July 17, 2019
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