Nice post, thanks for taking the time !
For reference, one of Macron’s most visible tax reforms was to remove a wealth tax which brought in 3bn per year. So that was the same order of magnitude as the pension deficit.
I haven’t read anything about this really. Were labor unions mostly protesting against retirement going from 62 to 64 years, the way Macron went about the reform, both or other?
FWIW retirement will be raised to 70 from 67 here in Norway, though with some options to retire earlier if you give up some of the benefits. Hard to feel much compassion about the retirement age going to 64 on its own tbh.
There’s a good term in the pension industry called “pension envy” that catches the idea that decisions shouldn’t be made based on bringing pensions down to the lowest common denominator. This comes up a lot in the public sector vs. private sector debate - conservative policy advocates whip up support for cutting public sector pensions by emphasizing how private sector workers don’t have good pensions and it’s not fair. These arguments have some merit certainly, but they conveniently leave out the possibility that, you know, everyone should have good pensions. The race to the bottom is only good for a minority of people, mostly rich people that don’t need pensions because they have generational wealth anyway.
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It’s my pleasure, I so rarely actually know what I’m talking about!
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damn, you already have the krugman-esque je ne sais quoi. hope you decide to start a substack, or just go straight for nyt op ed pages
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Sure, I get that. But I honestly don’t see why people should retire at 62 when we live longer and longer, with better health outcomes than the generations before. Guessing the 62 retirement age in France was set long ago.
There should be carve outs for people in tough physical jerbs though.
Personally I’d rather see shorter or fewer working days rather than a low retirement age. More time and less material wealth.
It’s an important question to ask, but it’s not as obvious as it seems on it’s face. There’s lot of evidence that people are living longer lives but not necessarily dramatically (or equally) healthier lives.
A lot of the pressure on retirement ages isn’t because people are so much more vibrant and productive at older ages than they used to be. It’s because they’re starting work later in life and (as you say) living longer so it’s purely a math question of needing enough working years to save up for an increasing number of retirement years. The math works out great in the spreadsheet if you just push back retirement by a few years, but a lot of people are going to be miserable, unproductive, or both in their later 60s.
It’s very likely that pushing back the retirement date won’t change retirement behaviors all that much, people that need to retire before 65 (or 70, in other countries) will still retire. They just won’t get as much benefit as they used to because they will be considered an “early” retirement.
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Interesting.
The McKinsey report takes a global perspective though, doesn’t it? For example, smoking is nearly extinct here. Health care is widely available. Would be interesting to see country breakdowns.
Your point probably still stands even in the top ranking nations, though I’d venture to guess somewhat weakened.
I have seen similar results for US and Canada in the past at conferences, that McKinsey report was just something I looked up for an interested reader.
Anyway, we hope that in the long run people live healthier, longer lives. We also hope they can find productive, rewarding work later in life which is just a net win all around. But I still think that pushing back social security retirement ages is a) not the simple panacea that some technocrats make it out to be and b) not necessarily a good expression of our societal values.
On b), one thing I like to get on my high horse about (more IRL in my job than on the forum) is that Canada has dramatically improved it’s old age poverty rate in the last several decades. It’s a massive policy achievement that should be talked about as one of the very best things our government did since the late 1970s, but it is barely talked about at all and most people have forgotten how terrible it was to have many impoverished elderly people living frankly undignified lives in Canada. I don’t want to see our governments now start to roll back those important social structures because of allegedly “unsustainable” pension systems and I’m glad to see France fight for their old age income security. The challenges in the systems are very real, but we should rise to those challenges by shoring up the systems, not rolling back the protections afforded to the elderly. We can be better than that.
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For the unions this is 100% about the reform détails. For the rest of the population, and the fact that protests have not yet died down as they usually do, the attitude of Macron&co certainly plays.
Re: comparing the ages of retirement across Europe, one thing to keep in mind is that all systems are more complicated than just one single age number, for instance my understanding is that in France, you get a decreased pension if you retire between 62 and 67, so that the average retirement age is actually closer to 64.
(And for instance even though on paper retirement age in for instance Germany vs France is a 5 year difference, in practice it is closer to 1 or 2 years).
70 does seem pretty horrible though, I guess if you have any kind of physical job this means dying on the job or having ridiculously low pension ? I always had the idea that Norway had an oil-funded welfare state, I guess that’s wrong ?
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Yeah same here really. The new pension age isn’t really 70, but you get a decreased pension if you retire earlier unless condition x, y or z, and furthermore etc etc. Haven’t studied all the nitty gritty details to be honest.
And yes, Norway does have a bigger welfare state than most (if not all) other countries. But even here, decreasing birth rates and an ever aging population plays a big part. But iirc a big part of the pension debate revolved around the fact that the gubmint factored in ever increasing standards of living in the pension math, which some decried as completely unnecessary.
I tend to agree, both from a materialistic and environmental perspective. And even a quality of life perspective, it’s really a hassle to have kids and both parents having full-time jobs. We’re lucky enough that my wife can work 60% now when we have small children, but not everyone has that luxury.
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So Finland could be getting a right-leaning government after being announced as the happiest country.
The common basis seems to be a love for financial austerity. The current partner of Marin’s social democrats dont want to continue this partnership because they dislike her fight against climate change which hurts their voters.
THAT’S SOCIALISM!
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I really don’t like increasing pension ages mostly because the people arguing for it all are rich or have desk jobs while the people doing manual labor pay the price. As Mosdef pointed out the current ages can easily be supported by taxing the rich and corporations more.
i think retirement age should not be a cliff, and would rather payments start kicking in gradually. imo that would be better for both employers and employees to plan transitions in advance like that, but that doesn’t describe a majority of jobs.
essentially, in the modern age younger workers are switching jobs to get better pay. but late careers are likely sticking at their current job because leaving would mean taking a pay cut. if those close to 60/65/70 had retirement income start to come in, their options for shorter hours and less stressful work could make more sense, than trying to bank as much as possible while working
You’re not wrong, but in practice these kinds of “phased retirement” programs have kind of landed with a thud when tried. By and large, people’s preferences often match the cliff model. Either they’re sick and tired of work and want to retire 100% as soon as they are financially able to, and by age 60 most people have clued in that instead of working 3 days a week for 60% of pay you can just collect a full time salary and put in 60% of a FTE effort and dare your employer to fire you. There aren’t a lot of people where the mixed model actually helps them.
Does it make it worse for some people? If it is neutral for most but helps a few people, why not?
Good question. The main reason is that these phased retirement features come with an administrative cost. The simpler the benefit is, the cheaper it is to run. The added complexity of tracking phased retirements was seen to exceed the value.
i agree that phased retirement is a strictly tougher sell than cliff retirement, and in practice would be strictly worse than just UBI.
so it’s kinda middle-ground compromise between the two, which hints to me that it would be better than current system, even though both sides would hate it because it’s less than they imagined retirement should be.