4th Feb 2023

Brussels keen for 'automatic' hikes in retirement age

  • Growing old gracefully: 'What is really needed is a new vision,' Mr Blackburn said (Photo: soylentgreen23)

Keen to push forward with raising the retirement age right across the EU, but wary of the potential backlash from trade unions, Brussels wants to take the decision out of the political sphere and create an automatic legal system instead.

The European Commission will on Wednesday (7 July) say in a green paper that with the economic crisis aggravating the demographic challenge of pensions, it is time that retirement ages go up across the bloc, but that they should be automatically adjusted upward every time life expectancy increases.

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Where currently there are four people of working age for everyone over 65, by 2060, this number will be cut in half, the commission paper notes.

"The situation is untenable. Unless people, as they live longer, also stay longer in employment, either pension adequacy is likely to suffer or an unsustainable rise in pension expenditure may occur."

Getting people to stay in work longer is not an easy task. Public sector employees in France mounted a general strike earlier this month, disrupting transport and schools across the country, over government plans to hike the retirement age from 60 to 62. Governments in Spain, Romania and Greece are also facing anger from pensioners and unions over changes to pension laws.

In response, to avoid the vitriolic debates and industrial action that accompany every attempt by governments to adjust the retirement ages, the commission is proposing an "automatic adjustment mechanisms" as the solution.

The commission underlines that the green paper is "only an opening of a broad discussion," according to one EU official. But the document spells out quite clearly that all EU governments should impose such automatic changes to ensure that the longer people live, the later they retire, allowing each country to still have different retirement ages, but ensuring that all progressively increase.

"Introducing an automatic adjustment that increases the pensionable age in line with future gains in life expectancy ...represents a promising policy option," the commission paper says.

Member states appear to be on the same page as the EU executive, with a May report on pensions from the Council of Ministers, representing the EU's national governments, saying: "The basic idea behind them is to transfer decision-making from the political arena to the realm of the law."

'Prodding in one ideological direction'

Meanwhile, one expert on the pensions 'timebomb' says the fear governments and the EU have of the discussion is matched by what he calls "a real paucity of their ambition."

Robin Blackburn, a sociologist and historian at the University of Essex, spoke with EUobserver about the proposals.

"The document is trying to prod in a particular ideological direction," he said. "While they say they are soliciting for a response, for information, we can clearly detect beneath this, there is one specific way of looking at the problem and trying to apply pressure along these lines."

"The only solution on offer is for people to work longer. The proposals are quite modest and wholly inappropriate."

Mr Blackburn, the author of a pair of books that have taken the discussion about the future of pensions out of the pages of technocratic reports and into high-street bookshops: Banking on Death or Investing in Life: The History and Future of Pensions, and Age Shock and Pension Power: How Finance is Failing Us, said that while there is an ageing trend, "with projections of half a century into the future, we need to apply a pinch of salt."

He said that increases in immigration "would mitigate much of the problem."

Sharing out the misery

However, the main fault of the proposals is not the statistical projections on ageing but the assumption that there will be jobs for older people to do, Mr Blackburn added. So long as unemployment is high and growing, by pushing more people into the working environment, the EU would effectively be boosting the number of people who cannot find work.

"You can raise the official retirement age all you want, but if you do not deal with the conditions of the economy as a whole, you will not solve the problem. If the jobs aren't there, you are not going to get more older people being pushed into non-existent employment," he said.

"This means that as long as general employment conditions are worsening, all this policy is going to do is share out the misery."

Mr Blackburn added that the discourse of extending working lives also pretends that age is no longer a factor in workers' abilities to perform tasks.

"To some extent this is true, but there are still real limits to the kind of work that can be done, particularly frontline jobs. At 60-70, your response rates do decline, and this has an impact on jobs such as train drivers or forklift operators and so on."

An EU 'Social Security' system

Mr Blackburn called for a quantum leap in ambition among the EU elites: "What is really needed is a new vision, new sources of revenue to replace the funding shortfall in the system."

He compared the current period to that of 1930s America under Franklin Roosevelt, when the country faced a failing pension system. In response, President Roosevelt in 1935 created what became known as Social Security, a system of benefits for the elderly, widows and the disabled.

Increasing the number of older people retiring, proponents at the time argued, would create more opportunities for young people to find work and reduce unemployment.

Social Security was expanded in 1940 and 1949 until it covered almost every US citizen. It became massively popular - to the extent that all attempts at its privatisation by presidents Reagan, Clinton and Bush failed. Today, it the largest government programme in the world and keeps 40 percent of Americans over the age of 65 out of poverty.

"Europe needs its own EU-wide Social-Security-type system, but by coming up with new sources of funding, such as taxes on financial transactions, leases on public utilities, taxes on fossil fuels and share levies."

He said that this should be part of a "European Development Plan" under which the EU could direct pension capital into developing new industries, green technologies and new power sources - "maybe a series of world class universities in the Mediterranean" - and more investment in science and research.

Rather than provoking anti-Brussels anger amongst pensioners and trade unions, the development of such an EU-level pension system could actually boost support for the European Union.

As with the popularity of the US social security system, argued Mr Blackburn, an EU pension regime "would have the added effect of increasing the legitimacy and relevance of the EU amongst citizens through a tangible benefit to their lives."

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