Zeenat Aman, Amitabh Bachchan show India needs to revise its outdated working age norms

Is ageism finally a thing of the past? 

Bollywood makes the trend more noticeable, but we see the same in government for instance: After retiring from the IAS, bureaucrats take up positions on corporate boards, get appointed by government in regulators and on committees that shape critical policy. Traditionally, age has been no bar in high-skill work in which specialized expertise, experience and reputation are advantages – such as for doctors and lawyers. Increasingly now, other sectors are seeing similar delays in retirement. 

The Economist’s most read story at the moment is ‘Why you should never retire’; it discusses Warren Buffet and Giorgio Armani’s refusal to retire from active work even after being in their 90s and 80s. 

The improvement in health care and the quality of life in recent decades has prolonged people’s working lives, allowing them to remain productive longer. People now live longer, remain healthier well into advanced years. 

Technological advancements such as use of digital and AI tools and solutions are making people – at all ages – more productive and efficient, and changing the way we work, which is especially helpful for the elderly. Computers and AI tools can take over time-consuming tasks such as travel arrangements, writing letters, making presentations, freeing up minds pace and time for performing less laborious work, which works particularly to the advantage of the elderly who may want shorter workdays. These technologies can make even those laborious jobs done by low-skill workers, not just white-collar jobs, more productive. All of which allows for prolonged work lives even for the low-skill elderly.

Now, if the old norms for retirement age, working age could be updated to reflect all these changes and advancements and be in tune with the times, many more people that aren’t celebrities would have the option to work till well into their 70s if not longer; 80s is the new 60s! That will take care of the demand side. 

Conventionally, a higher proportion of working-age population is preferred mainly as there are more income earners and relatively fewer dependents, ie, children and retired people, in such an economy. This ensures higher output per head, higher incomes per head. This means more savings and investment in the economy that can be deployed for higher economic growth and development.

But many countries are discovering that populations are aging at lower income levels and they simply cannot afford to let people retire from work just now. 

In Thailand, for instance, the share of the population aged 65 or over was 14% in 2021, when its GDP per person was $7,000. When Japan had a similar portion of aged population, it was roughly five times richer than Thailand was in 2021. Thailand has, thus, become old before it has got rich. When this happens, the burden increases on the working age population and government of health care and pension costs of the older population. Resources must be diverted away from physical and social infrastructure needed for improving productivity, becoming richer. Therefore, it makes sense for a country like Thailand to raise the retirement age. 

Globally, countries such as Japan and China are facing of shrinking working population due to aging. Shortages in construction and health care are pushing up wages fast. Countries typically respond by adjusting immigration policy to keep wage costs low. Japan for instance has a policy of time-limited visas for workers in shipbuilding and other such critical industries. 

The other option used until a few years ago was outsourcing. A great number of jobs were relocated from advanced economies to low-wage countries such as China. Additionally, the threat of relocation of jobs were used in wage negotiations with worker unions, which is partly responsible for the angst against China in worker classes and the rise of anti-immigration politics in those countries. Now even China is past its working age population bulge. 

In South Korea, the problem of an ageing population has led to work lives becoming longer. The proportion of people aged between 55 and 79 that work has increased to just under 60%. 

In India, the share of the working-age population is large, will remain for some more time – what economists call the demographic dividend. Does that mean India doesn’t need to review working age and retirement age norms? 

Not really. If a country like India doesn’t openly debate raising the retirement age, it’s because it is sure to trigger anxieties, perhaps even protests from the young, the bulk of the population. The economy isn’t generating enough well-paying, productive jobs to absorb the large number of youngsters in the population that are finding it difficult to find employment, especially secure government jobs.

If the retirement age is raised, the young are bound to complain that they’d stand to lose whatever few employment opportunities there are to the more experienced candidates. Any increase in supply of experienced hands may also depress wages.

But it may not necessarily be so. We know that when a larger share of the population engages in productive work, the economy is more productive, richer. Such an economy generates new demand – not only for goods and services but also for more labour as newer jobs get created. Policy can aid this process by removing the disadvantages and structural biases that hobble the creation of new jobs. Policy can ensure more jobs per unit of capital are created. Labour markets depend not just on demography but two more factors: demand and automation. Carefully designed policies can make sure more and more jobs are created. 

India is an economy in which labour is abundant but skills scarce. Employers, thus, stand to save costs by keeping workers stay on longer years. They are unlikely to wait for the retirement age rules to change. Even if the rules aren’t changed, retirement age will go up unofficially. Employers will hold on to retired employees on contracts, etc. This is already visible in government that has been appointing bureaucrats after they retire from the IAS. It doesn’t trigger protests as the numbers involved are rather small.

Proactive policymaking will ensure better results.