Raising Retirement Age: Clash of Generations?

In developed countries such as those in Europe, retirement is a celebration. People retire with generous pension payout, supported by the current taxpayers. Retirees can remain active without worrying about their old-age financial support. The challenge is the growing ratio between numbers of retirees and taxpayers due to ageing population. Unless the taxpayers contribute more, the state budget may become unsustainable. Therefore,  an increase in taxpayers’ productivity will enable them to contribute more. The political concern with this solution is that the taxpayers may perceive it as unfair to finance an increasing number of retirees. Another possible solution is to raise the retirement age. Nevertheless, an increase in retirement age can be opposed by taxpayers as it will delay the enjoyment of retirement.

On the other hand, a developing country like Indonesia has a small pension payout, often lower than minimum wages. This remains true regardless of whether the payout comes from current taxpayers or from saving accumulated during their pre-retirement years.  Therefore,   delaying the retirement age can provide people with more time to finance their selves. Furthermore, not allowing people to work while they are still able and willing to work is a waste of resources and against human rights.  The challenge is that the younger generation may resist the increase in retirement age, arguing that it will hinder their career progression.

In both cases, raising the retirement age or abolishing the mandatory retirement age may reduce the challenge in providing old-age financial adequacy in an ageing population. Nevertheless, there may be political challenges in implementing such a policy. The older people in developed countries may resist delaying the enjoyment of retirement; while the younger generation in developing countries may be unwilling to wait longer for their promotion.