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The surprisingly large policy implications of changing retirement durations


  • Peter Hicks


The paper reviews evidence that suggests that, over the coming two decades, people are likely to stay in the work force at least five years longer, possibly by considerably more. The implications for policy are surprisingly large and surprisingly unrecognized. Recent trends, if extended into the future, suggest that changes of this magnitude are quite likely given a continuation of past labour market conditions. However, these past trends do not reflect new pressures that will work strongly in the direction of even shorter durations of retirement and longer durations of work. These new pressures will result from changes in labour supply and demand that will result from the baby boom generation moving into traditional retirement years in large numbers, increasing the demand for older workers. On the supply side, there will be a large in increase in the educational levels and skills of older people. The effect of market forces could be further enhanced by policy action. In other words, a five year extension of working life is the minimum that should be included in most future labour market scenarios. Delaying work-retirement transitions by even this amount would have large, positive economic and fiscal effects, significantly reducing the well-known negative effects of population ageing. They would have particularly important consequences for pension policy, with a dramatic reduction in the need for retirement savings and, particularly if accompanied by flexible work-toretirement pathways, would reduce the risk of changed income needs in old age. A range of other social benefits, including greater individual choice and well-being, also seem likely – if harder to quantify. However, as with any large social change, distributional consequences are inevitable. A few groups could be relatively worse off in a world where the norm was for work to be extended later in life. In the absence of strategy for addressing the needs of these potential losers, there may well be reluctance to take policy action, despite the likelihood of large gains for most, and on many fronts.

Suggested Citation

  • Peter Hicks, 2011. "The surprisingly large policy implications of changing retirement durations," Social and Economic Dimensions of an Aging Population Research Papers 284, McMaster University.
  • Handle: RePEc:mcm:sedapp:284

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    Cited by:

    1. Aranki, Ted & Macchiarelli, Corrado, 2013. "Employment duration and shifts into retirement in the EU," LSE Research Online Documents on Economics 53190, London School of Economics and Political Science, LSE Library.

    More about this item


    Income replacement; pension systems; pensions; retirement; retirement age; life expectancy; older workers; aging; Canada; projections; public policy;

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy

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