Every country strives to strengthen their economy. The American government is not an exception. The labor market seems to offer an opportunity for growth of the economy. In the US, 62 is the earliest age that an American can claim the social security benefits (Munnell, 2015). This age, also referred to as the early retirement age (ERA), and the full retirement age (FRA) continue to be important both socially and economically. So far, there are no requirements or policies on mandatory retirement age (Hannon, 2015). Raising these age limits would have beneficial economic impacts because they will lead to increase in the country’s GDP, reduce unemployment and improve the fiscal health of the pension system.
According to Cseres-Gergely (2014 ), raising the retirement age yields a positive impact on employment. Cseres-Gergely (2014) researched on the effect of increasing the retirement age on the employment rate of Hungarian women. The findings of the research revealed that increasing ERA by one year raised the employment rate by 5-7.4 percent.
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A different study by the Committee for a Responsible Federal Budget showed that rising the retirement age would lead to growth in the GDP (CRFB, 2012). CRFB’s research looked into the effect of raising the ERA from 62 to 64 years by 2025 and found that GDP would grow by one percent by 2035 due to increase in the size of the labor force. Consequently, the government would save $144 billion. Furthermore, rising the full retirement age from 67 to 70 years by 2035 would result in a $120 billion savings.
Staubli and Zweimüller (2013) conducted a research to establish the effect of raising the retirement age on the employment rate of older workers in Austria. The researchers estimated that increasing ERA by one year would lead to a reduction of government expenditure on retirement benefits by 126.8 and 104.5 million euros for men and women respectively. The research revealed that increasing ERA raises the employment probability by 9.75 percent for men and 11 percent for women. Additionally, the increase in employment rates would increase the government revenue by 29.2 million euros for men and 35.8 million euros for women per year. However, the government will have to spend 67.6 million euros in unemployment insurance (UI) and disability insurance (DI) programs due to the spillover effect created by the ERA policy. Overall, the researchers estimated that a one-year increase in the ERA results in the reduction of the government budget deficit by 228.9 million euros per year.
A documented proposal published by Social Security Administration (SSA) shows that raising the retirement age to 67 would result in 15.4 percent of member aged 62-66 retaining their social security benefits (Ross, 2015). Depending on the year of adoption of the proposal, the research revealed that the government would save between $50-100 billion (using the 2015 statistics).
Economic growth in a country depends solely on the productivity of its citizens. Owing to such, a higher number of workers results in increased productivity, hence the growth of the economy. I agree with the finding of various researches on the impact of raising the retirement age on the economy. Formulation of a policy to raise the retirement age would have a significant impact on the GDP, the employment rate of the older workers, fiscal health.
In conclusion, owing to the fact that each economy is striving to expand, retirement age policy provides an avenue for such growth. As proven by various researches, raising both the ERA and FRA provide economies with a chance of generating and saving more. Whereas these researches reveal the positive fiscal and economic effects of rising the retirement age, a comprehensive study of the cost-benefit analysis is necessary. The cost-benefit analysis should look into the effect of increasing the retirement age on the employment rates of the youth.
References
Committee for a Responsible Federal Budget (CRFB), (2012). Raising Eligibility Ages Is Good for the Budget and the Economy. Retrieved on October 24 th , 2017 from http://www.crfb.org/blogs/raising-eligibility-ages-good-budgetand-economy
Cseres-Gergely, Z. (2014). What effect does increasing the retirement age have on the employment rate of older women?
Hannon, K. (2015). Forbes: Is It Time To Abolish Mandatory Retirement? Retrieved on October 24 th , 2017 from https://www.forbes.com/sites/nextavenue/2015/08/02/is-it-time-to-abolish-mandatory-retirement/#6c56073540db
Munnell, A. H. (2015). The average retirement age–an update.
Ross, S. (2015).The Economics of Raising the Social Security Age Investopedia. Retrieved on October 24th, 2017 from http://www.investopedia.com/articles/investing/082015/economics-raising-social-security-age.asp
Staubli, S., & Zweimüller, J. (2013). Does raising the early retirement age increase employment of older workers? Journal of public economics , 108 , 17-32
