Retirement Age: Preferences of Employees Representing Various Age Groups

By Mendryk, Iwona | Economics & Sociology, October 1, 2017 | Go to article overview

Retirement Age: Preferences of Employees Representing Various Age Groups


Mendryk, Iwona, Economics & Sociology


Introduction

Aging of the population entails a number of consequences. Forecasts of unfavourable changes in the size of population, its structure with regards to economic groups and labour dependency ratio, are significant for Polish labour market and for the functioning of organisations. According to the Central Statistical Office (GUS), at the end of 2050 the size of Polish population will decrease to 33.951 thousand people, which makes up 88.2% of the population size as of 2013. It is also predicted that in 2050 potential labour resources will constitute 56% of the population (in 2013 63% of people were in the working age), and a significant difference will be observed for the population of non-productive age - the share of the elderly (retirement age) will be twice as high as the youth (pre-working age). The total dependency ratio of non-working population to working population will grow from 42 people in 2013 to 81 people in 2050 (GUS, 2014). Progressive demographic aging is measured by the following factors: demographic dependency ratio of the elderly and economic dependency ratio. On the basis of these two factors we can determine the share of elderly people in population, and the share of working people to non-working population. According to (Guzikowski, 2012), the economic dependency ratio (showing the relationship between the total number of unemployed persons aged over 65 to the total number of working age population in the age of 15-64) will increase from 31% in 2010 to 99% in 2060. This means that consumption of the growing number of retirees will have to be financed by working population, whose size is shrinking. The increase in expenditures on pensions could be financed in three ways: by increasing taxes and pseudo-taxation for working population (employees and employers), extending the number of working hours weekly (e.g., from 8 to 10-12 hrs. per day), or increasing the supply of labour in the economy by raising the retirement age (Urbaniak, 1998, pp. 43-44; Guzikowski, 2012, p. 7 et seq.).

The above demographic forecasts for Poland resemble the situation in the majority of other member states of the European Union. It is expected that in 2060 the median age in the EU will be 45 for men and 47 for women (as compared to the median age in 2013 which was 40 for men and 43 for women respectively). The percentage of young people (aged 0-19) in 2060 will amount to approximately 20%. Major changes will occur in the older-age groups. The share of people aged 20-64 in the EU-28 population will fall down to 51% (from 61% in 2013). People aged 65 and above will constitute 28% of the population (18% in 2013), while the percentage of people aged 80+ will be about 12% (5% in 2013).

Most EU countries have taken measures to extend working lives and thus increase the availability of human resources involving, among others, the retirement age increase. A similar solution was introduced in Poland. The Act of 11 May 2012 raised the retirement age in Poland for women and men to 67 years of age. Men were supposed to reach this level in 2020, while women - in 2040. According to new regulations, which came into force on 1 October 2017, the retirement age will return to the state before 2012 and will be set to 60 in case of women and 65 in case of men. The first people to conclude their economic activity according to new regulations are women born in 1957 and men born in 1952. At the same time, provisions specifying the path to reaching retirement age amounting to 67 were repealed.

Therefore, a rational "step forward" to mitigate the effects of demographic changes made by the previous government has been revoked. A "step backwards", which is lowering the retirement age, even though enthusiastically received by part of the society, entails a number of negative consequences (suffice to mention the forecasts on pension benefits for those who choose to take the opportunity to retire when they reach the statutory retirement age). …

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