ECONOMY

Aging demands labor reforms

The aging of populations poses a massive challenge for most developed countries’ pension systems, particularly Greece’s given its very low birthrate which puts pressure on its public finances, Alpha Bank has warned in a study. The problem of aging remains acute as long as the job supply deficit, particularly in specialized fields of work, cannot be covered continuously by a rising number of immigrants. The entry of foreign workers into local societies of developed countries tends to occur gradually and only with difficulty. Furthermore, aging societies will not function properly when the domestic population experiences a declining employment rate, despite lengthening life expectancy. This is why in many countries there are initiatives to keep the bulk of the population active and to raise significantly the employment rate for people aged between 55-65. Some people argue that it is financially necessary to extend the working life of older employees, who themselves see several positive aspects to that notion. There are, however, certain reasons that prevent older people from extending their working life, which the Alpha Bank study breaks down into three categories: the counterincentives of the pension systems, the needs of older workers juxtaposed against companies’ lack of flexibility, and the lack of support for older workers in the broader labor market. Challenges include the many opportunities that older people have today to extend their working life and remain active on their own terms even after retirement. In countries where the labor market is flexible and able to provide the appropriate jobs, older people can remain active at their paid work, adjust their working hours and still have time at their disposal for their other interests. Benefits The extension of working life will be of help in three main domains: – It will keep the growth rate of the work force at satisfactory levels, as a higher employment rate of older people will offset the negative impact of aging on economic growth. – It will limit the negative effects on countries’ economies by reducing early retirement spending. – It will help employers to manage the replacement of departing employees with younger ones more efficiently. Still, many initiatives are required for that to happen, including the cooperation of governments, employers, unions and generally all social groups. Particularly helpful would be favorable macroeconomic conditions, greater flexibility in the labor market and policies keeping older people in labor markets. Employers are already adjusting their views on older workers in countries where the lack of specialized labor is already being felt. Facing the retirement wave that will mean a lack of skilled and experienced staff, they are seeking ways to maintain the productivity of older people by offering them flexible retirement programs with adjusted working hours and a smaller workload.