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Pensions

Live longer, work longer?

Harun Onder's picture

Imagine yourself on a comfy seat like the ones they give to ministers. But do not get too cozy as you are about to make a difficult decision. Population is aging in your country, and there simply is not enough resources to finance the pension benefits of the retirees. What should you do?

The conventional wisdom suggests that you should increase the retirement age. The argument goes as follows. People live six years longer in retirement now than half a century ago. Therefore, using some of those additional years for work is not completely unfair. By increasing the retirement age, you could increase the number of contributors while decreasing that of beneficiaries at the same time. This should provide an effective remedy for the imbalances in pension system accounts.

Aging: A problem in Africa as well?

Sudharshan Canagarajah's picture

Recently, while reviewing a document, I came across a statistic about age dependency* in the Republic of Mauritius. Mauritius already had an age dependency ratio of 10.9 in 2010 and this is projected to rise to 25 by 2030 and 37 by 2050, which is at par with many East Asian economies. Aging issues in Europe and parts of Asia have already become an economic and fiscal policy concern over the last few years and will remain so for the foreseeable future, could it also become a problem for Sub-Saharan Africa (SSA) sooner than realized?

With 43 percent of the population below the age of 15 and only three percent above the age of 65, Sub-Saharan Africa is a predominantly young continent. The problems emanating from an ageing population, such as rising age dependency ratios and increasing health care costs, are far over the horizon as far as the continent is concerned. However, this may not remain so for long and definitely not for all the countries. Let me explain why.

Eliminating poverty in old age: are social pensions the answer?

Jean-Jacques Dethier's picture

Poverty in old age is prevalent in a large number of Latin American countries. Universal minimum pensions would be an effective and administratively simple way to substantially reduce poverty among the elder generation.

Photo: © Charlotte Kesl / World Bank
Alleviating poverty in old age requires a different approach from other age groups. Since poverty reduction efforts through labor market or education policies are ineffective, the only available instrument is to directly transfer money so the elderly can purchase goods and services. In rich countries, pension systems transfer money from the rich to the poor and often include a minimum pension that contributes significantly to reducing poverty.  But in developing countries, pension systems have such a low coverage that they cannot deal with old-age poverty.  In Latin America, which has what social scientists call a “truncated welfare state” - with income redistribution for the better-off and exclusion for those in need—most poor people are not covered by pension systems.