The Organisation for Economic Co-operation and Development (OECD) called on governments to create reforms for pension systems in order to extend the retirement age for workers and include more self-employed or part-time workers.
In its report «Pensions at a Glance 2019,» presented on Wednesday, the OECD noted that the 36 countries that make up it are not adapting to labour market trends and warned of inequalities between salaried and independent workers.
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On the issue of raising the retirement age, the OECD argued that the measure would serve to improve the finances of pension systems in each country, as well as to offer «better replacement rates to workers».
According to the OECD, «extending working life allows people to accumulate additional pension rights, increasing benefits.»
The agency added that the retirement age in countries will increase, on average, from 64.2 to 66.1 in the coming years.
The OECD’s expectation is that by 2060, life expectancy will increase by about 4.1 years, so increasing pension age would not be a problem for workers.
The risks of not raising age
In the face of an accelerating population in OECD countries, the agency warned that if governments do not implement pension reforms, more and more workers will be nearing retirement and fewer young people.
It stated that in 1980 there were two people over the age of 65 in OECD countries for every 10 of working age (between 20 and 64 years), a figure that would increase to just over three by 2020, and this number is expected to reach almost six by 2060.
«Aging is expected to be particularly rapid in Greece, Korea, Poland, Portugal, Slovakia, Slovenia and Spain, while Japan and Italy will remain among the countries with the most ageing populations,» he said.
Poverty in old age
The Paris-based agency said that people over 65 currently receive less than 70% of the average disposable income from the entire economy in Estonia and South Korea, but just over 100% in Israel, France and Luxembourg.
It detailed that on average in the OECD, over-65s receive 87% of the total population’s income.
The relative poverty rate for over-65s is 13.5%, slightly higher than for the general population which is 11.8%.
It stated that in Denmark, France, Iceland and the Netherlands the poverty rate in old age was less than 4.0%. While in Australia, Estonia, Korea, Latvia, Lithuania, Mexico and the United States it is over 20%.
He added that in 2018, the normal retirement age for men was 51 in Turkey, while in Iceland, Italy and Norway it was 67 for both men and women.
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The OECD indicated that the future normal retirement age will vary from 62 years in Greece, Luxembourg, Slovenia and Turkey; 71 years or more in Denmark, Estonia, Italy and the Netherlands.
The agency warned that backing down pension reforms that address long-term needs can cause «pension systems to be less resilient to economic crises in the future and unprepared to cope with an ageing population.»
Equality for all workers
The OECD also called on governments to ensure that the growing proportion of workers in temporary or part-time jobs contribute enough during their working lives to receive an adequate retirement income.
The agency considered that non-standard employment, such as self-employment, temporary or part-time work, currently accounts for more than a third of employment in OECD nations.
«Part-time work is three times more common among women than among men and self-employment is particularly common among older workers,» the body said.
«Governments must quickly establish more inclusive and harmonized pensions for all,» SAID OECD Secretary-General Angel Gurría, the report highlights.
«Reforming pension policies in OECD countries is essential to reduce gaps between standard and non-standard workers in terms of coverage, contributions and entitlements,» he added.
Gurría noted that in today’s picture non-standard workers generally earn less, often contributing less to pensions as well, he said.
As an example, he noted that if an independent worker contributes during his full working life, «ends up with about 80% of the pension benefit that wage earners with similar incomes would receive from mandatory schemes, on average across the OECD.»
He therefore called on governments to create more inclusive and harmonized pensions for all, rather than a radical change in pension design and financing.
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