As the average life expectancy across the developed world continues to edge upwards, there is a growing need to reassess what this means for our working lives. Current thinking tends to equate the length of our working life with the retirement age, but a recent analysis by researchers at the Max Planck Institute for Demographic Research suggests that this is only one factor to consider.
The study suggests that the ideal retirement age for the average German today is 65 years and seven months, but currently the average age of retirement is lower than 62. The authors suggest that this kind of gap is not unique to Germany, and indeed exists across much of the developed world. What’s more, it’s common for our working life to be interrupted by periods of non-work, whether due to unemployment, training, child bearing or illness that disrupt our ability to save for retirement.
Working life expectancy
Being able to accurately predict the working life expectancy of people is crucial both to governments and indeed to employers. Governments need to know so they can predict the income they can expect from taxes, and indeed the outgoings they can expect to make to retirement funds. Employers need to be able to predict the ebb and flow of talent at their disposal.
The team at the Max Plank are working to provide that level of insight for a number of different countries. In addition to highlighting when people plan to retire, they also aim to shed light on the reasons for retiring, especially if people are retiring earlier than expected.
They found a basic heuristic to describe their findings: the more education someone has when they’re 50 years old, the longer they are likely to work. Now, of course, that education itself takes up time that could have been spent working, but they are also less likely to be unemployed.
Economic factors
Perhaps unsurprisingly, the state of the economy also has a big part to play in how long people are working. For instance, research has found that a recession in Finland in the early 1990s had a negative impact upon the working life expectancy of 50 year olds in the country. The situation only recovered when the economy picked up, and older employees began staying in the workforce for longer again.
Similar results emerged when the team analyzed the situation in Spain after the 2008 financial crisis. It showed a rather staggering 12 year reducing in the number of working years for men, from 38 years to 26, and 7 years for women, from 33 also to 26 years. As before however, those least affected by this were those with the most education. The researchers hypothesize that this was because the construction sector was especially hard hit by the recession.
Similarly, the 2008 financial crisis appeared to have less of an impact on the working life expectancy for women than men. For instance, in the United States, the economic downturn affected the workforce in very different ways, largely depending upon the education, gender and demographics of segments of society. For instance, the working life expectancy of 50-year olds who had a university degree went down, with the researchers hypothesizing that such people tended to retire early after losing their jobs, with other segments of the workforce not able to afford such actions.
The opposite was the case for women without a high school qualification. For them, even when they were over 50 years of age, their working life expectancy increased after the recession. The researchers believe this was because the recession led many of the poorer sections of society back into the workforce, in part to compensate for their husbands losing their jobs or having their incomes reduced.
Long-term trends
So what longer term trends can we extrapolate from this work? Can we expect working life expectancy to continue rising as our overall life expectancy goes up? The data from Finland suggests this is indeed the case. There, the average number of working years a 50 year old can expect to have in front of them has gone up by 1 year from 2001 to 2012, which is a larger increase than that in the overall life expectancy.
In the United States however, the picture is not quite so positive. While generally speaking, working life expectancy for 50 year olds is higher in the US than in the majority of European countries, it hasn’t really changed to reflect changes in life expectancy. Indeed, the only time it changed between 1992 and 2011, was during the great recession, when it decreased.
While the researchers believe that it is broadly speaking a positive thing that working age life expectancy is rising in step with overall life expectancy, they are nonetheless concerned with inequalities within the population. This is an issue they plan to explore the issue in more depth, and especially things such as differences in health and health-related behaviors.
As the population across the western world ages, this is an issue that will have a profound impact upon both employers and governments alike. You sense at the moment that there is a laissez faire approach and the issue has been kicked down the road for future generations to tackle. Hopefully as we gain a greater understanding of the issue however, it will give policy makers and HR managers the bravery to tackle the issue head on.
