Raising retirement to 62

Raising retirement to 62

Prime Minister Manmohan Singh is keen on extending the retirement age of civil servants to 62, one of his aides told this columnist in Delhi recently. He had apparently been keen to do so earlier this year, but such a change was thought politically risky at a time when the Congress party was using Rahul Gandhi’s youth as its electoral strategy (how do you convince voters that the party is going to harness the energy of the youth if you propose to keep all the old babus for another two years?).
It may seem unreal now, but back then many in government feared that the Congress might lose power , so the PM’s plan was shelved. It is being revived again, with the PM himself taking great interest.

This proposal has two justifications. First and foremost is fiscal. As had happened when the retirement age was raised from 58 to 60 in 1998, the expenditure on pensions would be curbed. In this year’s budget, finance minister Pranab Mukherjee earmarked non-Plan expenditure for pensions at Rs 25,085.49 crore. That is a growth of almost 40 per cent (39.4 per cent). It is a major contributor to the total spending that was announced by Pranab, a little over Rs 10 trillion, a hike of around 36 per cent from last year.Of course, coming at the time of a global economic slowdown this massive expenditure is possibly a good risk to take; but the prime minister is obviously looking for ways to keep costs from running away.

Of course, worse than the central finances are those of many of the States; their governments are far more reckless than the Centre’s. In the decade after New Delhi raised the age of superannuation to 60, the States slowly but surely followed suit. The States would likely follow the Centre’s lead again and that would help them manage their fiscal problems.

The other reason the PM wants to push retirement back another two years is that he wants to make tap the valuable human resource that bureaucrats represent. For one thing, life expectancy in India has gone up. According to UNICEF, in 2007 it was 64 years, and this is a figure that the average bureaucrat would have pulled upwards. Thus, when a civil servant retires at 60, she or he is still at their mental peak, and each acts as an institutional storehouse of government policy and programme implementation. Retaining them for another two years would possibly enrich functioning of the government. At the very least, it would keep some of the hypocrites off the boob tube — it’s very bizarre that the same bureaucrats who set government policy for 30 years or so, start abusing the government at the nearest TV station studio the moment they find themselves jobless. (Maybe it’s their pique at not getting a post-retirement sinecure).

The PM is not the first person to have such a brainwave. Almost a year ago, the University Grants Commission appointed a committee under G K Chadha to study pay revision, and he made a suggestion that teachers’ retirement age be raised to 65. This is timely advice considering that India is currently set to expand education in a major way under the stewardship of the dynamic Kapil Sibal. It is not just a matter of filling the ranks of teachers, but imparting quality teaching to India’s children.

If the PM wants to extend the retirement age then he would only be following a global trend. The retirement age in the US is 65; in Japan it is 60 and the government is gradually raising it to 65 by 2013, but people anyway continue working till 65 on reduced wages. By 2033, Austria’s retirement age will be 65. In Denmark it will be 67 years by 2027. Hungary plans to make it 69 years by 2050. Israel is already raising it to 67 years for men. All these countries and many others are increasing the retirement age because of an increasingly alarming problem — their ageing populations. By 2020, a quarter of Japan’s population will be 65 and over. Life expectancy in the US is about 77, and by 2050 is expected to go up to 83. Japan’s is already 82.4 years. Indeed, the life expectancy in some of the advanced countries, according to 2009 OECD data, are: France 80.9 years, Canada 80.4 years, Sweden 80.8 years, Italy 80.9 years and Spain 81.1 years. You would have to think that as India gets wealthier — which it undoubtedly is — our population’s life expectancy will similarly increase.

Imagine a person retiring at 60, but living till at least 80 (if not more), perhaps physically weakened as she or he passes 75, but still mentally at the top of his or her game. What do they do with such a long retirement? And besides the fact that the increase in life expectancy leaves retirees with too much time on their hands and their skills unutilised, it also places a great burden on the working population, which has to finance the social security and health benefits that the elderly need.
In the West it costs much more to maintain an elderly person than it does to raise a child; and health care costs in the rich world are projected to be those countries’ biggest finance headache (much more than the costs of the stimulus to end the current economic crisis). Thus it is not surprising that there are an increasing number of voices in the West and Japan who are talking of increasing the retirement age to 75. Doing so would engage the older citizens, contribute to the state exchequer in terms of taxes from older workers, and reduce the social security burden on the young. It is a surprisingly obvious solution.

Party boss Sonia Gandhi can manage the naysayers in the Congress, and the BJP is still shell-shocked from its electoral defeat to do serious damage to the government. And even within the BJP it is thought that currently the coming assembly elections in Maharashtra favour the Congress. Manmohan Singh will soon enough have the political wind at his back to make this proposal.
Good thing, for it is an eminently sensible one.