NETHERLANDS: How to Finance Old Age? Work Longer

HILVERSUM, The Netherlands (Radio Netherlands), July 21, 2006: Do people in the Netherlands and many other western nations want more free time in the future, or a better standard of living? That, according to some economists, is the question that lies at the heart of the debate about raising the retirement age which is going on in the Netherlands and elsewhere. Retire Later? With a rapidly ageing population, there are an increasing number of calls from political circles in The Hague for the standard retirement age to be raised. Finance Minister Gerrit Zalm said only recently that a future cabinet should consider the possibility of raising the age at which the national old-age pension commences, in stages, to the age of 67 (it is now 65). But not all economists are convinced of the need to put retirement age back by two years. Population changes One thing is clear, the current trend is towards raising the retirement age. It's an international development, with the discussion taking place in various countries, and Germany and the United Kingdom already having decided to raise the retirement age to 68 and 67, respectively. Many western nations will very soon find their populations include many more elderly people. On the other side, they will have many fewer younger people to pay for their state pension systems and help finance the needs of the elderly. The populations of these countries are ageing rapidly and living longer, while fewer children are being born to balance out the trend. Making people work longer is an option that's worth considering as a way of trying to stop the costs of the state pension and health services rising too dramatically in years to come. That, at least, is the view expressed in certain political quarters. Not necessary There are, however, some who disagree with this view, including Paul de Beer, Professor Emiratus of Labour Relations at the University of Amsterdam, and Peter Kooiman, an economist with the Dutch Bureau for Economic Policy Analysis. They don't feel this is necessary. Dutch flag According to the Dutch Ministry of Social Affairs, the population of the Netherlands is indeed ageing rapidly. By 2020, 1 in 5 of the population is expected to be aged 65 or above. By 2050 that could have risen to 1 in 4. Paul de Beer says that while employees who choose to go on working longer can make a contribution to meeting the rising costs of the old-age pension system, "We are rich enough to fund the costs." Peter Kooiman agrees that we are growing increasingly rich: "If we decide to use that wealth to enjoy free time, then that's possible." Wealthier Peter Kooiman says that people in the Netherlands are now, on average, more than seven times wealthier than they were 100 years ago. The standard of living has therefore increased considerably, and people now have much more free time. He wonders whether the desire for more free time will actually continue, and says he wouldn't be surprise if it died a natural death. After all, people already have a lot of free time, and work itself can also be enjoyable. On the other hand, less free time would probably be a step too far. Paul de Beer says many people who work would like to retire before the age of 65. This is confirmed by research carried out by Statistics Netherlands, which shows that no more than two in ten people want to continue working until they are 65. The number of people who would be keen to go on working until 67 is certain to be even lower. However, Paul de Beer adds, "But if the consequence is a reduced increase in their purchasing power, then the level of willingness could well increase." Social unrest The question of how to keep the old-age pension system affordable is a theme that's certain to play a role in the campaign for the - early - Dutch parliamentary elections in November this year, and the possibility of raising the normal age of retirement is part of that discussion. Economists says this should be a matter of choice because, as Rabobank economist Niels Visser points out, "Otherwise it could lead to great social unrest." He argues that the Dutch government should try to develop a system that actually encourages people to want to go on working longer. The Confederation of Netherlands Industry and Employers (VNO-NCW) is also calling for a raft of measures to help keep a lid on the extra costs arising from the ageing workforce: "Raising the retirement age must be looked at seriously. The cabinet needs to face reality." Although the confederation doesn't favour any one measure in particular, it adds that going on working up to the age of 65 is something which the government needs to focus attention on. Save for retirement Currently, some 40 percent of Dutch people aged 55 to 65 are still working. Ten years ago it was only 26 percent. Early retirement at age 58 - which had almost become standard in the Netherlands - has already been halted. However, for those people who really want to stop working at a relatively early age there's another solution: save money and spend less, because someone will have to finance those additional years of free time. By Wendy Braanker Copyright Radio Netherlands 2006