Flexible retirement for Baby Boomers
FEDEA has published a working paper by José Ignacio Conde-Ruiz (Fedea and UCM) and Jesús Lahera (Complutense University and Fedea) in which they analyse how Spanish legislation (both labour and pensions) should be reformed in order to take advantage of the full potential of senior talent in Spain and thus successfully face the ageing process that lies ahead and that puts the sustainability of the pension system at risk. The report presents an ambitious retirement reform proposal to generalize that is fully compatible with paid work.
Main conclusions of the analysis:
- Spain is ageing and the "Babby Boom" generation (those born between 1957 and 1977) will start to retire in 2023. The dependency ratio or the percentage of the population aged 64+ out of the working age population (16-64) will be 57% in 2050, up from 33% today. This situation will put negative pressure on the sustainability of the pension system and have profound implications for the labour market.
- An analysis of the social legislation in force in Spain shows that it is designed with an approach of incompatibility between receiving a pension and carrying out paid work, with a few exceptions.
- Fedea presents an ambitious reform proposal to generalise retirement that is fully compatible with paid work, based on the principle of voluntariness:
- It should be made easier for companies to hire older workers with a new compatible employment contract, a special legal regime, especially termination, without compensation costs for the hiring company.
- Progress should be made towards an "à la carte" retirement system that is so flexible that makes it possible to adapt the exit from the labour market, not only to the hardship of the occupation performed or the worker's health, but also to individual preferences, adapting our pension system to the new longevity of the population.
- These retirement reform proposals meet three objectives:
- To allow the country's full employment potential to be tapped at a time when the working-age population is set to fall dramatically.
- To help workers, who so wish and are able to work, to improve their income in retirement.
- Improve the sustainability of pensions (pension expenditure is reduced and income is increased).