There have been two rounds of massive strikes in France protesting the pension reform over the last few weeks. Due to the demonstrations, metro and suburban rail services in Paris have been severely restricted, thousands of citizens have to take buses, ride bicycles or even walk a long distance to work or go to schools.
But most of Parisians told reporters that they are willing to endure the inconvenience because it is the people’s right to strike and they support the protesters’ demands that among others, the retirement age should not be pushed back by two years to 64 years old, and retirement ages of public workers in jobs deemed physically or mentally arduous should not be increased by the same number of years as the wider labor force.
Leaving aside the discussions that the pension reform plan is unfair and needs to be amended or not, we are seeing a trend that state pension ages are rising around the world. One of the main reasons that governments are considering raising the retirement age is that for the last 50 years, fertility rates have decreased worldwide.
Take Japan for instance, the fertility rates have been decreasing from 1.803 per woman in 1980 to 1.368 in 2022. That is, for the past 23 years, it has been lower than the replacement-level fertility rate, roughly 2.1 children per woman.
In Taiwan, the birth rate drop is even more dramatic. In 1980, the fertility rate in Taiwan was 2.538, higher than the replacement-level fertility rate. However, in 2008, it dropped to 1.051, barely making it to one child per woman. The fertility rate in Taiwan last year was 1.219, slightly recovered but still lower than most countries in the world.
While we are seeing a global decline in birth rates, the life expectancy has increased worldwide. In other words, people are living longer but having fewer children globally, which means fewer people are in the workforce and labor shortages are felt in many developed countries.
As a result, public pensions in many countries are under pressure and need some types of reform. In Taiwan, it is said that the pension system will go bankrupt by 2048. In France, it is estimated that between 2023 and 2027, the pension system’s finances will deteriorate significantly, reaching a deficit of between 0.3 and 0.4 percent of GDP until 2032.
As for the increase in retirement age, Ireland raised the retirement age to 66 in 2014. In Japan, since May 2020, if one chooses to receive pension benefits from 75, the pension amount would be increased 84 percent. In Germany, the public pension’s standard retirement age is 65 and nine months, but it will gradually increase to 67 by 2029.
The situation in the Philippines is a little different. Although the fertility rate in 1980 was 5.246 and it dropped to 2.479 last year, it’s still higher than the replacement-level fertility rate. Simply put, the Philippines doesn’t have to worry about labor shortage for now.
At the same time, compared to its Southeast Asian neighbors, the Philippines has the oldest age for mandatory retirement and there is a proposed House bill seeking to remove the 65 years old mandatory age of retirement. In that case, an employee who reaches 65 years can choose to continue their employment as long as they qualify under the bona fide occupational qualifications of their job.
While the bill is still being studied, I think it is vital to take into account what is for the best interests of the labor, population data, financial position of public pension plans and other countries’ experiences before making the final decision.