Killing Retirement

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It is time to kill retirement.

No, not retirees. We have not arrived at Charlton Heston’s dystopian future where the elderly are shuffled off to become Solyent Green.  Quite the opposite – it is time to kill the notion that there is a beginning to our ends.

It is hard to kill something that suffers from a problem of definition.  There is no one ‘retirement age’ but a range of them.  There is a retirement age for government employees, pilots and, in some places, drivers.  There is a retirement age for pensions and MPF cash-outs.  

So what must die?  The concept that people must be forced to make choices or can only be helped on account of their strict calendar age.  Respect for the aged is a time-tested cultural value with solid underpinnings.  However, the idea that a birthday triggers a move into a sunset stage of life, where one is denied work and provided benefits, is a recent invention, having its origins in Bismarckian Germany.  

Stop – you’ve earned it

The original German pension qualifying age was 70, lowered to 65 long after Bismarck’s death.  At that time, the average life expectancy was in the 40’s, lowered by many who died before 5 years old.  If  you survived to adulthood, many could and did survive into their 60’s and 70’s.  A typical lifetime of hard labour had moved German Emperor Wilhelm I to suggest: “. . . those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.

Going to the source, it hardly sounds like an automatic “cha-ching” on one’s birthday envisioned by promoters of a universal pension scheme.  The definition of those ‘disabled …by age and invalidity’ having a “claim to care” became ‘everyone’ in the Western world.  

Once the idea of ‘universal’ took hold,  it became impossible to shake.  The upper and middle classes, well organised and active in politics, ensured their cheque was in the mail.  While countries still grapple with how to eradicate poverty among the elderly, powerful lobbies like the AARP (formerly the American Association for Retired Persons)hold massive political power. ‘Grey Power’ forced a new Conservative government in Canada to back off reindexing ruinous pension plans in the 1980’s.  Universal pensions did not reduce poverty.  They did create a powerful new class of politically active, entitlement-minded seniors in the upper and middle classes.

The setting of a universal pension also created a new idea – the elderly were provided for, and should make way for their juniors, especially during times when difficult labour markets made it hard for younger workers to move up in the workforce and secure income to establish families.  

Work?  But you’re ooooolllllllllld…

The standardisation of workplace conditions and rules introduced as the Western world industrialised was short-lived, but  its legacy remains and is being replicated across Asia.  As factories and their Tayloresque division of labour and union imposed standardisation grew, pensions and automatic ejection from work became part of the package.  A standard pension to care for the aged can only be justified if all are rendered infirm by the passage of years.  If 65 is the age when one needs to be taken care of, then we must all need to be taken care of at 65.   This is the circular logic driving policy demands for universal pensions.

A person is capable of working and caring for himself or not.  The fact is that among older people, like younger people, some are more capable than others.  An 80 year old may be supremely fit and able to earn spectacular incomes from current work or from capital honestly earned from a lifetime of labour.  A seventy year old may struggle – and succeed – to make ends meet.   A 30 year old may be completely incapable to survive alone due to accident, illness or fecklessness.  

Government imposed, defined contribution, pension schemes, like our Mandatory Provident Fund, try to avoid or correct the Ponzi-like elements of defined benefit pension schemes.  By forcing people to save and cash in on schedule, they hope to avoid the crushing financial obligations other states struggle with.  But all create the impression of strict age being the proper trigger determining our life stages.  Only now are we trying to correct the error of our thinking.

80 is the new 60

Our government in Hong Kong is tackling the potential perils of an aging population.  Fortunately, we are not as far down the road, culturally and fiscally, of imposed geriatric indolence and pension obligations as many Western countries whose dire pension obligations are correlated to their woes.

In Hong Kong, people have a different attitude.  At the high end, our go-go entrepreneurs never stop.   Run-Run Shaw has to be the ultimate example of successful aging, a working centurion who started a new technology venture in his 60’s.  Many successful business owners are working octogenarians and even nonagenarians.  These exemplars of industry have their weaker reflections throughout lower income Hong Kong.   Many small family businesses continue to be run by their owners – many because have no clear exit for the business, an insufficient capital base for retirement or have no heirs.  This may include one and two person businesses where if the owner is sick or infirm, the income disappears – a precarious situation indeed.

Big organisations, standard rules of aging

In the corporate and government world, old means expensive.  Seniority-based pay scales, as in teaching, are especially dangerous, killing incentive to perform in young and old alike. These systems see the most need for reform, so older workers can rise according to their ability, not become a broad class of liabilities.  Those still performing could be retained for as long as they chose to work.  Those who were not performing would have incentive to improve or move on.  While this smacks of heresy to unions of those in protected trades, it is reality for the rest of us.

Some political leaders will promise they can protect current entitlements and provide new ones.  They will pick retirement dates as the payday for people to receive benefits.  The political benefit is that people can clearly see when they can cash in their political support for a cheque – whether they need it or not.  The downside may be enforcing the idea that the day they get paid off is the day they get laid off.

Political leaders need to explain this to their constituencies – not promise payouts and accidentally endorse the idea that old people are useless.

Need, not age

People need to save for a rainy day, regardless of whether it is an unforeseen accident, an aging relative or  their own infirmity due to age at 60, 70 or  80.  Successful earners and savers will have more work and leisure options than the rest of us – as they do at every other life stage.  Pensions should not be linked to age, but owned and cashable by individuals.   If corporations choose to create packages with a variety of age linked conditions, to manage actuarial probabilities and pay outs, then we should be free to choose them -or not.  

We should plan for working later in life.  In a Hong Kong where many of us will live to be over one hundred, we will  be glad for a declining workforce that needs us well into our sixties and seventies.  Shanghai’s education system shows an example of how this could work, with its best teachers returning as mentors to help weaker teachers improve.  In places like Canada, people are experimenting with combining modest pensions with part time, less stressful, and lower paying, work to supplement incomes.

Currently it is mostly our civil servants who work to an expected payout.  We should find a way to retain the best and wean the rest off the idea of an automatic, handsome retirement that will become less defensible as the general public learns more about it.  

Outside of the civil service, most work to a fear of being made redundant and considered too old to be useful.   We know we will have to hustle to continue to prove our relevance and adjust our expectations and circumstances.  Coming early in one’s career, it is expected.  After decades of being comfortable in our roles, it is scary.  And for those at the bottom of the ladder, it can mean at best, a life sentence of drudgery and at worse, a miserable hellish poverty.

Bismarck’s Elderly

For an elderly person in their 60’s or 70’s sweeping the streets or recycling newspapers, aging is particularly daunting.  If arthritis and other ailments set in, their ability to work in any capacity will become diminished. Without a strong family network, they will be alone.  This is where we need to focus.  It will not happen like clockwork on a 65th, 67th or 72nd birthday.  The need will creep up like an undiagnosed Alzheimer’s or fall like the hammer blow of heart attack or stroke.

Accordingly, in the rare instances where charity, the preferred front line of social care, does not deliver, solutions must be focused on those with the greatest needs.  Universal retirement protection schemes (URPs) are not the answer.  As noted in previous Harbour Times, many proposals suggest fiscally sustainable URPs assume they take from current programs and MPF savings.  It would mean less for the needy – in some proposals half as much.  Those most in need would find themselves less able to defend their benefits than powerful lobbies protecting new entitlements.  

Last issue we argued the CE and ExCo got it wrong on HKTV.  This time, perhaps broadly right on pensions when the Chief Executive suggested we focus most on the needy.  This should be true whatever one’s age group.  Dispensing benefits based on an arbitrary birthday becomes a calculus of buying votes and fiscal payouts – it does not address need.  By ceasing to pick numbers out of the air, we can get back to recognising that a person’s workplace value isn’t, for better or worse, determined by their birthday.  Likewise, their need, whether as a solitary elderly or a single young parent, should determine our response to their plight.

If we are to kill retirement age as a concept, we must kill it completely.  Rather than being a guide to our later years, it has become a straightjacket robbing us of our best years and dulling our response to the plight of the needy.  Let us help those in need and let the rest of Hong Kong thrive.  Let retirement die – let the living begin.