How Long Will You Have To Wait To Retire?

address this coming crisis is to ignore it. But as the bills stack up, that's becoming increasingly difficult to do. So what's the answer. Two of my colleagues are here to sort out the tough economics and tricky politics. Ben Sills in Madrid leads Bloomberg's Government and Economics covery across Europe, and Nancy Cook is a White House correspondent in Washington. Then we're seeing an awful lot of anger from French citizens who do not like President mccron's plan to raise

the retirement age from sixty two to sixty four. Can you describe what's going on in Paris? Yeah, the French people are furious about this, aren't they. This is kind of like the third rail of French politics. It's been an issue which successive presidents have promised to tackle, have tried to tackle, and time and again we've seen they draft a proposals, they submit it to the National Assembly and then boom like the people are out in the streets.

The French people know how to strike and it becomes a real test of the nerve and the resolve of the leaders. My name is Julie. I'm twenty one years old. We consider that the government want to make us work until That's what I think about young people who didn't not study. They started working very very young, but we will still ask them to work until sixty five. This is scandalous, alarm and I was seventy one in solidarity with that young people. It's a very bad, very firm

It's not the time, not a good idea. And my name is Matthew. I'm forty seven years old. I'm an English teacher and we're protesting because we don't want to spend the rest of our life just working without the retirement. There's money to be found in other places. I think taxes could be raised in in different sectors and uh, asking people to work just to avoid rising taxes is

probably not the solution. Mccrown has kind of made it his pal mark that he's impervious to public opinion when it comes to doing what he thinks is right for the country. As you said, my current likes to think that, you know, he's going to do it his way. He's tried that several times and it hasn't worked out very well for him. He had protests in the streets before COVID over the same sort of you know, very stringent

pass cutting. Why is it that he thinks that the French people are going to go along with this, That's a really good question. I've kind of asked our colleagues in Paris what his rationale for it is and they they will tell you that he's just a very self confident politician. He thinks that ultimately he can bring people around with the power of his arguments, and also, you know those people who ultimately aren't persuaded, well, you know,

they can get angry. And he's kind of betting that he'll be able to you know, a combination of enough determination, enough public information making his case the people that will be able to peel off enough support from the strikers that they become marginalized and ultimately he can push his plans through. I mean that the thing is, at the end of the day, the retirement age sixty two. I'm not expecting I'm going to retire at sixty two, and I would take sixty four if you offered it to

me now. So it's difficult, I think, was to really understand why the bunch of people are so angry about this. But you know, that's the culture of France, and that's the approach that you know, so many of these unions, these public set to workers have Nancy Ben described pensions as the third rail of French politics. That is the very expression that's always been used in the U S

when it comes to social security and other entitlements. And right now in the US we're seeing this big fight between Joe Biden and the Republicans over whether or not Republicans in Congress are going to try to in some way cur tail or limit Social Security to get ahold of costs. There was a big speech in the U S the State of the Union, and Joe Biden really seized on this idea of Republicans wanting to cut Social Security and medicare, you know, as something Republicans want to

do that is a third rail here as well. Some of my Republican friends, I want to take the economy hostage. I get it, unless I agree to the record plans. All you at home should know what those plans are. Instead of making the wealthy pay their fair share of some Republicans, some Republicans want Medicare and SOUF security sunset. I'm not saying it's a majority of senior citizens here vote in huge numbers, and so basically he's really trying to put Republicans on the defensive and say this is

something you want to do. In reality of Florida, Senator Rick Scott, who ran the political group that wanted to get Republican senators elected this past mid term cycle, did put forward a plan saying that he thought all federal programs should sunset and be re evaluated after five years. So this is a plan he put out. It was not like a widespread Republican plan. However, the Biden White House has seized on this as like one of their key foils heading into and they are really hammering the

Republicans home on it. It came up in the State of the Union, a bunch of Republicans booed him, but The President then went to Tampa, Florida and sort of reiterated this. You know, Florida, as you know, has a ton of old people who live there and retired there. So this is going to be a really key thing heading into the election, with Biden trying to draw a contrast with Republicans saying, you know, he wants to keep

these programs intact. He's a defender of them and trying to argue that Republicans want to cut them, and even the Senate Leader, Mitch McConnell, the Republican leader, came forward to say, no, we're not going to do that. We're not touching social Security. So you can see the Republicans running away from this idea themselves. They're totally running away from it because they understand how important it is to

senior citizens and people that vote. And in America, you have to remember that Social Security is viewed a little bit differently than other entitlement programs like food stamps or Section eight vouchers for housing, because social Security is viewed as something that workers, you know, are taxed on throughout their working lives and they've paid into it, and so it's viewed as something where you know, I have paid into this part of money for my whole career, and

I deserve these benefits and any cuts to them are basically like taking money away from people which they have already set aside, and people do not like it. You know, It's really similar the situation in Europe. You're seeing across the content a whole bunch of countries where governments are trying to just to stretch the system, to turn the dial a little bit, to make these systems more sustainable over the long run, and it makes people really angry.

We're not just talking about France, in Italy, in Spain, in the UK, all of these countries particularly there are European countries often where the budget situation is not the strongest and where the state pension system is one of the major liabilities at the moment. Look forward into the future and the ratio of workers to people over sixty five just gets worse and worse and worse, and and that situation is just going to get so much more acute. So we have this problem. It has to be solved.

I mean, the reason why they're doing this isn't punished seniors. It's because there isn't enough money to pay them out espe actually because there are fewer younger workers than there are people now retired. So what is the answer. We've seen any number of things come along. You raise the retirement age, you cut benefits, or you means tested so that wealthier people, you know, get less money. But nancy

are any of those things likely to fly well. So the last time Social Security was really changed like in a big meaningful way was under Ronald Reagan, you know, the Republican president, and then a Democratic Speaker of the House, Tip O'Neill, changed it and made some tweaks to make it more sustainable. So that was the last time this came about. I think that one other sort of wonky idea that people have talked about, or the policy wonks have talked about, is there is a limit of how

much of one salary is taxed for Social Security. And so one idea that people have had is you could raise the amount of one salary that is taxed, so people who have higher salaries would pay like a greater share for their salary. And that's one way to do it, and people who were in last would never hit the cap. And so in that way it's more progressive, right, so a majority of Americans would not pay more. It would just be the wealthy pay more into the Social Security

Trust Fund. But it is a problem that the United States will have to solve. By five the taxes will only pay for seventy of the benefits. So this is something that politicians will have to grapple with. But the thing is is that this is not something Joe Biden wants to do. This is not really something that the

majority of Republicans want to do. And I would say a decade ago there was more appetite to deal with these deficit busting issues, um when President Obama was president, but really like President Trump blew through the deficit, you know, that was not sort of a thing that he was interested in, and so both parties really just like don't want to talk about it at this point. This is not the time for budget hawks in d C. And

so it's an issue that they keep pushing off. So it seems like the answer for the US is it's gonna be somebody else's problem once I'm already gone from Harvist. Then what about in Europe? We have a lot of countries, different governments, different approaches. What are some of the ways that they're trying to get their arms around us. With the exception of Makron, I mean, he's really out in front in terms of trying to tackle it. But I don't think that shifting the retirement age from sixty two

to sixty four. It's symbolic and that kind of opens the process of making the system sustainable, but it's not a fix in itself. My kind of guess is that will you know you've you've seen how this works, wears in you'r we just muddel on a mudel on mudel until we reach a crisis. In this situation, I think there'll be a lot of muddeling on and then there is one solution out there, but it's arguably even more

controversial than pension reform itself. That's immigration. There's going to be tons of pressure for immigration into the EU in the decades ahead. I'm sure it's going to be the same in the US, and Nancy could speak to that. But you know, when you get to the point where the number of workers is declining year after year, and that's hitting not just the pension system but GDP growth and inflation and all these issues, there's a lot of

people who want to come in and work. But that's just a really difficult political issue to open up at this stage. When you get to a crisis, it's gonna look a bit different. Yeah, I agree with that. I think that, you know, immigration is something that could definitely help as well, because it would expand the U S tax space and we've seen so many immigration restrictions in

the US. But you know, just like social security and medicare are the third rail in politics, so is immigration right now, particularly for Democrats who feel like they don't really have a solution for it. And so it's like all the third rails of politics in one part. You know, then, as you say, beautifully put it, things will sort of muddele on until it reaches a crisis. How many years are we looking at for France, for Italy, the UK before the bill comes due and we reached the point

where something has to be done. That's a good question. Maybe not this crisis, but one of these crisis somewhere along the way. The problems in the social security system are going to become a major factor for the sustainability of the public accounts. And that's when you're going to late night you know, high stakes negotiations to sort this out. That will be the same thing in the US. The US will model along for the next decade until it's

a major crisis. And the last time they reformed Social Security, it was really like, you know, an eleventh hour deal and when there was real solvency of it up for grabs and these you know, Republican president and Democratic Speaker of the House came together. But it was really something that they did at the last minute, and that is the way Washington works. Nancy Cook, Ben Sills, thanks for coming on the show. Thank you very much. Thanks so much.

When we come back, all kinds of unpopular ideas to fix this problem, as we've heard, there's not enough money and not a lot of political will. What do we do. My Bloomberg colleagues Amy Bainbridge, Ainsley Thompson, and Emily Kadman are here with me now. They've been going country to country to try to find a way out. Emily, maybe

I'll start with you. We're seeing this tension over retirement ages happening all over the world between governments and workers who are feeling like they're changing the rules of the game on them. Yes, I think this story is something that taps into something that cuts across cultures, across classes, across you know, many many different things. Fundamentally, many of us,

I'm in my forts. You know, we watched our grandparents, We watched our parents, We watched people be able to retire in their sixties, sometimes even younger, and that kind of seemed like the norm. But that's just really not true. Now. You know, I'm sitting here in Sydney and I'm looking at, you know, a state pension age of around sixty eight. That seems a very very long time away. Now I'm in a privileged position, you know, in that I will

probably be okay. But you know, many other people are worried about how they can stay in the work force until that long. And you know, will they be able to find a job, will be able to stay in a job, Will companies want to hire them when they're in their sixties? But you know, this really is something that cuts across everywhere once you start looking for it. There are so many countries where people are starting to push back, starting to push back against the idea that

they think the rules of the game have changed. The trouble is that for governments, the economics are really quite frightening as the population ages, fertility rates have dropped, so they just simply aren't going to be the same number of workers for the same number of retired people there

were when these systems were set up. So it's a very difficult dilemma for governments because if they don't do anything, if we all retired at the same age that maybe our parents did, well, then the bill is going to get bigger, bigger and bigger, and then may well be

little money left for other key spending priorities. I would also add with that, once we started looking those central themes around the anxiety about when exactly you'll be able to exit the workforce exists almost everywhere and different countries are grappling with this in different ways. So where I'm speaking to you from in Australia, the pension age, the

state pension age is still really it's safety net. There is a private saving system here, it's been around for three decades, but it does largely benefit people that have an unbroken stream of employment, who are in a decent paid job, who work full time. It does mean there's still a lot of people that don't have a great private savings behind them, so there's still a big reliance on the state public pension and what the government here has asked people to do is work longer before you

get that. And Australia is far from isolated. Many many other countries are doing exactly the same thing, and it means that there's kind of this deadline that keeps moving and people are not happy about it. And I think the interesting thing is it's so many different cultures as well.

So for example, in China, where you know, the retirement age hasn't actually changed in four decades, there have been multiple attempts by the Communist Party to encourage people to work for longer, every time they've been met with huge popular resistance. And then you switch to somewhere like Ireland, where in a recent election a proposal to raise the retirement age had to be dropped after the popular backlash. So it's one of these things that really does take

us around the globe. And as Amie said, every pension system is different, but the same kind of universal themes come through. I was just going to say, it is such a politically sensitive subject, as you say, and it's a huge voter group that is affected. So I think often politicians have been loath to get involved to an extent, but at the same time we have this big fiscal issue that they need to do something. I mean, I think one of the difficulties is with you know, some

other difficult reforms. The interests of different generations are different, right you know, think think of housing, you know, the younger generation. This is another universal issue across many things. Can't afford to buy houses. You know, there would be a considerable supporter base for reforms to make housing cheaper. And yet when it comes to pensions, there's not that same kind of generational conflict going on because we all expect to retire at some point. We all hope to

retire at some point. So when you talk about raising the retirement age, it's not only those people who will be imminently affected, you know, in the next ten years who are angry. Is there's people much younger who are now looking at the goalpost shifting for when they get older. So it can have despite the many fiscal consequences and the many problems of it, it can be very hard

to build a constituency for change. How is it that so many countries us around the world with entirely different economies, different forms of government all pretty much at the same time, are facing this dramatic shortfall. I guess there's this huge demographic shift that's happened over the past few decades, and it's really we're coming to the point end of that.

According to the best available data from the Organization for Economic Cooperation and Development, the o e c D, back pensions consumed about five and a half percent of g d P and by twenty forty that could top about ten.

So you know, the stats are in and I guess the other thing that we haven't talked about is when you look at the demographic shift, a lot of people are also working entering the workforce later, so more people are getting educated, for example, so they might not work into the workforce proper until they're early to mid twenties sometime. So that again shifts that economic base as well. And we know that that base is shrinking, and all the experts say, look, you have to do something about it.

So there has been this gradual rise around the world. I think the highest retirement age it's getting up to now almost seventy in some countries. That's not the norm, it must be said, but depending on the particular situation, in a country you have to be quite extreme. I guess what's happening here in Australia and make it harder say something like Frances. Australia has sort of introduced this incremental shift, so it wasn't like we woke up one day and all of a sudden the retirement age became

sixty seven. We're gradually working up to that over a period of years, and so people had kind of this time to ease into it. But I think that message in France and other countries, it's pretty extreme and it's not very palatable for people. It can be quite a shock. It's a real skill to try and take the population with you and explain the reasons why this is needed. Yeah, and some of the countries where we sort of aren't seeing the same kind of level of people literally on

the streets. One thing that has been gaining some popularity is attempting to automatically link pension increases to life expectancy, um, you know, a purely mathematical link, and that in some ways is aimed to take some of this emotion out

of the situation. You know, it's mainly broad generalization, but countries in Northern Europe right now, we are experimenting with that, and you know, it's relatively new, and you know, we'll kind of see how that plays out over time, but you know, that is one way that people are trying to do it, and that may take some of the emotion out. As we talked about. Ireland is quite an interesting one as well. They were trying to raise the

retirement age. They dropped it proposal because there was this popular backlash during the election, and instead they're telling people that if they work for longer, they will get a higher pension for each year that they keep working over the age of sixty six. So that's quite an interesting way of doing it as well. I think, to sort of courage people to keep working if they're able, not saying you can't get your pension, but if you're able

and keep working, you'll get higher pension. I think we're seeing some creative solutions coming out easy. In your story, you also write that one of the reasons this has become such a crisis is that people are just living longer. When these systems were set up, people tended to be retired only for a short time before the end of their lives, and now people's lives have stretched on. Yes, that's right, and that's one of the arguments I guess

governments make for raising the retirement age. They're like, well, you're still going to have the same amount of years in retirement because you're living longer now, so therefore you should be working longer. It doesn't always wash with the public though. I don't think that that argument, because they were expecting to retire to have this pension at a certain age. And just going back to that question of life expectancy, worst which we saw a really extraordinary rump up.

It was getting better and better every single year. I mean, what is true is that rate of acceleration has slowed the expansion of public health care systems, and the amazing advances in medical technology have helped make us live long with a lot of things. But now we are getting into a lot of issues around things like chronic disease. If you had cancer fifty years ago, you would probably

brutally die relatively quickly. Now, modern medicine can help expand your lifespan, but is it expanding your lifespan in a way that you can actually meaningfully work. This is where we're starting to get to the pointy end of what life expectancy actually means, and this concept of healthily life expectancy, how long are you going to live without major diseases, major illness, whether it's you know, diabetes, whether it's cancer, whether it's obesity. There are a lot of chronic diseases

now that make people's ability to work later hard. Even if they are living later, we'll be right back. Any One thing that comes through in your story is how this issue exposes these tensions between various parts of society, where people who live longer are often those who had less physically demanding jobs and made more money, and yet they'll wind up getting more money than those who need it most and perhaps need to retire earlier because jobs

took a bigger toll on their health. Absolutely, I think it really lays bare the class of which you belong to in society. It's really hard to give one example that cuts across all countries, because there's a nuance to every country's retirement system. No two really are the same. There is, of course a push in many developed countries to come up with a private saving system that's different

to a government to find benefits scheme. So in Australian New Zealand, the region we're speaking to you from today. That is what happens, and it's a percentage of your salary that your employer must put away into savings. But given it's a percentage of your salary, that means that if you work in a higher paying job, of course at the other end, you will have more money. And so therefore there's kind of this in built problem with

the system. And we also know that you know there's a there's a guaranteed amount that you have to put away, but some workplaces offer you know, as much as five percent over that guaranteed amount in a way to lure

good employees. So if you're highly educated, you might be in line to get a fifteen percent of your salary put away that's then invested for you by a large fund over time, and that wealth grows, so when you reach for a time and age, you'll you won't need to really worry about the state pension system at all. But if you're a transient worker, if you're a healthcare worker, maybe if you're a teacher, you know you can have secure employment, but you also might not lot and typically

those jobs are lower paying. So then by virtue, you will have a lower savings at the end and become more dependent on the public system as a safety in it, and then that in built discrimination can occur. And that's part of a big debate in the developed world at the moment is how women are treated in that system. If women work part time, of course, that impacts your private savings. And also you know, if you if you're a casual worker, for example, and you work multiple jobs,

how do you build up a proper nest egg. And there's various reforms that have happened here and elsewhere to try and fix those issues, but it still is a glaring gap in the system. I think. For me, one of the really startling things that I guess I hadn't really thought about was how much people who are in particularly physical jobs are discriminated against when the retirement age rises.

Often it's difficult to keep up a really physical job into your sexties, especially into your late sixties, and so that means those people have to go on either unemployment benefits or health benefits which are lower than pensions, and so it increases poverty and old age, which is very difficult for people. There was a study by the i f S in the UK, and it looked at the retirement age which was raised by one year in the UK to sixty six, and that made a difference of

doubling the poverty rates of sixty five year olds. So it's quite startling when that happens. I think, raising the return in age by one year double the poverty rate. How did that happen? Because the people who would have got their pensions and who were unable to work instead had to go on the unemployment benefit or health benefits, and they are lower than the pension benefits, and so

they were pushed into old age poverty. Whereas I would also say that from talking to people who study this phenomenon globally and a lot of demographers are looking at at this kind of thing being employed in your early sixties. I mean, if you already have a secure job and you're working behind a desk, then it's kind of easy just to stay in that job and just push, you know,

you might even push beyond the retirement age. But if you're somebody who's been in different types of work, or you're exiting the workforce and then have to you know, you have to change jobs for whatever reason. What lobby groups say Advocates says that there's still a huge amount

of discrimination against older workers. So if you're sixty five, for example, applying for a job, what are your prospects against somebody who might be ten, twenty thirty years younger than you, And that that is where the playing field is really not level at all, because if you are job hunting at that age, there needs to be a mindset shift from employeers as well to make sure that

they give those opportunities to older workers as well. And Amy, I think some of the things you have been looking at is really going into how the pension age being raised does discriminate against particular groups of people. There is a court case that's being heard and it's looking at this idea that Indigenous people in Australia live around about eight years less than non Indigenous people in Australia, and therefore they should be able to access the age pension earlier.

Exactly how much earlier, we don't know. That would be up to the court to decide. But I think it's a really interesting example of trying to challenge a system that one size fits all really just doesn't work for everybody. When you look down the road in a few years when the bills start to come do how will this

be paid for? The best description I've heard of it is, you know, this is a slow moving financial crisis, probably the slowest we have ever seen, because you know, it's not some dramatic thing that's going to happen and be done with and there'll be a solution in you know, one month, two months, a year. This is building up to an incredible pressure point and at some point the needle is going to have to be grasped. At some point,

something is going to have to be done. But whether we're there yet or not is I think probably not. I think, you know, the likelihood is this problem will we continue to kick down the road a little bit further until it really does come to a point. I mean, you know, morbidly. The only thing that might stop this becoming such an intractable problem is if the increases in life expectancy do really slow down, if the increases in life expectancy to go into reverse. But that would be

absolutely nothing to celebrate. The extension of life expectancy has been one of the big successes of this century. And you know, the idea that anything like that would have to be endangered. To solve this is not answer I think anybody on any side of the political aisle wants any day. Bridge, Ansley Thompson, Emily Kadman, thanks so much for joining me today. Thank you, Wes, Yeah, thank you with It's a pleasures. Thank you. Thanks for listening to us here at The Big Take. It's a daily podcast

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