12 April 2002

60-Plus Fastest Growing Population Group, U.N. Agency says

ILO says social systems need to ensure decent retirement

As the number of people in the world aged 60 and over grows faster than other age groups, social protection systems need to adapt to ensure decent retirement and health at old age, says the U.N. International Labor Organization (ILO).

In an April 12 statement at the end of its second World Assembly on Ageing the ILO said retirement systems in industrialized countries will come under increasing strain as life expectancy increases and birth rates decline, lowering the ratio of working people to pensioners.

In some developing countries, the ILO says, less than 20 percent of the labor force has social security. Older people in these countries, particularly women, continue to work in areas such as agriculture, childcare and domestic work, it said.

The labor organization said countries should keep their social systems "in financial equilibrium" sharing the burden of aging among population groups. It added that countries should guarantee equal treatment of men and women for pension and survivor benefits and take measures to prevent discrimination of older workers.

The ILO also called for flexibility in the workplace to give older workers the opportunity to remain active longer and receive more training.

Following is the text of the ILO statement:

Facing the ageing gap: New-age solutions to old age problems
Second World Assembly on Ageing
Madrid, 8-12 April, 2002

"The vitality of our societies increasingly depends on ensuring that people of all ages, including older people, remain fully integrated into society. For older workers social inclusion means, first, a decent income from work or retirement and, second, the possibility of participating in the life of the community through employment, volunteer work or other activity." Juan Somavia, ILO Director-General

The International Labour Organization (ILO) has a long history of fighting for the rights and fair treatment of older workers. The Organization believes they remain a key contributor of experience and knowledge to many businesses and organizations, represent a source of economic and social benefit to their local communities and should be treated decently. ILO Recommendation 162 (the Older Workers Recommendation, 1980) calls on all member States to adopt a national policy to promote equality of opportunity and treatment for workers of all ages, and to take measures to prevent discrimination against older workers.

Changing demographics

In the world today, the number of people aged 60 and over is growing faster than all other age groups. Between 1950 and 2050 it is expected to have increased from 200 million to 2 billion. Developing countries still have a relatively young population compared to industrialized nations, however, in the long term their proportion of older people is generally expected to increase significantly. In some developing countries HIV/AIDS is having a deadly impact on the demographic profile. Nine out of every ten workers in the world today are not covered by a pension scheme capable of providing adequate retirement income.

Ageing in industrialized countries

Projections suggest that in the future social security systems in industrialized countries risk coming under increasing strain due to an ageing population. Over the last few decades, these countries have experienced a drop in the average age of retirement accompanied by an increase in life expectancy and a significant fall in birth rates. As a result the ratio of pensioners to the number of people working has increased, and is projected to continue to do so.

Contemporary social protection systems are said to be ill-equipped to deal with ageing, and thus require reform. However, what affects national social transfer systems, which redistribute income from the active to the inactive, is not the demographic shifts alone, but rather the system's dependency ratios: how many pensioners have to be maintained by every single active person.

If the ratio of the retired to the active rises, changing the financing mechanisms will not solve the problem of rising pension costs. A long term solution is to increase participation in the labour force, notably among women, older workers, young people and people with disabilities. In the past few years a number of countries have decided to raise the age of eligibility for a basic public pension, most implementing them on a gradual basis. Japan, for example, is raising the pensionable age from 60 to 65 and the United States from 65 to 67. Belgium, Portugal and the United Kingdom are all raising the age for women to that of men.

Can increasing participation keep the systems financially robust?

ILO calculations show that in a rapidly ageing European country with a de facto retirement age of 60 and a female labour force participation rate like that of the Netherlands, the combined unemployment and old-age pensioner dependency ratio would have been in the order of 62 dependants per 100 employed persons in 1995. If the country were to raise the de facto retirement age to 67 by 2030 and increase female labour force participation to the present highest levels in Europe (i.e. Swedish level), then the combined dependency ratio in 2030 would amount to about 68 per 100 employed. Under the status quo (a de facto retirement age of 60 and unchanged female labour force participation) that ratio would be 80 to 100, or about 18% higher. This suggests that employment is key to the future financing of social protection. (Source: Social security: Issues, challenges and prospects, Report VI, International Labour Conference, 89th Session, ILO Geneva, 2001.)

Ageing in the developing world: a different challenge

In most developing countries, less than 20 percent of the labour force is included in regular social security systems and retirement is a luxury few older people can afford. Even if the formal sector requires them to retire, insufficient transfer incomes force older people to continue working in the informal economy. About 40 percent of people over 64 years of age in Africa and about 25 percent in Asia remain in the labour force, most in agriculture. In the more developed parts of the world the rate is less than 10 percent. A large number of older people in the developing world work in the informal sector, a part of the economy that has been dramatically expanding recently.

As well as paid employment, in developing countries, older people, in particular women, continue to make a very important "invisible" contribution -- such as child minding or domestic work -- allowing other household members to engage in "visible" economic activity.

Gender and ageing

Women make up the majority of the over-60 population in many countries. A large part of their economic contribution is through household and informal economy activity with the effect that they often benefit less from pensions. Social security schemes are particularly relevant to women workers whose entitlements can otherwise be very low due to low pay or to part-time jobs which are often interrupted by family responsibilities and unemployment. Yet, older women provide an indispensable contribution to the economy and society as they are often the primary care providers.

Women over 60 who have lost their partners greatly outnumber their male equivalents. Women's inheritance rights are poorly established in many societies and widows are often denied access to their husbands financial resources.

Taking practical action to meet the challenges of ageing

While ageing is not a "catastrophe", it does pose a policy challenge. Ageing is a long-term phenomenon and coping mechanisms can be introduced gradually.

Steps for tackling the challenges presented by an ageing population include:

• Introducing gradual and flexible transitions from active working life to retirement as a means to give older workers the opportunity to remain active for longer.

• Developing measures to prevent discrimination in employment, with a special attention to older women workers.

• Implementing policies to train and retrain older workers in order to help them adapt to new demands and opportunities.

• Developing the potential of information and communication technology (ICT) to open up employment and training possibilities for older people.

• Enabling older workers to stay longer in employment and making it attractive for them to do so.

• Responding to changing family structures and lifestyles by guaranteeing equality of treatment between men and women on, for instance, pensionable age and survivors' benefits.

• Keeping social transfer systems in financial equilibrium by sharing the financial burden of ageing fairly between the active and inactive populations.

• Investigating the scope and limitations of migration replacement as a solution to population ageing.

• Developing the work and the working environment in order to reduce long-term invalidity and to ensure decent retirement and health at old-age

• Strengthening traditional and family-based safety networks as a means of mitigating the negative effects of HIV/AIDS.

The vitality of our societies increasingly depends on active participation by older people. A central challenge is to promote a culture that values the experience and knowledge that come with age. The overall aim is to foster the economic and social conditions that allow people of all ages to remain fully integrated into society, to enjoy freedom in deciding how to relate and contribute to society, and to find fulfilment in doing so.

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