Raising the retirement age and cutting back pension entitlements are possibly the most unpopular measures that any modern European government can take for the purpose of stabilising the public finances. From an individual’s point of view, the advantages seem remote or non-existent and the disadvantages all too immediate. From the point of view of a ruling political party seeking re-election, it’s much the same story. This explains why there is growing interest among European Union policymakers in the idea of “de-politicising” the pensions issue, by making certain changes to pension systems automatic and not subject to endless, acrimonious political struggles.
Take a Green Paper published today by the European Commission. A Green Paper is a document designed to stimulate public discussion, not make firm policy proposals, so the Commission steers a cautious path through the issues. Nonetheless, it observes in one passage: “A number of member-states have demonstrated that a promising policy option for strengthening the sustainability of pension systems is an automatic adjustment that increases the pensionable age in line with future gains in life expectancy.”
In other words, it would be a matter of unchangeable public policy: politicians couldn’t touch it once it was introduced. Such a step would have profound implications. As the Green Paper notes, life expectancy in the EU has risen by about five years over the past 50 years, and it may rise by another seven years by 2060. On these trends, people’s retirement age could be pushed somewhere near 70 if an automatic adjustment mechanism were in place, and they wouldn’t be able to do anything about it.
Is such a change necessary? Perhaps. Europe’s financial crisis has devastated the public finances. Long-term economic growth rates have fallen, unemployment has risen and national debts have soared. As a result, pension systems are under unprecedented strain.
But I am not sure that the right way to proceed is to attempt a ”de-politicisation” of highly sensitive areas of government policy. EU leaders are discussing the same approach in relation to controlling national budget deficits. Impose a constitutional limit on deficits, goes the argument, and governments will be forced to behave themselves.
Would they, really? And would automatic increases in the retirement age be forever excluded from political debate? It defies common sense to believe that political parties, employers, trade unions and interest groups of all kinds – not least, pensioners themselves – would maintain eternal silence on the subject.
In the end, there is no substitute for solutions reached through free political discussion and, at times, conflict. The solutions will probably be temporary, and more efforts required. But that is the price for living in an open society. You cannot depoliticise everything.
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