Early retirement during the pandemic: pros and cons

Should we allow people to retire early during the pandemic or bring down the retirement age? Proposals to lower the retirement threshold for the next two years have become increasingly frequent; one option is to bring the retirement age back to its pre-reform level for a limited period of time. The reasoning behind these proposals seems benign – the idea is to give wider opportunities to younger employees.

Credit: Maxim Bogodvid | RIAN

I admit that this measure may be beneficial. However, first of all, it requires the most in-depth evaluation of the labor market situation (after all, no one can guarantee that the vacant jobs will be filled by new employees). Also, it will be essential to develop a system that would take into account whether a senior citizen can and wants to quit employment and go into retirement. During the pre-reform time, there were situations where employees who were old enough to be entitled to state retirement benefits were forced to leave their jobs.

Russia has had similar experience with early retirement. Wouldn’t it be better, without meddling with the existing pension reform, to consider possibilities of a simpler and more transparent early retirement at the request of the employee? There are some reasons for that.

Why is it not always feasible to lower the retirement age for, say, two or three years? This measure only seems attractive to older employees who counted on the previous pension conditions. The unemployment benefit for pre-retirees reaches RUR 11K ($160). Considering the regional disparity, the difference between an average pension and the unemployment benefit seems insignificant. Therefore, unfortunately, there will be no radical changes if the retirement age is reduced.

It should also be noted that in the second half of 2020 and the first half of 2021, the number of retiring men and women will be significantly lower due to the gradual increase of the retirement age. That is, the suggested measure to reduce it will simply not affect them.

Regardless of the general retirement age, it appears to be feasible to allow early retirement three years before the retirement age if a candidate has accumulated sufficient service record. It would be reasonable and necessary to speak about a more simple and transparent early retirement procedure. It may be possible because the workload of the Pension Fund is expected to lower in the next couple of years.

It is necessary to determine early retirement criteria based on a worker’s health, personal references, the current situation in the labor market and the employer’s status. Of course, any discrimination in the labor market must be prevented. Those working pensioners who feel comfortable in the workplace must not be forced out of their jobs.

Decisions concerning the population must be weighed out and based on the do-no-harm principle. When it comes to decisions concerning a significant segment of the population, any influence of force majeure may take away the state’s room for maneuvering if the situation changes. Therefore, decisions must be easily adaptable. Rushed decisions may remain as restrictions for a long term; therefore, it must be clearly stated that they are temporary.

Currently, it is employment services that are fully in charge of decisions concerning early retirement, which is unfair and inefficient. Job centers must confirm that it is impossible to find employment for a specific person from the range of local job openings – still, this must not impact the performance assessment of a specific job center and the income of its employees. This is very important. These centers do not have the level of authority and financial leverage to resolve these problems because creating and maintaining jobs is a responsibility of the Ministry of Economic Development.

We know about the potential outcome of the pandemic but the actual developments depend on the level of business activity in the economy, the investment dynamic and conditions in the market (including its specific segments). Perhaps we should assess the prospects of early retirement for pre-retirees in the industries most affected by the pandemic. These industries include aviation, culture, leisure and entertainment, physical fitness and sports, travel industry, commerce, hospitality and consumer services.

Of course, early retirement for the workers who wish to retire one year before the official retirement age must be simplified as much as possible because obtaining a different qualification at the expense of the government in the current conditions may be unreasonable. Every worker requires an individual approach based on their wishes and life situation.

By Farida Mirzabalayeva, PhD (Economics), Associate Professor, Department of Human Capital Development at Plekhanov Russian University of Economics (partner department of the Russian Chamber of Commerce)

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