Decrease in the Retirement Age - 60 to 58: Is it viable?

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In many industrialised countries, the average age of retirement from employment has decreased over the last 30 years in spite of better health facilities and increase in the expectation of life. Many countries and corporations have introduced avenues for early retirement within their pension systems.

India has to create job opportunities to younger generations. It is argued that the old have failed to change according to changes in technology, productivity and expectations of reduced cost per person. It is argued that reduction in retirement age will downsize the unit, it is preferred route of improving the efficiency, it will help the sectors like education and universities a lot, as most of the Universities are in trouble, it will have profound effect on the way organizations work and will become panacea for the ills of many Government Departments. This reduction in retirement age will work out as lever for Government to reduce headcount, cut costs and inject new blood to the changing organisations. Even, this scheme is less harsh than firing people and it works out more humane way of reducing the size. There is a feeling among the younger generations that sixth pay rate of pay may not be congruent with their current productivity of older employees. Apart from this, the BJP Manifesto of enhancing the career opportunities for younger and often less expensive employees will reduce the costs of social security such as pension, if implemented before the approval of seventh pay commission report and consequent increase in the pension funds requirement.

The anticipated problems are increase in life expectancy will make the early retirement plan costly since pension benefits have to be paid for a longer period of time. Even, the reduction in age may impose additional costs on the Government as well as quasi fixed costs.  They will cause harsh criticism as it will create serious issues like financial problems, psychological problems, values, power and security, identity crises, boredom. It is involuntary compared to voluntary schemes of many banks. Some view that it will be contrary to the international standards, where Government workers work up to 65 years, it is a sort of age discrimination, it will exploit the vulnerable position of late career employees who have limited future options. No doubt, in India salary increases by age and not on productivity, even it is true in educational sector. Some experts argue that to align, this striking imbalance of productivity and salary, as such, as a worker becomes older, productivity declines while salaries continue to rise, this reduction in the retirement age comes to the rescue. But research has not confirmed its validity. Many researchers have concluded that age and productivity are unrelated. On the other hand there is increased productivity in the professionals like University or College faculty.

In many Universities of international repute such as Harvard, MIT and Yale, elimination of arts and science faculty members with buyout package is common. There are many public funded University Departments, which have become not viable, useless. In all Government Departments the expenditures and performances have been placed under scrutiny by the general public to utilize effectively the available resources. Government departments are now more accountable to public. Even, severe competitions from private organisations also exert pressure on them to reduce expenditure. Even, Universities are not separate from this issue.

Indian Universities mainly (Except self-funded Deemed to be Universities and Private Universities) rely on funding from Government.  The contribution from its primary stake holder, i.e. students is meagre, only a small part of revenue comes from students, the large chunk of money comes from the public as tax, whether this is justifiable? Public recently started question the validity of spending money on higher education. The mood is grim now, there has been fund crunch, cut in funds, how to achieve this?

A pertinent question that has often been emerged here, is it easy to downsize Universities? Universities have their goals and objectives.  No doubt, higher education has been facing severe budget crisis in recent history. The government priority on other services such as health care, primary and secondary education have been responsible for cut in funding of Universities. However, unlike corporate sector, where cutting costs lead to increment to shareholders value, there would be less incentive for Indian Universities to control costs and financial control is an indicator for the success of Universities.