Retirement age needs a review


Economic Times, May 29, 2013

Increase retirement age of government employees to 62

Bibek Debroy  
Wednesday May 29, 2013, 02:45 PM
 
On 21st March 2013, there was an unstarred question in Rajya Sabha, about whether there was a proposal to increase the retirement age of Central government employees. The relevant MOS answered there was no such proposal. That’s not quite true, because there is such a proposal floating around and it went to Cabinet sub-committee and an in principle decision to implement was taken by Department of Personnel and Training (DOPT). One should not mix up existence of a proposal with a decision about implementing it. Evidently, a decision has now been taken to increase the age from 60 to 62 years, the last time such an increase took place was in 1998, when there was an increase from 58 to 60 years. Whenever such a decision is taken, debates centre on the big picture. What are arguments for? First, life expectancies are increasing. There is a shortage of good people within government. Let’s tap this expertise. Second, in any case there are extensions in “exceptional circumstances”. But that’s arbitrary and can be shot down by the Appointments Committee of Cabinet (ACC). Why not formalize the system by allowing extensions to everyone? The trouble with this argument is that there will be no finality about 62 either and there will be “exceptional circumstances” beyond 62.

Third, there should be parity. Professors now retire at 65. High Court judges retire at 62, Supreme Court judges retire at 65. The counter-arguments of the big picture are also obvious. India is a young country, young need employment opportunities. Promotional avenues of existing civil servants get blocked. Often, in the private sector, people retire at 60 and there are extensions, with the qualification that extensions are at consolidated monthly emoluments, with no perks. An increase in retirement age occurs with all perks. Therefore, there are significant fiscal costs. While these big picture arguments and counter-arguments are important, my problem is that such decisions aren’t taken because of logical coherence. They are ad hoc decisions, driven by myopic motives. First, increase in retirement age postpones the one-time superannuation burden of severance payments by around Rs 5000 crores. For a government that has drawn up red lines on deficit numbers, that’s a desirable objective, even though it is myopic because it increases fiscal costs on future governments. Second, there’s a clear political cum electoral motive. Outright, if we include Defence, we are talking about 1.5 million Central government employees.

In a broader sense, we are talking about something like 6 million, excluding State governments and quasi-government, all urban. This is therefore a significant component in that 65 million urban household figure. These two points will also be made when the 62 decision is announced. But the one that bothers me most is a third element, one that is invariably never talked about. Such ad hoc decisions are taken because of specific individuals. There is one particular individual whom government wishes to place in one particular position. Once he is placed there, government wishes him to benefit from increase in retirement age. But to ensure he is placed there, one needs to ensure those who are senior to him get out of the way first. After all, supersession is not desirable. Hence, announce the decision after some people have retired at 60 and exited. This is the way decisions are taken. At one level, there is no point complaining, because we have accepted corruption of institutions and systems as fact of life. But when this 62 decision is announced, as it soon will, let us not pretend there are any big picture considerations involved.
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Comments:


M G WARRIER
May 30,2013 at 09:23 AM IST
We are getting used to adhocism and issue-specific or rather individual-specific decisions on matters which really are much wider and affect many. The cases for and against increase in retirement age brought out here are relevant. But it is equally relevant that ‘productive’ life of serving employee(not in the narrow sense of ‘workmen’, but an inclusive sense covering anyone who works and gets paid for that) is much longer than what it used to be when the present ‘retirement’ age was conceived. On the one side government discontinues a ‘defined payment’ pension scheme because those who continue to be in ‘productive’ employment will have to bear the burden (costs). On the other side longer service tenure becomes the prerogative of businessmen, advocates and politicians (lifetime?) or those who are self-employed. Unemployment position is an issue. But bringing down retirement age or keeping it static is not the solution. High time the position is reviewed.
(Reply to M G WARRIER)- K.B.Neelakantan
May 30,2013 at 05:43 PM IST
I agree with with shri M G Warrier. It is necessary to review now because of the longevity,expertise, government not filling of vacancies at proper time in the past, lack of succession planning leaving only a few at the top.
(Reply to K.B.Neelakantan )- M G WARRIER
May 31,2013 at 02:47 PM IST
Very true.
A review of retirement age is long overdue for several reasons:
• There is a felt need for upward revision.
• If 'serving' population cannot shoulder the cost on the 'retired'(this is the argument for killing defined payment-based pension scheme), those who are fit should be allowed to work and earn in fields where they have skills
• Denying regular employment is not the way to tackle indiscipline in organised sector. In the long run managing regular employees in the organized sector would be much easier than handling millions of dissatisfied ‘contract employees’
• There are countries and organisations where 'retirement' age is seventy plus and even after 'retirement' those who are 'fit' for continuance are allowed to continue in service on mutually agreed compensation package
• Worsening unemployment situation cannot be improved by 'early retirement'
• Employers have a responsibility to ensure reasonably acceptable post-retirement lifestyle for their employees who have spent their life for the institution/organisation
Anyway, BPL (Businessmen-Politicians-Lawyers) category has no fixed retirement age! Their unilateral decision on retirement age for ‘working class’ is not acceptable!!


AshokPrabhu
May 30,2013 at 07:26 AM IST
This idea can work only in western Economies.Indians need more and more employment for young graduates.Better to abandon this idea.

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