What will matter to us as we age? A healthy body and mind, above all, but also a comfortable home, family and friends, and enough money to benefit from the good things in life we never had enough time to enjoy while working and bringing up a family.
Chances are that if we were fortunate enough to get good education and skills, and if we found and kept a good job, both in terms of pay and working conditions, our life in retirement will be pleasant. Even if we need long-term care and personal help, it is likely that we can get good quality services because we have health and care insurance and we can pay for extra support if needed.
But for those among us who had a less fortunate start into their working lives, who lost their jobs once or more often during their active years, who worked part-time and were paid little, who had physically demanding jobs taking a toll on their health, for all those people retirement and old age risk being much less enjoyable.
OECD data[i] show that overall today, the majority of pensioners in OECD countries enjoy as good living standards as the average population. At the moment, inequality among elderly groups is low, compared to other age groups and in particular, young adults. This is not surprising: many of today’s retirees, at least men[ii], have worked for most of their active years in stable jobs.
However, a “job for life” and even a “career for life” are rare commodities for people starting out today. The increasing share of non-standard work arrangements is one important driver of growing income inequality. Between 1995 and 2013, more than half of all jobs created in OECD countries were in part-time and temporary work or in self-employment. Low-skilled temporary workers, in particular, have much lower and instable earnings than permanent workers.[iii] Thus, future retirees will be a much more diverse group. Some will have experienced long spells of unemployment and low wages, while others continue to enjoy stability and higher earnings.
The situation is more unequal when it comes to wealth. In 2012, the bottom 40% owned only 3% of total household wealth in the 18 OECD countries with comparable data. By contrast, the top 10% controlled half of all total household wealth and the wealthiest 1% owned 18%[iv], which means that the money people make on their investments is even more concentrated than other forms of earnings. This, of course, will affect what people have to live on in retirement.
Poorer people are also less healthy and die younger than rich people. Many of the future elderly may move into older ages with disabilities, in bad health, and a limited ability to keep working and contributing to society. On average across the 15 OECD countries for which we have data, the gap in life expectancy between people with low and high educational levels was about 8 years among men and 4 years among women.[v]
The experience of old age for today’s younger generations could change dramatically compared to their parents, with improved living standards and a longer life for some and a shorter, sicker and more poverty-ridden life for others. And there are no reasons to assume that the ageing experience will be the same for generation X, generation Y and the millenials. What we need is a close look at inequality both within and across cohorts to design appropriate policy responses.
The OECD has a major project underway focusing on the two mega-trends of population ageing and rising inequality. It will examine how inequalities are compounded over the life-cycle by analysing the links between poor health and poor labour market experience during active years and poor social outcomes among the elderly. It will identify points throughout the life-cycle for policy interventions to address these challenges effectively and efficiently rather than waiting for when people retire. We need to rethink our systems of social protection to accompany people throughout their increasingly diverse life courses. This could not only generate substantial savings for governments, but first and foremost change the lives of people as they age and make retirement a well-earned reward for all.
about the author
Monika Queisser is Head of Social Policy Division at the OECD, where she supervises and coordinates the work on social protection spending, social indicators, pensions, family policies, tax-benefit systems and income inequality and poverty. Her background is in pension system analysis and pension reform. She has been working at the OECD since 1997. In 2007-8, she worked as an adviser to the OECD Secretary-General. Prior to joining the OECD, Ms. Queisser worked at the World Bank in Washington, D.C. She was a member of the pensions and insurance group in the Financial Sector
[i] OECD, Pensions at a Glance 2013
[ii] OECD, Closing the Gender Gap 2012 and Gender Data Portal
[iii] OECD, In it Together: why less inequality benefits all, 2015
[iv] OECD, In it Together: why less inequality benefits all, 2015
[v] OECD, Health at a Glance 2015, forthcoming