The raising of the normal retirement age (NRA) in the ageing era in the advanced countries: the dilemma between securing the stability of the pension system versus the risk of increasing unemployment

Abstract

ABSTRACT Due to the rapid increase in the population ageing worldwide, this study explores the effect of raising the Normal Retirement Age (NRA) on unemployment by age groups in 30 advanced countries, focusing particularly on comparing the youth unemployment versus the senior unemployment. The study presents a conceptual model that weighs the characteristics of the labour markets in the advanced countries, by examining the opposite forces that may influence the unemployment by age groups when the NRA is raised. The results show that raising the NRA in a labour market that has already suffered from a lack of available jobs leads to an increase in the youth unemployment and even in the adult unemployment, but raising the NRA helps to decrease the senior unemployment. The study suggests that if a country has already suffered from high levels of unemployment, particularly among the young, then the policymakers should weigh the costs of the long-term unemployment versus the costs of not raising the NRA. Conversely, if a country has already suffered from a shrinking of the working population, then raising the NRA may contribute both to an increase in the working population and toward solving the problems of the pension system.