Why you should be thinking about state pensions
Elections are only a day away, and one of the major topics this year is our state pension. Wait! Don’t start yawning or clicking away now! As a student you might have other priorities on your mind when voting – who will pay for your tuition or your public transport, for example. It might seem boring to think too far ahead. But in fact it’s pretty exciting, even for you as a student. In fact: especially for you. Robin L. Lumsdaine, Professor of Applied Econometrics at Erasmus School of Economics, who has done a lot of research on health and ageing, explains why.
1. Our demographic landscape is shifting towards fewer workers and more retired people
This presents a big challenge to public finance. We could just sit back and wait to see what the future holds for us; but why would we, when we can actually see into the future? ‘The thing about demographics is that they're fairly easy to predict’, says Lumsdaine. ‘How many 60-year-olds we’ll have 20 years from now, for example.’ It’s actually thinking far ahead that could transform our system into something sustainable.
One man with such long-term vision was an American government official called Richard Suzman who, in the 1980s, realised that in about 40 years' time the US would have a big state-pension problem. Suzman pushed for data collection from a large, representative sample of the US population that was transitioning from near-retirement age to being elderly. In the years that followed, his efforts were expanded to many countries around the world, so that now half the world’s population is represented by these data collections. Using these data sets, we can now compare the advantages and disadvantages of different systems across the globe.
So it’s right now that we can and must start informing ourselves, and thinking about all our future challenges. About who will have to retire later and who could work longer, for example. Or about how we can make saving money more attractive, so we are able to support ourselves if there’s less money for us down the road.
2. You have the power to change your future: it’s called voting
Some political parties are specifically addressing elderly people who worked their whole lives thinking they’d receive a nice pension, and now see that pension being threatened. ‘If you’re retiring next year and today you hear that you will get less money, it’s understandable you feel it’s unfair,’ says Lumsdaine. ‘Many of these people didn’t have the advance knowledge’.
But we do have the advantage of knowing what the problem is. The question now is how to address it. That’s where politics comes in – another challenge. ‘A politician’s life is short. It’s hard for them to offer solutions that benefit voters 30 years from now, because they need to be re-elected by the current voters,’ explains Lumsdaine. ‘Young people need to recognise that politicians need their support to make long-term decisions without being punished for it.’
Politicians themselves can also pitch in here. ‘Don’t ignore the young people, the voices of those you think are not interested in the subject. In my experience, if you give young people information and encourage them to be interested, they will be. It’s not helpful to only speak to those you think want to hear.’
Finally, there needs to be more collaboration in politics to transform our system into a sustainable one. ‘Politicians like to emphasise differences, because they want to be elected. But to get things done, we need to work together and recognise that most people want a sustainable program. We can either continue focusing on the short-term and let the public pension system go bankrupt, or we can try to bridge the challenges.’
3. Last but certainly not least: the subject is actually a lot of fun for many young people
Once people become informed about state pensions they discover that it’s actually a lot of fun. Lumsdaine knows this from experience. In the US, she taught a bachelor class about the economics of ageing to students who weren’t interested in pursuing an economics degree. ‘My colleagues told me, "That’s impossible. They’re not interested, they’re not going to understand," but it turned out to be wildly successful. Most of them even ended up studying economics.’
During her 2015 sabbatical at Erasmus University Rotterdam, Lumsdaine had 12 bachelor students working on retirement-related subjects with the European version of Suzman’s dataset (the Survey of Health, Ageing, and Retirement in Europe). Ten of them continued to use the data for their bachelor's thesis, a few continued further with the subject for their master's thesis, and one of them even got a thesis award – a nice cash amount – from Netspar, the Network for Studies on Pensions, Aging and Retirement. Lumsdaine has also co-authored three academic publications with Erasmus students working on ageing-related issues and has a number of related projects still in process.
Why were they so enthusiastic? ‘If I had to guess, it’s the opportunity to do original research as part of the Erasmus bachelor programme’, says Lumsdaine. Besides, everyone has parents and grandparents. Most of us are already concerned about the needs of the elderly and how that affects the lives of young people. It’s just a small step to start thinking about these topics on the national level.
So: inform yourself; realise how important you are to a sustainable future and go vote! Want to start informing yourself right now? Lumsdaine’s advice: browse through Netspar's website, where you can read both policy briefs and academic research on these topics. Additional advice would be to consider taking classes in economics, econometrics, and finance. Whatever you do, just start looking into it – we promise it won’t be boring!