Edited By Richard Ennals and Robert H. Salomon
Part 4: The Choice is yours – on Incentives and Individual Choices 203
203 Part 4: The Choice is yours – on Incentives and Individual Choices 204 205 16 Economic and Social Incentives for Viable Age Policies Knut Røed The demographic challenge There has been a rapid change in the number of people in the workforce, com- pared with those who are of retirement age or above. This poses a challenge for policy makers. A viable age policy would be a policy that balances work, consumption and leisure over the lifetime for an ageing population. We should not assume that ageing is to be regarded as necessarily implying labour market inactivity. Do we all have to work more, or longer? In principle, we do have a choice. We can work longer, or consume less. There is, from an economics perspective, no basis for arguing that everyone should work longer. After all, leisure is not of lower economic value than a flat-screen TV. We should consider changes in health and wealth. Is it now easier and more profitable to work longer? Are leisure activities more attractive? These questions are not to be decided by policy makers. The economist’s recommendation We should work as long as, and to the extent that, the value of the work exceeds the value of the foregone leisure. This principle obviously calls for individually determined retirement profiles. As we age, the cost of providing the required effort may rise, and leisure may become more valuable. At some point, we probably also become less pro- ductive. The speed by which this...
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