Macroeconomics And Mandatory Retirement

Macroeconomics And Mandatory Retirement        Before 1986, mandatory retirement was a reality in the US. The law allowed employers to ask employees to retire when they reached the age of 70 years. However, in 1986, mandatory retirement was abolished.

         Macroeconomics evidence suggests that the impact of restricting mandatory retirement on a nation is small but a positive one. There is evidence to show that increasing employment rate among older people has an effect on the output and living standards. Output and living standards increase in addition to the government’s fiscal status.

       In the US prior to 1978, the age limit for mandatory retirement was 65 years and it was seen that no more than 5 percent of people were retired against their will when they were fit to continue their jobs. In 1986, the percent of those forced to retire when they reach 70 years even when they were fit and wanted to continue working was around 1 percent to 2 percent.

      This means in terms of macroeconomics that reducing the extent of early retirement is more important in terms of increasing employment rate than restricting mandatory employment. In any company, older employees are paid higher than younger employees not because they are old but due to the wealth of experience and expertise they bring in. By enforcing mandatory retirement, a company is doing away with this experience and expertise. By having older employees in an organization, younger employees can be trained to take on responsibilities once the older employees decide to retire.

        Although mandatory retirement is no longer prevalent in the US, many people retire while they are in their 60s to spend time with their family or indulge in activities they always wanted to do.

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