What was bound to happen has finally occurred: the European Union (EU) has recognized the need to strengthen the pension system, or it will begin to fall apart, writes Latvijas Avīze.
Historically, the current pension system was designed with the assumption that a person would live only a few years after retirement, as well as based on the assumption that the number of workers would exceed the number of retirees. Both of these assumptions have proven to be incorrect.
Advancements in medicine and healthcare systems have increased the life expectancy of retirees. If in the mid-20th century the average number of years people spent in retirement, even in developed countries, was 5-10 years, today it averages 15-20 years, at least in countries where the healthcare system is more or less developed. For example, in Latvia in 1956, men lived on average for two years after retirement, while women lived for ten. In the USA and Western Europe, people lived on average for 3-5 years in retirement, while in the rest of the world, many did not even reach retirement age, dying earlier.
Now, even in Sub-Saharan African countries, which do not have a high standard of living and developed healthcare, retirees live for up to five years in retirement, while in countries like Canada and Japan, it is about 18-20 years. Other developed countries are also approaching these figures.
To support retirees, a corresponding number of workers is necessary, ideally two or more workers for each retiree, since state pensions are formed from the social contributions of workers. However, global urbanization, the increasing number of educated women entering the labor market, and a number of other factors have led to demographic changes and halted population growth almost everywhere except Africa.
All these problems are also characteristic of prosperous Europe, which is why the European Commission is proposing that EU states create more effective pension systems that would complement state pensions and provide retirees with income in old age.
