Bríd Smith criticised the Dáil Committee report’s portrayal of a pension “time bomb”, arguing the narrative is false and that raising the state pension age is not the only solution. She urged raising employer PRSI and emphasised older people’s ongoing productivity and unpaid contributions.
Dáil Committee report findings
She said the committee exposed the assumptions behind what she described as near hysteria about a pension time bomb. She noted the Minister dismissed the Dáil Committee report and said she agreed with Deputy O'Keefe's anger at that dismissal.
Problems with the dependency ratio
She argued the common ratio between those of working age and those over 65 is arbitrary and misleading, citing figures of about 4.5 working-age people per pensioner now, 3.5 by 2030 and 2.3 by 2051. She said the ratio does not measure productivity, health or how many over-65s will continue to work, and stressed that people living longer are often healthier, active and contribute unpaid childcare and other vital labour.
Cost estimates and policy alternatives
She highlighted Commission estimates that the Social Insurance Fund deficit could reach £13 billion in 2050 if no changes are made, and that raising the pension age to 68 would save about £3.8 billion in 2050. She said research shows the 2014 increase to 66 had little effect on retirement behaviour and warned of unintended social consequences. She pointed to the Dowell report’s estimate that raising employer PRSI by 4-5 per cent would add 3-4 billion euro to the fund and argued that increasing employers' PRSI is a more equitable fix than raising the retirement age.
Productivity and distribution of wealth
She argued rising worker productivity undermines the alarm over demographic ratios, noting productivity has outpaced wages in other countries - for example a cited US increase in productivity of 61 per cent since the 1970s versus a 17 per cent rise in wages. She said the share of national income for employed and self-employed people fell from 89 per cent in 1970 to 60 per cent in 2012, and that fairer distribution of wealth would reduce any need to raise the pension age.
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I think the Dail Committee report has exposed arguments and underlying assumptions behind what I would describe as near hysteria about a pension time bomb and this committee's report has showed that this is a false narrative. Since the recession in 2008 there has been constant clamour from economists and employers to tackle the rising costs of state pensions and we heard it from the Minister tonight this must be done it's a hard decision we have to look after the young etc. The chief argument that the government and the economists make is that people are living longer and that in the future the ratio between the numbers of workers in the labour force and the numbers of retired workers will grow and be unsustainable. Words like burden and dependency are used to convey that message. Workers living longer is a time bomb that must be diffused and the only solution is to defer pension payments from 65 to 68 and possibly later if need be. And I find the Minister has dismissed the Dail Committee report and I concur with Deputy O'Keefe's anger on that. And why do I say this is a false narrative? Firstly, the calculation of the ratio between those of working age and those over 65 is an arbitrary and misleading one. We are told that they are approximately 4.5 people of working age for every pensioner and this is set to decrease to 3.5 to every pensioner by 2030 and 2.3 workers to every pensioner by 2051. This actually means very little, even if it was correct. It does not tell us how productive that those who are still working are, nor how dependent those over 65 will be, nor if demographic trends are certain. People living longer now should be a great cause for celebration. Not only are people living longer, but those with extra years are healthier and more active than past generations have been. And while they may be getting a modest state pension, many are still active and productive and providing essential labour for wider society. In that sense, they are not dependent. The ratio used does not tell us how many of those under 65 can and do work, nor does it calculate how many over 65 will continue to work or would choose to do so if they were allowed. And equally at the other end of the equation, it is misleading. A modern technology driven economy means that workers stay in education for longer than we did decades ago and also that under the state pension age they cannot as yet join the workforce. And at that same time, many women are being forced out of the workforce because of childcare costs. Many of those over 65 continue to play vital roles in our society, even if they have formally left the workforce. Most of them will be in good health, not dependent on health services or other services, in the same proportion to people of that age in previous decades. For example, it is only because of retired workers, whether grandparents or close families, providing unpaid childcare that many families, many thousands of people can continue to work. Secondly, the expected cost of this time bomb. It is presented as a given and insurmountable fact that it can only be avoided by raising the pension age. It is not. The Commission, for example, calculated that the social insurance fund deficit, the fund that PRSI taxes go into and that pays out benefits like the state pension, could reach £13 billion in 2050 if no changes are implemented. The savings predicted from raising the age to 68 are calculated to be at £3.8 billion in 2050. In fact, none of these are certain figures and research shows that when the pension age was increased to 66 in 2014, it had little impact on the number of people who retired at the age of 65. The impact of forcing thousands to work longer will have unintended consequences and will not be cost-free. Childminders and volunteers in many vital sectors will have been kept at work and this will have a knock-on effect on our society. What is not publicised by the economists or the government is the fact that raising the tax paid by employers could address any deficit. If the PRSI paid by employers was raised by just four or five per cent, that would add another three or four billion euro to the fund as highlighted in the Dowell report. This is more than the savings from raising the retirement age is predicted to yield. Workers will pay into the Social Insurance Fund throughout their entire working life. Indeed, since the last recession, they have also paid additional taxes like USC with little or no tangible benefits, while employers continue to pay the lowest PRSI rates in Europe. The first step in addressing this issue is to raise that rate and to make sure that the Social Insurance Fund does not face a deficit. The government, of course, will faint at the notion of raising taxes on employers, but then they have no problem taking the hard decision to slash workers' benefits or to raise the retirement age. Thirdly, the fact that the ratio may increase does not in itself constitute a crisis. By every measure available, worker productivity has increased enormously over recent decades. Indeed, the gap between workers' productivity and their pay has also widened. In the US, for example, since the 1970s, workers' productivity has increased by a staggering 61 per cent compared to wages which have increased only by 17 per cent. The difference is pocketed as profits and helps explain the widening inequality across many countries. Irish workers are the same. Massive leaps in productivity over decades go side by side with a decreasing share of the overall wealth in society. In 1970, the share of national income for employed and self-employed was 89 per cent of the economy, but by 2012 that had declined to 60 per cent. The point here is that three workers in 2030 will be as productive as five workers were in 1970. Logically, there is no need to fear that that ratio or the ability of society to support a population living longer if wealth and resources are distributed equitably and social supports are funded through taxes on wealth and profits. As unions and workers fight against these proposed changes, the wider arguments have come under scrutiny and have been exposed. Behind the attempts to raise the pension is a philosophy that never, ever looks to raise taxes on employers or to tax the vast wealth that workers generate as profits during their working lives. Instead, it seeks to reduce the rights and support that workers have fought for over generations. The real agenda behind the pension time bomb is the continuation of an ongoing war on all workers' rights and entitlements. We should not fall for this and we should defend the right to retire and bring it back to 65 as a cornerstone of a decent society. Finally, it is not about fairness. All of what you are saying, Minister, is not about fairness or equity. It is part of an ongoing war on pensions and retired workers. PRSI and employers is a hard decision, but taxing retired workers on modest pensions or forcing workers to work another two years, you seem to be happy with that. The best of luck to you when you go before the electorate in 2025 on a platform of raising the retirement age to 68. Thank you. Thank you very much. Thank you.
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