Fearing a pension fund collapse, the Ministry of Labor wants to shorten the time to increase the retirement age.

Instead of taking 8 years to increase the retirement age for men from 60 to 62, the Ministry of Labor, War Invalids and Social Affairs is seeking opinions to shorten the increase to 4 years.

The Ministry of Labor, War Invalids and Social Affairs is seeking comments on the draft revised Labor Code, which includesThere are two options for retirement age. One is to keep the retirement age for men at 60 and for women at 55; the other is to increase it by 6 months each year, starting in 2021 until men are 62 and women are 60.

For example, if a male worker retires in 2020, the current retirement age will be 60; if he retires in 2021, the retirement age will be 60 years and 6 months; if he retires in 2022, the retirement age will be 61; if he retires in 2023, the retirement age will be 61 years and 6 months...

Compared to the first draft announced at the end of 2016, the roadmap for increasing the retirement age has been shortened. According to the old plan, it took 8 years to increase the retirement age for men from 60 to 62, and 20 years to increase the retirement age for women from 55 to 60, but now it only takes 4 and 10 years, respectively. If this plan is approved, the retirement age for men will be applied in 2025 and in 2031 for women.

6 reasons to increase retirement age

In its explanation to the Government, the Ministry of Labor cited six reasons for raising the retirement age. The most important reason is that if the contribution and benefit levels and the contribution and benefit periods remain the same, the pension and death benefit funds will become unbalanced in the long term.According to ILO research, from 2023, Vietnam's pension and death benefit fund will fall into a state where the annual revenue is not enough to cover expenses, and must be drawn from the surplus fund to pay. From 2034, the surplus fund will be paid out and must be compensated by the budget.

Why is the pension fund unbalanced? Graphics: Tien Thanh.

The second reason is that if the retirement age is not raised and the fund's financial sustainability is ensured, the contribution rates of employees and businesses must be increased, or the pension benefits of employees must be reduced. Raising the contribution rate is difficult because it increases the financial burden on employees, reduces the competitiveness of businesses, and makes it difficult to ensure the living standards of employees. Reducing the benefits makes it difficult to ensure the living standards of retirees. Therefore, increasing the retirement age is the best way.

Third, the average life expectancy of Vietnamese people has increased significantly compared to before, about 73 for men and 75 for women. Men at age 60 live an average of 20 years longer, women at age 55 live an average of 24.5 years longer, the pension period is quite long. Meanwhile, many retired people continue to participate in the labor force, with the need to work more.

The fourth reason cited by the Ministry of Labor and the United Nations Population Fund is that Vietnam is moving from the golden population period to the aging period. In the future, the economy will lack young workers. Raising the retirement age is also preparing for the future of the labor force. Many countries have raised the retirement age, some to 67, to cope with the trend of aging population and labor shortage.

Fifth reason, raising the retirement age to take advantage of elderly human resources with experience and high professional qualifications in the context of increasingly improving labor health.

Finally, the ability to balance the pension and death benefit funds depends on expanding social insurance coverage, reducing evasion, and effectively using social insurance management costs... According to calculations, these factors only help the fund extend the balancing time by 1-2 years.

The route is too fast

Dr. Nguyen Huu Dung, former Director of the Institute of Labor Science and Social Affairs,agree that increasing the retirement age is in line with the general trend of the world. However, when countries increase the age, they usually have a roadmap of 15-20 years, Vietnam shortens it to 4-10 years, which is too fast. This roadmap will create pressure on employment for young workers. If following this plan, the Ministry must come up with a "very strong" solution to solve the employment problem for young people.

The new ministry talks about the pressure to increase the retirement age without analyzing the factors that hinder the increase. For example, the average life expectancy of Vietnamese people has increased to 74, but the population's health is poor. Each Vietnamese person has an average of 12 years of illness, the average healthy life expectancy is 60.2, so retirees will face many illnesses and diseases, so the time to receive pension will be short.

Dr. Dung further analyzed that the retirement age of 62 for men and 60 for women is suitable for developing countries with average income. However, the income of Vietnamese people is still low, so this plan cannot be applied at the present time but must be considered further. A reasonable plan is to increase from 1 to 3 months each year until the desired retirement age is reached.

According to him, extending the retirement age is only suitable for some people working in scientific research, doctors, and engineers because the time of retirement is also the time when they are "ripe" in their profession, have a lot of experience, and it is a pity to retire. As for civil servants in public administration and preschool teachers, the retirement age should be kept the same. In the direct labor, service, and heavy and toxic labor sectors, the retirement age should not be increased, and should even be reduced.

How do retirees get paid? Graphics: Tien Thanh.

"So far, there has been no systematic assessment of the impact of increasing the retirement age on each group of people. According to a survey by the General Confederation of Labor, 70% of workers want to keep the retirement age the same, but that is only for direct laborers; workers in the FDI sector are pushed out at around 40 years old," said Dr. Dung.

Mr. Vu Quang Tho, Director of the Institute of Workers and Trade Unions, commented that Vietnam's economy is recovering after several shocks, and needs further monitoring. Currently, there are more than 200,000 unemployed bachelors and masters, so let's not discuss raising the retirement age but rather assess the impact of this increase on labor groups.

"Increasing the retirement age is essentially extending the working age. Should we tell young people aged 18-25 who are in their golden working age to wait until they retire before starting work?", he asked, saying that those who want to increase the retirement age do not represent the majority of workers, especially direct workers.

He informed that in August-October 2016, the Institute surveyed workers in all three regions, and the results showed that they all wanted to retire early and did not want to increase their working age.

Sharing the same view, former Deputy Minister of Labor, War Invalids and Social Affairs Pham Minh Huan assessed that increasing the retirement age to balance the fund is good, but the cost of businesses to pay workers' salaries is limited. Many business owners said that they will add more robots and automated production lines to replace humans. Because they have to calculate the problem of how to survive when the social insurance contribution rate has increased, now the retirement age is also increased, so they are under great pressure.

According to him, increasing by 3 months each year as in the old plan is reasonable and must be divided specifically into groups of subjects. For heavy laborers, the age should remain the same at 55 for men and 50 for women. About 4 million workers in the administrative sector and management officers will increase first; 9 million workers in the direct production sector will increase later.

"Regardless of the plan, first of all, there needs to be a report assessing the impact of increasing the retirement age on the labor market, the health of workers, and fund management... There must be complete information so that when the law is submitted, the National Assembly has a basis to consider whether to increase it or not," he said.

According to VNE