Raising the retirement age to utilize the workforce more effectively?

The Deputy Minister of Labour, Invalids and Social Affairs answered several questions related to the draft study on increasing the retirement age.

The adjustment to increase the retirement age is being studied by regulatory agencies for inclusion in the draft amendment to the Labor Code, expected to be submitted to the National Assembly in 2017. So, why increase the retirement age and how will it affect the health and psychology of workers? VOV interviewed Mr. Pham Minh Huan – Deputy Minister of Labor, Invalids and Social Affairs – on this issue.

Mr. Pham Minh Huan - Deputy Minister of Labour, Invalids and Social Affairs.

PV:Sir, the proposal to raise the retirement age is not a new issue, so what are the reasons for the authorities to once again conduct research and seek opinions at this time?

Deputy Minister Pham Minh Huan:Researchers warn that the rate of population aging in our country is increasing very rapidly, meaning that the life expectancy of Vietnamese people has increased significantly. In fact, our workforce—women over 55 and men over 60—consumes many highly qualified, capable, and experienced individuals who can contribute effectively to specific job positions. Particularly concerning is the pension fund, where the contribution period is too short and the benefit period too long, leading to an imbalance in the fund.

From a policy perspective, there are two aspects: either we must increase contributions or reduce benefits. Therefore, researching increasing contributions by extending the contribution period is also a crucial factor. Furthermore, the trend in other countries worldwide, due to increased life expectancy, is to extend working hours. They also adjust retirement ages to effectively utilize the workforce, especially highly skilled workers. Considering these four factors, we need to address this issue for further research.

PV:Some argue that raising the retirement age will deprive young workers of opportunities. What are your thoughts on this issue?

Deputy Minister Pham Minh Huan:Every problem has two sides. On the one hand, we can make better use of experienced workers. But on the other hand, we must consider health factors, as people age, labor productivity, and especially the impact on the labor market, as more people reach working age.

These are challenges that must be considered during the planning process to determine the most appropriate approach. In other countries, increasing the retirement age follows a phased approach. For example, in Vietnam, today the retirement age for women is 55 and for men is 60, but tomorrow it might be changed to 60 for women and 62 for men in 2017 – that's not right. There must be a phased approach, increasing the age gradually by a few months each year to minimize disruption. The relevant agencies will have to calculate this.

PV:Sir, will raising the retirement age lead to a decrease in pension benefits?

Deputy Minister Pham Minh Huan:In fact, the 2014 Social Insurance Law has undergone some adjustments. We believe we are in the process of reforming social insurance policies. Currently, our contribution rate is 32.5% of salary and income. Regarding benefits, under the old law, the maximum benefit was 75% of the average salary on which social insurance contributions were based. This is a high rate compared to other countries worldwide. In other countries, the average pension benefit is only 40-60%, but because our base salary is low, even with a 75% contribution rate, the absolute amount received is still very low. Therefore, there has been an adjustment in the benefit portion. For example, previously, men needed 30 years of social insurance contributions and women needed 25 years to receive the maximum pension of 75%, but now, to receive this maximum, men need 35 years and women need 30 years.

PV:So, how has the proposed increase in retirement age taken into account the health and psychological well-being of workers, sir?

Deputy Minister Pham Minh Huan:Of course, psychologically, we must prepare, and the workers themselves need to prepare. Health is clearly also a factor. The physical condition of Vietnamese people is not very good compared to the region. That's why in many countries, the retirement age can be raised to 65.

We haven't yet calculated the specific plan, but many experts suggest that, for now, men could retire at 62 instead of 60, and women could retire at 58 instead of 55. Later, when Vietnam's socio-economic conditions improve and the physical health of Vietnamese people improves, we may be able to further adjust the retirement age upwards.

PV:Thank you, sir!