Gulf states must raise retirement age

It is no surprise that most of them have the experience to make significant improvements, both in the work they do or transferring that expertise to younger generations.

In the Gulf, however, the situation is very different. Wherever you go in these cities, you will see groups of the young, the middle-aged as well as the elderly gathering in cafés in the mornings.

Once, many Gulf citizens on reaching 40 years or completing 15 years of work would start thinking of retirement, or the so-called early retirement.

Unfortunately, GCC retirement rules do allow them to retire, which represents a significant economic, professional and social loss, and will eventually lead to the so-called actuarial deficit in pension and social security funds.

This will thereby require Gulf states to intervene to provide financial support to save these funds. This crisis has already happened in some of these countries and poses an additional burden on public budgets.

Creates market distortion

It goes without saying that such phenomenon is a major imbalance for the Gulf’s labour market, negatively reflecting on economic growth and leading to a development gaps that will need to be quickly resolved before it exacerbates.

This is in particular because global economic conditions are moving towards further complications, especially in the oil markets on which GCC states depend.

The first thing the GCC states can do is to address major imbalances in the pension and social security systems.

In some European countries, in the last three years, the retirement age has been raised from 60 to 62 and 65 years, in conjunction with the increase in average lifespans to more than 80, up from 75 years two decades ago.

Change with the times

Thanks to significant developments in health services witnessed by GCC countries, the average life expectancy has reached a similar level to developed countries, as shown by the Human Development Report issued by the United Nations.

This is a great achievement by all standards.

With that in mind, a number of Gulf citizens spend no more than 20-25 per cent of their age at work, compared to 75-80 per cent in developed countries.

This a wide differential and a significant economic loss affecting growth rates and balance of payments though increased remittances abroad. This is in addition to the huge amounts spent to educate Gulf citizens, but have not been fully benefited Gulf economies by them serving more years.

Certainly, there are many reasons for this disturbing phenomenon that must be analysed to develop effective solutions. There are some employees who just don’t want to work, but the vast majority left their jobs for reasons that could have been addressed, especially among those well qualified and with expertise.

It is also possible to issue laws limiting decisions by employees to retire simply for personal desire, dissatisfaction, or minor disputes that can be overcome in the field of work.

However, there are many retirees ready to return to work whenever possible and utilise their energies. Retirees can also work at entities such as the ministries of labour, whether full- or part-time, in a way that does not conflict with hiring fresh graduates.

Finally, it is time to raise the retirement age to respond to the emerging economic conditions and to make the most of qualified Gulf workers, in addition to scraping the so-called early retirement plans, except in exceptional cases such as a health disability proved by a medical report issued by a specialised medical committee.

Such an approach will have significant positives on economic and social conditions.

It will also be a strong support for state budgets and benefiting from the radical reforms in GCC countries in preparation for the post-oil period.