Retirement age is increasing : an assessment of its impact on economic growth in Malta

Abstract

The aim of this dissertation is to assess the impact of increasing the retirement age on economic growth in Malta. The global phenomenon of an ageing population has become a growing source of concern. In light of this, several countries are attempting to alleviate the impact of population ageing on labour supply by extending individuals’ working lives, largely by raising retirement ages in the face of falling birth and death rates, as well as rising life expectancy. To some extent, this pension reform will assist in conquering the burden that ageing population poses on pension systems. The dissertation attempts to answer two main questions: (i) whether increasing the retirement age would impact economic growth, and if so, (ii) the size of this impact. This study is inspired by the fact that, while it is widely acknowledged that policies that raise the retirement age are critical for economic growth, population ageing, and the sustainability and adequacy of pension systems remain major challenges for the twenty-first century. The key conclusion of this study is as follows: According to the author's estimates, the rise in retirement age has driven changes in labour supply and economic development. Indeed, a 1% increase in the number of gainfully occupied population translates in about 0.6% rise in real GDP per capita. If just the working population in the age group of 60 and 64 is considered and grows by 1%, real GDP per capita grows by about 0.2%.