Lump of Labour Fallacy - Early Retirement

Early Retirement

Early retirement has been used to induce workers to accept termination of employment before retirement age following the employer's diminished labor needs. Government support for the practice has come from the belief that this should lead to a reduction in unemployment. The unsustainability of this practice has now been recognized, and the trend in Europe is now towards postponement of the retirement age almost everywhere except in France, where if according to the proposal of the French Socialist Party it might be returned from 62 to 60. In an editorial on The Economist a thought experiment is proposed where old people leave the workforce in favor of young people on which they become dependent for their living through state benefits. It is then argued that since growth depends on having either more workers or greater productivity the society cannot really become more prosperous by paying an increasing number of its citizens unproductively. The article also points out that even early retirees with private pension funds become a burden on society as they also depend on equity and bond income generated by workers.