KOCHI: Kerala encounters a distinctive challenge, marked by the nation’s highest life expectancy coupled with the lowest retirement age of 56. Furthermore, this relatively small state grapples with the highest unemployment rate.
A paper titled ‘Retirement Age for Government Employees in Kerala: Time for Reconsideration?’ — presented by Joemet Jose and T V Sekher — reveals the average age of individuals joining government service in 2014 was 33 years. This leaves only 23 years of effective service before their retirement. Consequently, it results in a pension liability that extends beyond the actual period of service.
The research suggests it is highly probable many employees will be entitled to more years of pension than the years of service they provided. Additionally, the reduced number of years in service will make it tough for new entrants under the contributory system to financially prepare for their extended retirement life.
Renowned economist K P Kannan had earlier told TNIE that the retirement age should be raised by another four years, considering most people live up to 90.
“Youth organisations in the state are a deceived lot, perpetually waiting for jobs. Despite a retirement age of 56, job opportunities are scarce. Annually, only 23,000-24,000 staffers retire, representing the net employment potential. My estimate is at least 10 lakh people with a graduate degree actively seek work or sit at home, including around eight lakh women,” Kannan says.
The Economic Review of 2023 reveals Kerala’s unemployment rate stands at 7%, in contrast to the national average of 3.2%. In the fiscal year 2022-23, the unemployment rate among males was 4.8%, while among females, it was higher at 10.7%. The paradox lies in the fact that despite its relatively modest size, Kerala boasts a remarkably substantial workforce. Various reports indicate the number of pensioners and salaried employees in the state consistently surpasses 10 lakh. Kerala also maintains the highest proportion of salary and pension components in both revenue receipts and expenditures compared to other southern Indian states.
In its report, the 11th Pay Commission expresses concern over the escalating debt obligations of the state and the growing burden of interest payments. It also notes the rising expenses associated with pensions, including ongoing disbursements to pre-2013 recruits and pension contributions for post-2013 recruits. “The exchequer cannot and should not be seen as a limitless repository of funds,” the report adds.
Experts suggest an upward revision of the compulsory retirement age could benefit the government. It could enable the utilisation of the capacity and potential of a significant portion of experienced employees who might otherwise be labelled as ‘aged’ and ‘economically unproductive.’ Moreover, it would contribute to alleviating the burden on the government in terms of providing pensions and other retirement benefits.
The Pay Commission also recommends that raising retirement age by just one year, to 57, will free around Rs 5,768 crores in the annual budget (2020-21 estimates) — lump sum benefits at the time of retirement including gratuities, commutation value and surrender of earned leave — which could be used for capital spending and for transfer to the local bodies.
Researchers worldwide have noted that pension systems face sustainability challenges when eligibility ages remain fixed while life expectancy steadily increases. Across the globe, the current older population exhibits higher remaining life expectancies and better health compared to earlier generations. Many countries have acknowledged and addressed this reality by adjusting and raising the retirement age accordingly.
Number of Pensioners in Kerala
3,72,136 Service Pensioners
1,28,436 Family Pensioners
4,737 Ex-Gratia Pensioners
Invalid Pensioners 41
Personal Staff Pensioners 1,223
Part-time Service Pensioners 4,512
*Source-Report of the XI Pay Revision Commission, Kerala