Differentiating Retirement Age to Compensate for Health and Longevity Inequality?

The rise of average healthy life expectancy calls for an overall increase in the age of retirement. However, many observers suggest that to achieve equality, the latter should be differentiated across socio-demographic categories. The request stems from the observation that same-age older individuals differ a lot in terms of health, and, what is more, that the differences are systematically correlated with their socio-demographic background, and also with remaining longevity. Historically, in most retirement systems, a uniform age has been used as a proxy for poor health and the ensuing loss of work capacity and the need for replacement earnings. But now comes this proposition to adopt a slightly more refined proxying strategy: one that consists of using several retirement ages to better match the distribution of health status and work capacity across socio-demographic groups. Many observers and stakeholders call for the abolition the uniform age of retirement and its replacement by a differentiated retirement age policy. A first sight, the proposal makes perfect sense. But we will show in this chapter that, in a world of systematic retirement age differentiation by socio-demographic group, there would still be a lot of what health economists call Type-F errors (failure of treatment i.e. no retirement for people in poor health) and Type-E errors (excessive treatment i.e. people in good health going for retirement