At the top MBA Colleges in Delhi NCR, academicians and students are regularly engaged in learning, researching and implementing industry best practices. The search for optimization of resources for time, space and scale keeps going on and on. The search for the invisible hand of the market keeps going on and yet we do not recognize the facts that lie straight under the naked eye. We fail to take cognizance of the fact that for a free market economy that has achieved full employment equilibrium cannot move forward or grow without the destruction of at least few of the unproductive economic forces. Death and retirement are thus two very important factors that affect economic growth rates and take the world forward. Make no mistake no industry is as sustainable, as greatly repetitive, as destructive and as productive as death. Retirement is a brainchild of economists, policy makers and state but is born out of the problems of death and its antidote –long life span.
The Economics of Retirement
At Ishan Institute of Management & Technology, the academicians of the faculty of business administration have touched down upon the issues of death and retirement in the lectures of business environment and business ethics. The point here is not to romanticize death like a poet or get philosophical without mind over matter but to understand the trouble that is fomenting in the PIIGS (Portugal, Iceland, Italy, Greece and Spain) and to a certain extent in the United States of America as well (in the context of falling off the fiscal cliff). There are some unusually interesting statistics available. In the United States of America an individual at the age of 65 years needs $ 400,000 just to cover health care costs. This data comes straight from an article published in the Harvard Business Review by Neil Pasricha. The article further asserts that retirement itself increases the risk of depression by 40%. While these may refer to data on explicit and implicit costs of retirement, as Carlyle has said it is incorrect for an economist to interpret costs only on the negative side. It is crucial to know why retirement is a cost at all.
Choice of Techniques by Amartya Sen and Disguised Unemployment
Nobel laureate economist Amartya Sen in his seminal work Choice of Techniques (Basil & Blackwell Publication, London, 1956) asserts that there are three aspects of employment: productivity aspect, income aspect and recognition aspect. Of these three aspects most people without any formal training in the profession of economics refer to income aspect as being singularly important in comparison to the other two factors. This is a gross mistake to say the least. The productivity aspect of employment determines the value component and hence also determines the bargaining power of labour as a factor of production. In the corporate sector where a clear line of distinction is drawn between blue collar and white collar labour, it may be said that managerial work that most business school graduates look forward to is an overlapping of labour in the classical sense of economics and intrapreneurship, a managerial form of entrepreneurship. Never the less the productivity aspect of an individual has been observed to decrease with aging and may also turn negative in terms of marginal productivity of labour. Recognition aspect of employment concerns the fulfilment of psychological and social attributes. The yearning for being accepted as a team member in social institutions like business enterprise, family, school, community and friends cannot be negated. Psychological attributes of the Freudian type of self, social self, ideal self and finally the ideal social self are highly important in determining the youthful aggression that any individual needs so very badly.
Sigmund Freud and Cultural Super Ego
Sigmund Freud, in his seminal work Civilization and Its Discontents (1930) has elaborately discussed his famous structural model of psychic attributes. The work explains the components of the self that have been hinted at above. It will not be entirely wrong to attempt to understand retirement in the area where Amartya Sen’s views on development economics overlap with the psychology based construct of Sigmund Freud.
With aging, decline in productivity and a realization that the self is eroding in terms of value to the economy and society set in. The Freudian concept of ideal social self is then an extension of Sen’s concept of recognition aspect. Imagine an individual who has spent more than 30 years of his life dressing in the C-suite and leading life on the fast track with more than an empire of connections on LinkedIn retiring from job and thus retiring into oblivion. Imagine that same individual being forced to change his status update as “retired” on LinkedIn. Will the next morning ever be the same? Will he be in a hurry to follow a routine? These are questions that will continue to haunt him as long as he is alive.
The Yerkes –Dodson Law
What does retirement have to do with age? How does the psychological construct of a man change with age and finally lead to the erosion of recognition aspect and the dissolving of the ideal social self. At the top MBA colleges in Delhi NCR, academicians and students have engaged in research on these questions. The Yerkes-Dodson Law is a vital tool that links the missing dots and thus probably enables academicians in business schools to understand the phenomenon of retirement. The Yerkes-Dodson Law asserts that there is proportionality between mental arousal and performance. In the initial stages there is direct proportionality between arousal and performance and this direct proportionality lasts till the inflexion point. Beyond the inflexion point the graph goes downhill. There is inverse proportionality between arousal and performance beyond the inflexion point. The bell shaped curve is shown below.
How Does the State Step Into The Picture?
In the year 1889, Otto von Bismarck, the then Chancellor of Germany coined the term “retirement.” He said “Those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.” His objective was to address the problem of youth unemployment and streamline employment opportunities for the youth by removing the unproductive components from the workforce. The age limit for this was set at 70 and above. Other countries followed suit with retirement ages at 65 or 70.
The problem though is the way science and technology in medical sciences and health care have stepped in to increase the life span of mankind. The longer is the life span, longer is the time lived post retirement and hence greater the problem.