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.