Simulation of the Costs and Benefits of Delayed Retirement: Evidence from Vietnam

Vietnam is experiencing one of the fastest rates of population ageing in the world, yet has a low retirement age at 55 for women and 60 for men. This paper identifies the impacts of raising the retirement age and assesses how these would translate into either net costs or net gains for the Vietnamese economy in the long term. First, the paper uses national and household-level data to assess how a change in the employment rate of older workers would impact the employment status and wages of younger workers and impact the school attendance of their grandchildren. Second, this paper conducts a cost-benefit analysis to assess the net annual benefit of raising the retirement age according to four policy scenarios. This calculation is used to project the net benefits of each scenario over 33 years. The paper finds that increasing the employment rate will not impact the employment rate of younger workers, and will only negatively impact their wages in households where an older woman would stop helping with housework in order to resume formal employment. Given these findings, this paper concludes that raising the retirement age will result in a net gain in all four policy scenarios and that gains will increase the higher the retirement age is raised. The gains from raising women’s retirement age will exceed those of raising men’s age in the long term as the female share of the formal workforce continues to grow.