Retirement age abolished

Supply side policies are far more important than managing aggregate demand when it comes to sustaining economic growth and achieving long term prosperity. Hence the focus of policy in the early 1980's (under the benign leadership of the Blessed Margaret) moved to improve the capacity of the UK economy. Despite the recent emphasis on maintaining aggregate demand that is just a short-term 'make-do and mend'.

The aging population means that there are two pressing factors to be dealt with. One is to ensure that the workforce is big enough to support a growing dependent (old) population. The second is how to pay the benefits and pensions the old will require without running an ever larger budget deficit.

One solution is to let everyone work longer. They get benefits later and pay more tax while they continue to work. The effect is that the Aggregate Supply curve (technically the Long-run AS curve) shifts to the right. It has positive effects on growth, employment and inflation.

The BBC explains that some firms may offer 'golden goodbyes' to get rid of staff they can't make retire. Personally I am open to offers now.

You may not have noticed but the National Minimum Wage also rose today. This is also a supply side policy, although unusually one that restricts markets rather than freeing them up. The NMW rose to £6.08 an hour for those over 21, that's 15p an hour more than before. For 16 and 17 year olds the rate is now £3.68 an hour.

The effect of a minimum wage depends on if the market would have set a lower or higher wage than the government minimum.  It can reduce employment if set too high, but can reduce poverty when firms would have set a lower wage, but can afford a higher one.

The BBC cover the retirement age abolition here