Can Policy Facilitate Partial Retirement? Evidence from Germany

Role of labor demand in the labor market effects of a pension reform

“…Employers also must pay additional pension contributions of at least 70% of the pre-partial retirement earnings. As a consequence, average earnings during partial retirement are about three-quarters of the previous gross salary (Klammer and Weber, 2001) and pension entitlements accrue at a minimum of 90% of the rate obtained under full-time work (Berg et al 2020).…”

“…1 Huber et al (2016) and Berg et al (2020) concentrated on the employment effects of the introduction of partial retirement, which was part of the 1992 pension reform. They also did not differentiate between employer types.…”

“…These rules differ among sectors and collective bargaining agreements, but they increase dismissal costs and they can make the dismissal of older employees virtually impossible. In addition, unions favor partial retirement as an alternative to unemployment before retirement (Berg et al 2020). Unions also support older employees in their bargaining efforts with their employers to prolong employment or obtain a partial retirement contract.…”

“…The shares of the block model were lower during the first years after the introduction of partial retirement(Berg et al 2020). …”

“…The Partial Retirement Act gave employers the option to offer partial retirement as a bridge to retirement from 1996 onward. During the initial years following the introduction of partial retirement, employers could only offer the bridge option if they were subject to collective agreements that included partial retirement (Berg et al 2020). Accordingly, partial retirement incidence increased with the number of employers entitled to offer partial retirement 23 from less than 3% in cohort 1940 to almost 28% in cohort 1944 combined with a strong extension in the duration of partial retirement from about 32 months in cohort 1940 to about 48 months in cohort 1944.…”