Changes in labor market participation of older employees in Germany

Abstract

For many years, Germany has been regarded in international comparisons as an example of a generous early retirement culture, resulting in a low labor market participation of older employees. Recently, however, employment rates of older employees have increased remarkably. Reasons are the demographic structure of older persons in Germany, a long-term trend of increasing female labor market participation, and reforms in labor-market policies and pension policies during the last 10 years. Despite an increasing labor market participation of older employees, traditional labor market risks for older persons partly remained, but some new risks evolved as well. Therefore, social differentiation among older employees increased.Although detailed macro descriptions exist, the causes of labor market developments cannot be fully understood with cross-sectional data alone. An important stimulus is to be expected from individual longitudinal data which reflect employment histories and labor market transitions such as employment exit and retirement.

Retirement Expectations in Germany—Towards Rising Social Inequality?

“…Germany's pensions system and the labor market have undergone many strong reforms in the last 20 years. Early retirement pathways were closed and the statutory retirement age was raised [12,26]. In addition, the German state implemented programs training older low-skilled workers and subsidized companies for employing older workers, while employers introduced human resource measures aimed at older workers [31,32].…”

“…Women and individuals with a partner expect to retire later than men and those without a partner [45]. The rather low expected retirement age of women can be partly explained by the traditional male-breadwinner model-meaning that only the husband is working, while the wife does mainly housework and cares for the children-that was encouraged by the German welfare state for years [12]. And although reforms are now aiming at increasing the female labor market participation rate, women still work much less than men and have lower incomes as well as retire early and, thus, have much lower pensions.…”

“…Older workers willingly used the opportunity to retire early with only small financial penalties and retirement before 65 was seen as the standard, while retirement at age 65, or even later, was the exception [25]. Consequently, the employment rate of older workers declined drastically [12,26], falling from 50 to 35 percent for the age group of 50 to 65 between 1970 and 1990 [27]. However, this decrease varied according to different groups of older workers: It was stronger for the low educated than for the high educated, because especially blue-collar workers and low-qualified employees in the production sector were pushed out of employment and most frequently used the early retirement options via the unemployment and disability insurance [18].…”

“…Discussions are still ongoing over the reforms' impact and whether the overall positive development of the economy and the generally rising female employment rates are more important than the reforms. Still, it is more than clear that older workers' employment rates and average retirement ages have started to rise in Germany [11,12]. In fact, the employment rate of workers older than 50 years has increased from 40 to 60 percent from the mid-1980s to the mid-2010s [27], and their retirement age has increased as well.…”

“…In reaction, German policy makers have introduced several far-reaching reforms with the aim of increasing the retirement age and, thus, relieve the pension system of financial pressure: They lifted the statutory retirement age from 65 to 67 [7], introduced training programs for older workers [8], and abolished early retirement pathways [9,10]. Consequently, the average retirement age and the employment rate of older workers began to rise [11,12]. However, it is important to study not only the actual behavior of the current pensioners but also future retirees' opinions about their retirement timing, as expectations and plans when to retire have proven to be a good proxy for actual retirement behavior [13][14][15].…”