Differences in Life Expectancy Between Self-Employed Workers and Paid Employees when Retirement Pensioners: Evidence from Spanish Social Security Records

Abstract

The aim of this paper is to examine differences in life expectancy (LE) between selfemployed (SE) and paid employee (PE) workers when they become retirement pensioners, looking at levels of pension income using administrative data from Spanish social security records. We draw on the Continuous Sample of Working Lives (CSWL) to quantify changes in total life expectancy at ages 65 (LE65) and 75 (LE75) among retired men over the longest possible period covered by this data source: 2005-2018. These changes are broken down by pension regime and pension income level for three periods. Contrary to what has been observed in countries such as Italy, Finland and Japan, LE65 in Spain is slightly higher for the self-employed than for the paid employees when retirement pensioners. For 2005-2010, a gap in life expectancy of 0.23 years between SE and PE retirement pensioners is observed. This gap widens to 0.55 years for 2014-2018. A similar trend can be seen if pension income groups are considered. For 2005-2010, the gap in LE65 between pensioners in the lowest and the highest income groups is 1.20 years. This gap widens over time and reaches 1.51 years for 2014-2018. Although these differences are relatively small, they are statistically significant. According to our research the implications for policy on social security are evident: differences in life expectancy by socioeconomic status and pension regime should be taken into account for a variety of issues involving social security schemes, e.g. to establish the age of eligibility for retirement pensions and early access to benefits, to compute the annuity factors used to determine initial retirement benefits, and to value the liabilities taken on for retirement pensioners.

Mortality and life expectancy trends in Spain by pension income level for male pensioners in the general regime retiring at the statutory age, 2005–2018

“…To summarize, this section has highlighted the importance of the link between mortality and (pension) income level and the fact that very little is known on this subject in Spain. The present paper helps to fill a gap in the literature because it enriches some of the results presented in Pérez-Salamero González et al [ 42 ] in various ways: introducing the concept of relative mortality, focusing on paid employee (PEP) workers when they become retirement pensioners (self-employed workers when they become retirement pensioners are excluded given the weak link between pension income and LE), and refining the procedure for obtaining life expectancies within groups and including total LE by PI level at age 75.…”

“…The contributory system in Spain is structured in different “regimes” or schemes, each of which covers a group of workers of a particular type. The General Regime is the essential core of the whole system and includes all employees over 16 not included in another “special system” [ 42 ].…”

“…Retirement pensioners belonging to the special system for the self-employed (SEP) are also excluded because the pension rules make their benefits a poor proxy for lifetime income [ 42 ]. It is paradoxical that the average retirement benefit for all the pensions in payment was around €10,196 per year in 2018 for the SEP regime.…”

“…None of the cited papers for Spain look at the specific case of retirement pensioners; most focus on adults aged 50 and over from the general population due to the lack of information on retired individuals. To the best of our knowledge, only one paper [ 42 ] so far has examined differences in life expectancy (LE) between self-employed (SEP) and paid employee (PEP) workers when they become retirement pensioners, looking at levels of pension income using administrative data from Spanish social security records.…”

“…Finally, Pérez-Salamero González et al [ 42 ] examined differences in LE between self-employed (SEP) and paid employee (PEP) workers when they become retirement pensioners, looking at levels of pension income using administrative data from Spanish social security records. They found that LE at 65 is slightly higher for SEP than for PEP retirement pensioners, despite the fact that the average retirement benefit is (much) lower for SEP than for PEP workers.…”