Differential mortality, aging and social security: delaying the retirement age when educational spillovers matter

Abstract

To lower the forecasted increase in the social security burden linked to population aging, delaying the legal age of retirement has been privileged throughout industrialized countries. Compared with a uniform delay, some argue that those who have entered precociously the labor market should be allowed to retire earlier. They assert that such a ‘long career’ exception is all the more justified that those unskilled workers live also less long due to heavier and potentially health-damaging jobs. In this paper, we then study macroeconomic and distributional consequences of global gain in life expectancy, with or without the postponement of the legal age of retirement and with or without a ‘long career’ exception. By considering a framework where individuals decide to acquire skills depending on economic incentives and differential mortality, we focus particularly on spillover effects possibly generated by education. We show in particular that introducing a ‘long career’ exception cannot be to the advantage of future unskilled workers unless education yields no spillover effects.

Growth and Welfare Implications of Mortality Differentials in Unfunded Social Security Systems

“…Historically, this has led many economists to conclude that PAYG systems adversely impact economic growth. 2 However, several recent studies, such as Kemnitz and Wigger (2000), Yew and Zhang (2009), and Le Garrec and Lhuissier (2017) among others, argue that under certain conditions, unfunded Social Security promotes economic growth by reducing fertility and incentivizing investment into education.…”

Financial knowledge and key retirement outcomes: an overview of the issue

“…She concludes that more financially sophisticated individuals are more likely to favor pension reforms. Finally, Le Garrec and LHuissier (2017) examine the macroeconomic and distributional consequences of global gains in life expectancy, allowing for the impact of education. Taking into account the endogenous acquisition of skills and knowledge, they find that educational spillovers enhance the appeal of postponing retirement ages in national pension systems.…”

Chronic patients as retirement-aged workers: the impact of employment-based health insurance and chronic conditions on health-related working capacity and late-life career participation

“…Policymakers encourage retirement-aged workers to participate in late-life careers to relieve the pressure of population aging and address the shrinking workforce, declining dependency ratio, and the sustainability of pension systems (Le and Lhuissier 2017 ; Litwin et al 2009 ). Population aging brings a decline in the working-age cohort, leading to the labor deficit (Cai and Wang 2006 ).…”

“…Existing policies address labor shortages by raising the retirement age and encouraging retirement-aged workers to participate in the labor market (Zeng 2011 ). Many countries have introduced phased or progressive retirement system to encourage retirement-aged workers to continue working (Le and Lhuissier 2017 ). For example, Britain has adopted a progressive retirement scheme and planned to delay the retirement age up to 66 by 2020 and 69 by the end of 2040 (Department for Work and Pensions of the UK, 2014 ).…”

“…Japanese government, in 2013, passed the Elderly Employment Security Law to delay the statutory retirement age to 65. France whose retirement systems are considered the most generous raised the legal retirement age from 60 to 62 (Le and Lhuissier 2017 ). Similar challenges happen to China where there are 249 (and 167) million people aged > 60 (and > 65), accounting for 17.9% (and 11.9%) of the total population (National Bureau of Statistics of China 2020 ).…”