Early exit from the labour force between exclusion and privilege: Unemployment as a transition from employment to retirement in West Germany

Abstract

Over the past twenty-ve years, unemployment has been growing continuously in West Germany. In this study one of the reasons for growing unemployment is analysed: unemployment of older people in their transition from employment to retirement. First, the different possibilities of transitions into retirement are explained within the framework of social security regulations. Taking this legal framework as a starting point, early retirement passages are then modelled with the IAB unemployment subsample. It will be shown that -due to the long duration of these unemployment episodes -early retirement contributed considerably to the rise of total unemployment. Early retirement patterns will be broken down by economic sub-sectors and establishment size. It turns out that this kind of unemployment originates primarily from large establishments in manufacturing and extractive industries. Multivariate analysis presented at the end of the paper also includes personal characteristics such as gender or skills and income levels. In the light of these ndings, the 'push' and 'pull' hypothesis common in explaining early exit are discussed. Drawing on the statistical ndings as well as on the institutional analysis, it is argued that both kinds of factors are at work.

Smooth transition or permanent exit? Evidence on job prospects of displaced industrial workers

“…A last explanation argues that the biggest impediment to re-employment for displaced workers is not the lack of education but advanced age (Chan and Stevens, 2001;Knuth and Kalina, 2002;Couch and Placzek, 2010). Older workers should find it particularly hard to be re-employed for two reasons (Daniel and Heywood, 2007, pp.…”

“…It thus runs contrary to the logic of long-term employment relationships, whereby employers use delayed compensation schemes based on seniority to motivate younger workers to pursue a career within their firm. Displaced older workers may thus face the choice between long spells of unemployment, large wage losses or involuntary early retirement (Knuth and Kalina, 2002).…”

The Debate About the Consequences of Job Displacement

“…As an alternative to reemployment, unemployment or retirement, job displacement may lead workers of all ages to persistently exit the labor force, for instance for training, child care, disability or leisure (Knuth and Kalina 2002). On the one hand, workers with significant difficulties in finding a job may exit the labor market as an alternative to long-term unemployment.…”

Late-career Risks in Changing Welfare States

“…For most workers, this was the 'old-age pension after long-term unemployment and old-age part-time work' which could long be claimed by workers who were at least 60 years old and had been unemployed for at least 52 weeks after age 58 and a half (for further details, see the discussion of early retirement options in Section 3.4.3 below). Introduced in 1986, this regulation played an important role in facilitating early retirement during the observation period (Jacobs et al 1991;Knuth and Kalina 2002).…”

“…Finally, the oap after long-term unemployment and old-age part-time work (hereafter: oap after long-term unemployment) provided early retirement benefits at age 60 if a worker was currently unemployed and had been unemployed for a total of at least 52 weeks after age 58 and a half (or had been in old-age part-time work for at least 24 months). In combination with the provision lifting job search requirements on older unemployed people who committed to claiming a deduction-free oap at the earliest possible date (58er-Regelung, see Section 3.4.2 above), this early retirement option was crucial in making the 'unemployment pathway' one of the major routes for (very) early exit from the labor force in Germany (Jacobs et al 1991;Knuth and Kalina 2002;Ebbinghaus 2006). The 1992 pension reform introduced major changes to these early retirement options.…”