Effects of Early Retirement Policy Changes on Working until Retirement: Natural Experiment

Abstract

Many European countries have implemented pension reforms to increase the statutory retirement age with the aim of increasing labor supply. However, not all older workers may be able or want to work to a very high age. Using a nation-wide register data of labor market transitions, we investigated in this natural experiment the effect of an unexpected change in the Dutch pension system on labor market behaviors of older workers. Specifically, we analyzed transitions in labor market positions over a 5-year period in two nation-wide Dutch cohorts of employees aged 60 years until they reached the retirement age (n = 23,703). We compared transitions between the group that was still entitled to receive early retirement benefits to a group that was no longer entitled to receive early retirement benefits. Results showed that the pension reform was effective in prolonging work participation until the statutory retirement age (82% vs. 61% at age 64), but also to a larger proportion of unemployment benefits in the 1950 cohort (2.0–4.2%) compared to the 1949 cohort (1.4–3.2%). Thus, while ambitious pension reforms can benefit labor supply, the adverse effects should be considered, especially because other studies have shown a link between unemployment and poor health.

Effects of changes in early retirement policies on labor force participation: the differential effects for vulnerable groups

“…This study shows that the Dutch policy reform was effective in delaying exit from paid employment through early retirement and prolonging paid employment among workers, in line with previous research ( 6 , 23 ). However, differences were found across groups of workers.…”

“…This was reflected by the fact that both women and men postponed early retirement, by 5.63 and 8.51 months respectively, which is below the 13 months required to receive the same amount of benefits as people born before 1950. In line with a previous study ( 6 ), female workers born from 1950 onwards replaced the postponement of early retirement by spending more months in unemployment and – to a lesser extent – economic inactivity, while corresponding male workers spending more months in paid employment. This difference in effect on the reform between gender needs to be explained by the different labor market attachment across genders in The Netherlands.…”

“…Recent studies have concluded that the early retirement reform did prolong the working lives of Dutch workers, and this effect was stronger for males ( 6 , 7 ). Using a similar basic dataset and the same policy measure as in the current paper, Boot et al ( 6 ) showed that a larger proportion of workers born in 1950 left paid employment through unemployment benefits. Our study contributes to the literature by building on existing studies and provides a more thorough and nuanced methodological evaluation of the reform.…”

Effects of a government subsidy and labor flexibility on portfolio selection and retirement

“…In fact, there is some empirical evidence that suggests that an increase in retirement benefits causes a reduction in the labor supply (e.g. Blondal and Scarpetta 1997, Gruber and Wise 1998, Chan and Stevens 2004, Boot et al 2019. However, our theoretical result demonstrates that an increased UBI benefit provided for a lifetime also reduces the labor supply by lowering the wealth level for retirement.…”

Chronic conditions and self-perceived health among older employees in relation to indicators of labour participation and retirement over time

“…The working population is ageing due to, amongst 31 others, increasing life expectancy. This leads to an 32 increased need for labour participation [1,2]. To 33 minimize the burden on social security and pen-34 sion systems [3,4] several policy measures (such Mental chronic condition(s) strongly affect labour participation in terms of higher absenteeism and/or presentism, and higher sickness benefits, disability benefits, and unemployment insurance benefits [3,15,16].…”