The Effect of Early Retirement Incentives on the Training Participation of Older Workers

Abstract

Human capital theory predicts that older workers are less likely to participate in on-the-job training than younger workers, due to lower net returns on such investments. Early retirement institutions are likely to affect these returns. Using the European Community Household Panel we show that older workers participate less in training, and that early retirement institutions do indeed matter. Generous early retirement schemes discourage older workers from taking part in training, whereas flexible early retirement schemes encourage this. Finally, the results suggest that in most European countries training can keep older workers longer in the labour market. Copyright 2009 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd..

The effects of pension rights and retirement age on training participation: Evidence from a natural experiment

“…First, the limited age difference between the treatment and control groups in our sample and the simple and transparent age criterion guaranties the internal validity of the experiment and substantiates the causal direction. Our findings are therefore less likely to be confounded than the earlier studies by Fouarge and Schils (2009) and Bassanini et al (2005). Second, this paper explicitly analyzes the effects of early retirement incentives and how changing retirement expectations can affect training participation, whereas the extant literature on relation between (expected) life expectancy and human capital development provides only indirect evidence of this relation.…”

Further Training for Older Workers: A Solution for an Ageing Labour Force?

“…The compensation perspective of lifelong learning postulates that training as a way of improving one's knowledge and skills should be given to less educated people (Fouarge & Schils, 2009). As low-educated workers often lack the skills and abilities for coping with new technologies, they might receive lower wages and are more likely to get unemployed (Machin, 2001).…”

“…Fouarge and Schils (2009) examined the difference between younger and older workers in their training participation and explained it through the early retirement institutions in different European countries. They assumed that the existence of early retirement schemes shorten the time left for older workers to payback the investment on training even to a higher degree.…”

“…(2004b) show that training taken with the previous employer raises the probability of being in a permanent contract, while the probability was found to be the highest for workers belonging to the groups with low wage returns for training. For example, the force (Fouarge & Schils, 2009). These findings support the results presented earlier pointing to the positive relation between training and employability expressed by higher employment rates.…”

“…According to Schils and Fouarge (2009), older workers are affected by the institutional structure of early retirement schemes in their country. Countries which are characterized by having highly generous early retirement schemes expressed by limited "retirement dates" in which a person can choose from are more likely to have higher rates of older workers who choose retirement over work.…”