Modelling of factors in late career working and retirement patterns Per H. Jensen, CCWS, Aalborg University Workshop on delivering longer working lives and higher retirement ages, Organised jointly by the European Commission and the OECD, 12-13 November 2014 Thon Hotel Europe, Rue de la Loi 75, 1040 Bruxelles
Precondition: Grasping complexity of retirement Most political action in relation to early exit/retirement is based on the following logic: A. Older workers/retirees are rational utility maximizing actors B. Early exit retirement is triggered by generous welfare benefits C. Early exit/retirement behavior of rational actors can be changed by changing the economic incentives to retire This logic, however, is challenged by existing scientific literature. In literature no agreement as to why early exit/retirement occurs It is not clarified whether (1) early exit/retirement is voluntary or involuntary, or (2) a supply or demand side phenomenon. And there is no agreement about why some retire early while others retire late.
Purpose and Content Aim: to move beyond the economic incentive discourse. Important to get a more comprehensive and realistic picture of the retirement mechanisms. Important, if our wish is to combat the phenomenon more efficient Distinction: A. Factors supporting withdrawal from the labor market - PUSH, PULL & JUMP B. Factors supporting a prolongation of working life - STAY & STUCK My main argument: different factors affect different groups of workers (qualifications, gender etc.) and different segments of the labor market differently. Empirically, draw on the Danish and Swedish experience.
Withdrawal from the labor market as caused by PUSH factors Older workers are victimized by social structures (economic crises/unemployment, poor work environment leading to poor health and loss of workability etc.) It is involuntary. Leads to loss in income and status. Those pushed out are not able to react to changes in the incentive structure. Undermines the political logic.
Withdrawal from the labor market as caused by PULL factors Basically voluntary. Two types of pull: Rational actor theories: retirement is a deliberate and calculated voluntary decision. Older workers are lured of out the labor market by generous welfare benefits (anchored in economic theories) Norms and conventions: behavior reflects symbolic signals (retirement age; given by the welfare state or collective agreements). Retirement age is socially (not biologically) structured (inspired by sociological theories).
Withdrawal from the labor market as caused by Basically voluntary: JUMP factors But, material and symbolic stimuli do not determine action. Early retirement benefit is only one out of many factors conditioning social action (e.g. equity in the house, private pensions etc.) Retirement is an out-come of reflexivity and reflexive processes Two types of jump: Social gains Experience gains Most probably, changes in the incentive structure will not change behavior
Prolongation of working life as caused by Basically voluntary STAY factors Human resource management provides for good and interesting jobs, good relations with colleagues and management, good wages etc. Work is formative for identity
Prolongation of working life as caused by Basically involuntary STUCK factors Is not able to leave the labor market. Economic reasons; early retirement schemes are not generous seen from a high-income perspective Social reasons; risk of social isolation, especially among singles.
PUSH-PULL-JUMP or STAY-STUCK?? Not mutually exclusive. A nurse works in a stressful environment (no relationship between demand and resources); no recognition from management; husband retired; has 4 grandchildren; equity in the house; they move to a smaller apartment; her early retirement benefits and private pension savings top up husbands retirement benefits.what triggered the retirement decision? Danish data, however, show that the predominant reason for the decision to retire differs for among groups of workers.
Retirement pattern for different groups of workers PUSH: manual unskilled workers leaving the labor market at 60-61 years of age. Are recruited from Fordistic production systems/numerical labor markets PULL: white color workers (are actually calculating future pension/economic situation before retirement) JUMP: family (not individuals) is the decision making unit. Women follow their husband out of the labor market (is this reasonable?). Employment rate among older workers M: 62.7, F: 52.5 ----- STAY: the creative class; jobs are attractive; functional flexible labor markets STUCK: high-income groups + single women
Individual worker Women/men Work place Labour market or societal level Typology of factors in early exit/retirement Push Worn down (poor health). Working conditions eroding workability. Manual/unskilled workers Age bias in lay offs Re-employment shows to be impossible Pull Rule followers. White color workers. Enforced by redundancy payments Optimize pensions: black economy or restart career Jump Retirees are rule finders. Women Work is not as attractive as alternatives? Types of motivation for working longer Stay Job satisfaction high. Creative class Age management and retention policies Job shifts: more interesting alternative Stuck Instrumental relation to work Dependency of employer (not to get fired is important) Job shifts: better paid
Incentives seem to work or do they? Denmark: number of early retirees has fallen dramatically over the last 15 years 2000-2013 the take up rate fell from 72 to 52 2004-2013 the total number of retirees fell from 191,330 to 109,678 Some say that this is the effect of two early retirement reforms (2006 & 2011) - 2006-reform was supposed to take effect as off 2019-2022 - 2011-reform takes effect as off 2014
Employers retention behavior Employed 60-64 years of age Does your company try to retain older employees? YES: 69 % Early retired Did your company do anything to retain you in the company? YES: 21 %
Discourses matter 1999-2008: State organized campaigns argued that it is a win-win situation to retain older workers: Seniors gain: Older workers are not excluded or subject to economic, social and political marginalisation Companies gain: It is good for business: Campaigns rooted in social gerontology and American diversity management ideology grey is beautiful Supported by EU anti-discrimination legislation & subsidy to age management consultants etc. Helped to create a new late-exit-culture COMMUNICATION CHANGE BEHAVIOUR! Perhaps more than changing incentives?
Longer working lives possible if (1) Older workers are able to continue working (poor health as an outcome of poor work environment)(push) 40 % of early retirees report that they have left the Labor Market because of poor health (2) Older workers are willing to continue working (JUMP) 30 % of all early retirees report that they would have been able to retire even if the early retirement scheme did not exist (3) That older workers are wanted in the Labor Market (DEMAND) About 1/3 of early retirees would have liked to continue in a job if it had been possible to get one.
Denmark-Sweden Similarities with regard to national cultures, political systems, overall composition of the population, and state-society interactions Differences in early/exit retirement practices: 2011: Employment rates, 55-64 years of age Sweden: 72.3 Denmark: 59.5 EU 27: 47.4
Is early retirement and option Punished for retiring early in the pension system Health situation - Consumption of alcohol/smoking - Work environment Are labour markets inclusive? Employment protection Sweden Denmark Yes: 58 Yes: 60 Yes (contributory system) Good Life expectancy, age 60, males: 79.3 Otium? Yes: Sickness benefits Yes No, but this is changing Bad Life expectancy, age 60, males:76.5 Otium No, but this is changing a bit (flexjobs) No
Proportion of unskilled workers, 55-64 years of age Employment rate, women, aged 55-64 Average exit age, women Sweden No formal education: 25 % 70 71 63.7 61.4 Denmark No formal education: 37%
Summary Many factors are important Retirement systems only one of many factors of importance General health conditions of populations Health policies Work environmental policies Educational policies Inclusiveness of LMs Employment protection Senior policies and practices Lifelong learning Risk of early exit formed in the kinder garden Educational level and social position of father is an important predictor for the risk of early exit/retirement
Drawbacks of PULL focus PULL explanations DO NOT apply to the most vulnerable groups, i.e. those who entered the labor market when they were very young, have had harsh working conditions, no education/life long learning, poor salaries Often this group of people has no other option but to retire early PULL explanations do not apply to well educated and highly paid workers. The PULL-gaze excludes a discussion about equality in old age (early enters/late and highly qualified enters)
THANK YOU!
total labor force: 2.9 million Early exit/retirement path-ways in Denmark: (1) Disability pension (245,000) Eligible: all ages until 64 years of age Medical assessment (2) Early retirement scheme 60-64 years of age 30 years of membership About EURO 2,000 per month (3) Old peoples pension (65 years of age) (4) Occupational pension 60 years of age Fully matured in 2025