Reversing early retirement in Reversing early retirement in OECD - - PDF document

Reversing early retirement in Reversing early retirement in OECD countries

Bernhard Ebbinghaus Mannheim Centre for European Social Research (MZES) University of Mannheim

www.mzes.uni-mannheim.de www.mzes.uni mannheim.de Overcoming early exit from work and its consequences

70

Early exit from work (% Men 60-64)

Continent

60

Nordic

50

OUP 2006,2008 OUP 3/2011

Anglo- americ.

40

International Comparison 1) Why do early exit trends differ? (regime variations)

Japan

20 30

(regime variations) 2) Why is policy reversal difficult? (path dependency) 3) What are the consequences of reforms?

10 1970 1975 1980 1985 1990 1995 2000 3) What are the consequences of reforms?

(future old age poverty / Inequality)

Early Exit Factors: Welfare “Pull” and Economic “Push”

• B. Ebbinghaus: Reforming Early Retirement in Europe, Japan and the USA, Oxford: Oxford University Press, 2006.

Social benefits as “pull” into early retirement?

Protection – Pull Thesis:

• Benefits as incentives to exit earlier

Benefits as incentives to exit earlier

• also social context important

Pathways to retirement: Pathways to retirement:

• Early pensions (for women, for long

careers)

• Special schemes for early retirement

(with/out reemployment pledge) U l t b id t ti t

• Unemployment as bridge to retirement
• Disability pensions (age related

conditions labour market conditions conditions, labour market conditions, social criteria)

• Early drawing of private pensions

A Olney / OJO Images A.Olney / OJO Images

Economic “push” leading to labour shedding?

• Passive labour market policy

as answer to high g unemployment

• Old age unemployment as

bridge to retirement

• Seniority wage problem:
• lder workers cost more
• lder workers cost more
• Older workers perceived less

productive due to outdated p skills

• Socially acceptable

d i i ( i l l ) downsizing (social plans)

• Golden handshakes, early
• ccupational pensions

The Economist, Feb 16, 2006

• ccupational pensions

Institutional Variations: Regime Interactions

Exit Rate: Men Aged 60-64 (cohort adjusted, 5-year-average) ( j , y g )

80

Continental

80

Nordic and Liberal

70 80 Hungary Netherlands Germany Italy 70 80 Estonia Denmark Sweden 60 Italy Spain 60 United Kingdom United States 50 50 30 40 30 40 20 1970 1975 1980 1985 1990 1995 2000 2005 20 1970 1975 1980 1985 1990 1995 2000 2005 1970 1975 1980 1985 1990 1995 2000 2005 1970 1975 1980 1985 1990 1995 2000 2005

Bernhard Ebbinghaus: Reforming Early Retirement in Europe, Japan and the USA, Oxford University Press, 2006; pbk. 2008; and updates from OECD and Eurostat.

Exit Rate: Women 60-64 (cohort adjusted, 5-year-average) ( j , y g )

80

Continental

80

Nordic and Liberal

70 70 Estonia Denmark Sweden United Kingdom 60 60 g United States 40 50 Hungary Netherlands Germany 40 50 30 40 Italy Spain 30 40 20 1970 1975 1980 1985 1990 1995 2000 2005 20 1970 1975 1980 1985 1990 1995 2000 2005

Bernhard Ebbinghaus: Reforming Early Retirement in Europe, Japan and the USA, Oxford University Press, 2006; pbk. 2008; and updates from OECD and Eurostat.

Unemployment pathway: push or pull?

18,0 18,0

Unemployment rate, men aged 55-64 and 25-54

14,0 16,0 14,0 16,0 10 0 12,0 14,0 10 0 12,0 14,0 25-54 1994 25-54 2007 55-64 1994 55-64 2007 6 0 8,0 10,0 6 0 8,0 10,0 4,0 6,0 4,0 6,0 0,0 2,0 0,0 2,0 Hungary Italy Estonia Germany Spain Netherlands Denmark United Kingdom United States Sweden Kingdom States

Disability pathways: recipient rate (%) aged 20-64 (OECD 2009)

2007 or latest year available () Mid-1990s or earliest year available 10 12 pulation 6 8 working-age pop 4 Percentage of w 2 P

Welfare and exit regimes

Exit (M/W) Regime Public pensions Disability pensions Unemploy- ment Special exit schemes Firm-based OP/PP Sweden Low Social Dem Basic 65 -> **(*) 1990s (DB >DC) Sweden Low Social-Dem. Flexi **(*)

• 1990s

(DB->DC) Denmark Low/Medium Social-Dem. Basic 67->65 ** Bridge Efterlön (DC) 65; USA Low Liberal 65; Flexible 62+ * * ** (DB->DC) UK Low /Medium Liberal Basic 65; W: 60! ** (*)* (1980s) ** (DB->DC) Germany High Conservative 63/60+

• >Flexi

* Bridge Parttime * Netherlands High Conservative Basic 65 **(*) (1980s) VUT OP ** Italy High&Early Southern M60/W55-> (1980s) (*) Baby pensions Spain Low Southern 65; Flexible * (*)* * Spain Low Southern 65; Flexible ( ) Hungary High&Early Post.-Soc. 60/55->62 *** ** 60/55->63; Estonia Low /Medium Post-Soc. 60/55->63; 60+ flex. (*)* (*)* (late 1990s) (1998- DC)

Cross-national comparison of early exit patterns

• B. Ebbinghaus: Reforming Early Retirement in Europe, Japan and the USA, Oxford: Oxford University Press, 2006.

Policies reversing early exit Demographic challenge leads to pension reforms P di hift f i li i t ti ti Paradigm shift away from passive policies to activation Measures: Cl f i l ti t h

• Closure of special preretirement schemes
• Extending early / normal retirement ages in pensions
• Shorting / reducing long-term unemployment benefits
• More conditionality in disability pensions
• Anti-age-discrimination legislation
• Skilled labour shortage due to smaller young cohorts
• Life long-learning strategies
• Adaptation of working conditions, gradual transition

Difficult policy reversal (path dependency)

• B. Ebbinghaus: Reforming Early Retirement in Europe, Japan and the USA, Oxford: Oxford University Press, 2006.

Meeting the EU target of 50% by 2010? Poverty rates (40-60%) for the elderly (65+)

3 40 3 40

Elderly 60%

Second tier:

Private funded pensions

30 35 30 35

50% 40% Total 60%

tier: inequality effect

20 25 20 25 10 15 10 15

First tier:

5 5

Basic pension

First tier: poverty effect

2000 2000 2000 2000 2000 1999 2000 2000 2000 1999 2000 SP SP+ SP+ SP+ BP+SP+OP BP+OP BP+OP BP+(OP) BSP+OP BP+SP/OPBSP+(OP) B I D F S NL FIN DK CH UK US

Source: LIS data, “Governance of Supplementary Pensions in Europe” (GOSPE), Project funded by Deutsche Forschungsgemeinschaft (DFG), MZES, University of Mannheim

Conclusion: Main Findings

1) Cross-national variations in exit patterns: – Early exit was often socially accepted restructuration strategy Early retirement became social right / norm – Early retirement became social right / norm 2) Problems in reversing early exit: – Unintended consequences through social diffusion Unintended consequences through social diffusion and expectation trap – Policy reversal difficult due to status quo defense and externalization coalition 3) Consequences of reversing early retrirement: – Restrained exit pathways lead to later exit (but maybe also unemployment) Reforms may lead to more poverty and inequality – Reforms may lead to more poverty and inequality