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 Early exit from work (% Men 60-64) 70 Continent 60 50 Nordic Anglo- 40 americ. OUP 2006,2008 OUP 3/2011 30 International Comparison Japan 1) Why do early exit trends differ? 20 (regime variations) (regime variations) 2) Why is policy reversal difficult? (path dependency) 10 1970 1975 1985 1995 2000 3) What are the consequences of reforms ? 1980 1990 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) • Unemployment as bridge to retirement U l t b id t ti t • 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wage problem: older workers cost more older workers cost more • Older workers perceived less p productive due to outdated skills • Socially acceptable downsizing (social plans) d i i ( i l l ) • Golden handshakes, early The Economist, Feb 16, 2006 occupational pensions occupational pensions Institutional Variations: Regime Interactions
Exit Rate: Men Aged 60-64 ( (cohort adjusted, 5-year-average) j , y g ) Continental Nordic and Liberal 80 80 80 80 Hungary Estonia Netherlands Denmark Germany 70 70 Sweden Italy Italy United Kingdom Spain United States 60 60 50 50 40 40 30 30 20 20 1970 1970 1975 1975 1980 1980 1985 1985 1990 1990 1995 1995 2000 2000 2005 2005 1970 1970 1975 1975 1980 1980 1985 1985 1990 1990 1995 1995 2000 2000 2005 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 ) Continental Nordic and Liberal 80 80 Estonia Denmark 70 Sweden 70 United Kingdom g United States 60 60 50 Hungary 50 Netherlands Germany 40 40 40 40 Italy Spain 30 30 20 20 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.
Unemployment pathway: push or pull? Unemployment rate, men aged 55-64 and 25-54 18,0 18,0 16,0 16,0 14,0 14,0 14,0 14,0 25-54 1994 25-54 2007 12,0 12,0 55-64 1994 55-64 2007 10,0 10 0 10 0 10,0 8,0 8,0 6,0 6 0 6,0 6 0 4,0 4,0 2,0 2,0 0,0 0,0 Hungary Italy Estonia Germany Spain Netherlands Denmark United United Sweden Kingdom Kingdom States States Disability pathways: recipient rate (%) aged 20-64 (OECD 2009) 2007 or latest year available ( � ) Mid-1990s or earliest year available 12 pulation 10 working-age pop 8 6 Percentage of w 4 P 2 0
Welfare and exit regimes Regime Public Disability Unemploy- Special exit Firm-based Exit (M/W) pensions pensions ment schemes OP/PP Basic 65 -> Sweden Sweden Low Low Social Dem Social-Dem. **(*) **(*) -1990s 1990s (DB >DC) (DB->DC) Flexi Denmark Low/Medium Social-Dem. Basic 67->65 ** Bridge Efterlön (DC) 65; 65; Liberal * * ** ( DB-> DC) USA Low Flexible 62+ Basic 65; UK Low /Medium Liberal ** (*)* (1980s) ** ( DB-> DC) W: 60! 63/60+ Germany High Conservative * Bridge Parttime * ->Flexi Netherlands High Conservative Basic 65 **(*) (1980s) VUT OP ** Italy High&Early Southern M60/W55-> (1980s) (*) Baby pensions Spain Spain Low Low Southern Southern 65; Flexible 65; Flexible * (*)* ( ) * Post.-Soc. 60/55->62 *** ** Hungary High&Early 60/55 ->63 ; 60/55 ->63 ; Estonia Low /Medium Post-Soc. (*)* (*)* (late 1990s) (1998- DC) 60+ flex. 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 Paradigm shift away from passive policies to activation di hift f i li i t ti ti Measures : • Closure of special preretirement schemes Cl f i l ti t h • 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+) 40 40 Private funded pensions Second Elderly 60% tier: tier: 3 35 3 35 50% inequality 40% effect 30 30 Total 60% 25 25 20 20 15 15 10 10 First tier: First tier: poverty 5 5 Basic pension effect 0 0 0 0 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
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