early retirement in denmark and the netherlands a comparison of push and pull factors introduction

1

Early retirement in Denmark and the NetherlandsA comparison of push and pull factors

Introduction

Trends in labour participation and early exit

Push and pull factors- macro- meso- micro

Conclusions

Wim van Oorschot, Per Jensen

Center for Comparative Welfare Studies CCWS, Aalborg UniversityDepartment of Sociology, Tilburg University

2

Introduction

Early exit by older workers- from solution to problem- Council of Europe aims (Stockholm 2001, Barcelona 2002)

International comparative studies- larger N- effects of labour market (push) and incentive (pull) structures- unexplained variance

This study- inclusion of a range of other push and pull factors at various levels- N=2: Denmark and the Netherlands


3

Trends: labour force participation rates

The Netherlands

0

20

40

60

80

100

1973 1983 1990 1995 2000 2003

M15-64 F15-64 M55-64 F5564

Denmark

0

20

40

60

80

100

1973 1983 1990 1995 2000 2003

M15-64 F15-64 M55-64 F55-64

Sources: OECD Employment Outlook 1989, 1997, 2004


4

Trends: fulltime and part-time rates

0

2 0

4 0

6 0

8 0

1 0 0

F u l l - t i m e P a r t - t i m e

Source: SHARE-data: from table 5A.4 in (Boersch-Supan et al., 2005)


5

Trends: average exit age 1

50

55

60

65

70

1950 1960 1970 1980 1990 1995

NL-men NL-w omen DK-men DK-w omen

Source: from Table II.1, p. 53 in Blöndal and Scarpetta (1998)


6

Trends: average exit age 2

50

52

54

5658

60

62

64

1995 2000 2001 2002 2003

NL-men NL-w omen DK

Source::NL: CBS-data in SZW (2004)DK: Danmarks Nationale Reformprogram 2005


7

Trends: pathways of early exit

NL Men

0

20

40

60

80

100

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Employed Unemployed Disability Pension Other

NL Women

0

20

40

60

80

100

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Employed Unemployed Disability Pension Other

DK Men

0%

20%

40%

60%

80%

100%

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Employed Unemployed Disability Pension Assistance Other

DK Women

0%

20%

40%

60%

80%

100%

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Employed Unemployed Disability Pension Assistance Other


8

Push and pull: macro - work opportunity

Source: SHARE-data

U n e m p lo y m e n t r a t e s D K

1

3

5

7

9

1 1

1 9 8 3 1 9 9 0 1 9 9 5 2 0 0 0 2 0 0 3

D K T 1 5 - 6 4 D K M 5 5 - 6 4

D K W 5 5 - 6 4

U n e m p lo y m e n t r a t e s N L

1

3

5

7

9

1 1

1 9 8 3 1 9 9 0 1 9 9 5 2 0 0 0 2 0 0 3

N L T 1 5 - 6 4 N L M 5 5 - 6 4

N L W 5 5 - 6 4


9

Push and pull: macro - employability

W o r k s ta tu s b y e d u c a t i o n a l l e v e l ,m a l e w o r k e r s , a g e 5 5 - 6 4

02 0

4 06 0

N L - l o w N L -m i d d l e

N L - h i g h D K - l o w D K -m i d d l e

D K - h i g h

E m p l o y e d U n e m p l o y e d R e t i r e d

Source: EU Labour Force Survey as presented in Blondal and Scarpetta 1998, Table II.4, p. 57

Source: OECD (2004a)

0

2 0

4 0

6 0

8 0

1 0 0

N L 2 5 -3 4

N L 3 5 -4 4

N L 4 5 -5 4

N L 5 5 -6 4

D K 2 5 -3 4

D K 3 5 -4 4

D K 4 5 -5 4

D K 5 5 -6 4

% a t l e a s t u p p e r s e c o n d a r y e d u c a t i o n


10

Push and pull: macro - incentive structure 1 Early pension

Netherlands DenmarkVUT: payg, from 58 but mostly 60, 70%-80%, 10 years in sectorOccupational pension: ‘Pre-pension’Differences between occupationsTypical: Benefit depends on age of retirement: 70% of previous wage at age 62, lower/higher if on retirement earlier/laterCapital funded (paid from a worker's occupational old age savings: actuarial equivalence)Retirement age: 55-65, with 62 as pivot Part-time pensionWorking one or two days per week less, with less than proportional wage decrease as from the age of 58-60 depending on collective agreement; relatively high take-up

Private pension. State support: tax deduction of premiums up to a maximum per year. Pension payments are taxed.

Efterløn: payg, from 60, 91% of max. unemploym. ben. with ceiling (100% of UB if from 62), 25 year contribution recordOccupational pensionRules differ between occupations. Typical: Benefits depend on contribution and age of retirement. Capital funded (paid from a worker's occupational old age savings: actuarial equivalence) Retirement age: 60 and up

Overgangsydelse, Delefterløn to flexible efterløn(part-time efterløn), Delpension

Private pension. State support: tax deduction of premiums up to a maximum per year. Pension payments are taxed.


11

Push and pull: macro - incentive structure 1 Disability - Unemployment

Netherlands Denmark

WAO: disability benefitBenefit depends on degree of disability: max. 70% of previous wageDuration depends on age: 6 years from age of 59Pay-as-you-go funded

Fortidspension: disability benefitA flat rate benefit, with separate levels for singles and couples. Until 2003, four different benefit levels dependent on degree of employability, and people above 50 could be granted disability pension for non-medical reasons, e.g. low labour market chances. Duration unlimited Pay-as-you-go funded

WW: unemployment benefitDuration and level depend on work record, max. 70% of previous wage, max.5 yearsPay-as-you-go funded

Unemployment insuranceBenefit level is 90% of previous wage with low ceiling Duration is max. 4 years (max. 5 years for 55+ til efterløn, 30 months for 60+)Pay-as-you-go funded


12

Push and pull: macro - incentive structure 2

Replacement rates (Source: EU 2003)

0,76 APW

APW 1,5APW

Early pension NL Single, 60 86 72 77NL: VUTDK: Efterloen

DK Single, 60 68 42 28

NL Couple, 60, one earner 95 77 78

DK Couple, 60, one earner 73 47 32

NL Couple, 60, two earner, two children 79 83 86

DK Couple, 60, two earner, two children 95 62 53

Longterm unemployment NL Single, 50 88 52 34Social assistance DK Single, 50 60 37 24



NL Couple, 50, two earner, two children 50 31 26

DK Couple, 50, two earner, two children 98 67 48


13


Source: EU. (2003). Remain in or withdraw from the labour market? A comparative study on incentives. Brussels: European Commission, DG for Economic and Financial Affairs.

Replacement rates (Source: EU 2003)

0,76 APW

APW 1,5APW

Disability benefit NL Single, 50 82 60 66NL: WAODK: Fortidspension

DK Single, 50 142 88 58




14


OECD (2003)

Relative income of households with a head 65+, over period 1983-1994:DK: 73,4%NL: 87,5%

Heinrich (2000) ECHP-data

Persons 65+ in bottom two deciles of income distributionDK: 47%NL: 22%

Poverty rates among persons 65+DK: 10%NL: 4%


15

Push and pull: meso Hiring and firing

Age discrimination NL: 2004 Act on Equal Treatment by Age, 2003 …. by disability DK:. 2004, age and handicap added to national law that prohibits making distinctions on the labour market. CLA’s comply with 1999 EU Directive on age discrimination. Tradition in DK that the state does not legislate relationships between employees and employers.

Is there age discrimination? (European Working Condition Survey 2000) NL: 10% of older workers say ‘yes’ DK: 1%

Hiring intensity of older workers (50-64 years) OECD (2005)

NL: 0,35 DK: 0,41


16

Push and pull: meso Pay

NL + DK: Min. wage for older workers is the same as for younger workersNL + DK: No government wage subsidies for older workersNL + DK: tax and/or wage subsidy provisions for employers to employ disabled workers

Employer’s beliefs and attitudesDutch employers associate an ageing workforce with rising labour costs, resistance to change, increasing absenteeism, less enthusiasm for new technology, no increase in productivity (Remery et al., 2003). Among Dutch employers the general saying is ‘Who am I to stop an employee if (s)he wants to go on early retirement?’ (Van Dalen & Henkens, 2003)

DK …?…employers association has since the late 1980s launched campaigns encouraging their member firms to hire older workers. Among knowledge intensive firms it is increasingly becoming trendy to retain older workers. Not in unskilled manual work places.


17

Push and pull: meso

Employer’s policies for retaining older workers (survey data)

Sources: Netherlands (Remery et al., 2003), Denmark (Holt & Joergensen, 2003): (all data from 2000)

NL DK

Age limits for irregular work 35

Exemption from working overtime for older workers 34

Flexible working hours 47

Part-time early retirement/part-time pre-pension 51

Reduced working hours with proportional lower wage 41

Additional leave/ increased holiday 62

Reduced working hours without any or only a partly wage decrease 17

Reducing workload for older workers 41

Less demanding or other type of work 34

Training programs for older workers 21

Training and education 35


18

Push and pull: meso

Objective work conditionsEuropean Working Conditions Survey 2000:

…there is little difference in the degree to which Dutch and Danish (older) workers report to have been exposed to vibrations of machinery, loud noises, extreme temperatures, damps, dust and fumes, dangerous substances.

Employability of older workersEU Labor Force Survey:

‘yes’ to ‘…received some education or training in the past 4 weeks?’

Employed older workers (50-64): DK 14%, NL 12%Unemployed older workers (50-64): DK 14%, NL 6%


19

Push and pull: micro

Job satisfaction and control

J o b s a t i s f a c t i o n a n d c o n t r o l i n j o b b y c o u n t r y a n d a g e ( a v e r a g e s )

( E V S 1 9 9 9 / 2 0 0 0 )

56789

NL

<2

5

NL

25

-

49

NL

50

-

65

DK

<2

5

DK

25

-

49

DK

50

-

65

J o b s a t i s f a c t i o n J o b c o n t r o l


20

Push and pull: micro Retirement preferences

Esser (2004) Eurobarometer 2003, >=25 years of age

5 9 , 25 8 , 3

6 2 , 16 1 , 2

5 0

5 5

6 0

6 5

N l m e n N l w o m e n D k m e n D k w o m e n

A v e r a g e p r e f e r r e d r e t i r e m e n t a g e

5 , 86 , 7

4 , 95 , 8

0

2

4

6

8

1 0

N l m e n N l w o m e n D k m e n D k w o m e n

A v e r a g e N y e a r s e a r l i e r t h a n 6 5 / 6 7


21

Push and pull: micro Work ethic

European Values Survey (1999/2000)

1 = To fully develop your talents, you need to have a job2 = It is humiliating to receive money without having to work for it3 = People who don’t work turn lazy4 = Work is a duty towards society5 = Work should always come first, even if it means less spare time(1 = strongly disagree – 5 = strongly agree)

W o r k e t h ic o f o ld e r w o r k e r s ( 5 0 - 6 5 y e a r s ; a v e r a g e s ; E V S 1 9 9 9 / 2 0 0 0 )

012345

1 2 3 4 5

N L D K


22

Push and pull: micro Work orientation

European Values Survey (1999/2000)

W o r k o r ie n t a t io n s o f o ld e r w o r k e r s ( 5 0 - 6 5 y e a r s ; % ; E V S 1 9 9 9 / 2 0 0 0 )

02 04 06 08 0

N L D K


23

Conclusions

Higher participation rates and average retirement ages in DK than in NL

Macro level+/- Work opportunity rather similar+ DK: Higher educated, better employability+ DK: Less attractive incentives: fewer alternative pathways used, lower replacement rates of exit routes, pension income relatively lower

Meso level+ DK: Less age discrimination+ DK: Higher hiring intensity ? DK: Less part-time exit possibilities+ DK: More training and education+/- Objective working conditions

Micro level+ DK: Higher job satisfaction and control+ DK: Higher preference ages for retirement+ DK: Higher work ethic+ DK: More intrinsic work motivation


24

Conclusions


All in all

In Denmark

…less push out of work,

and

…less pull into retirement

than in the Netherlands

25

References

Blöndal, S., & Scarpetta, S. (1998). The retirement decision in OECD countries. Paris: OECD.Boersch-Supan, A., Brugiavini, A., Juerges, H., Mackenbach, J., Siegrist, J., & Weber, G. (2005). Health, ageing and

retirement in Europe: first results from the Survey of Health, Ageing and Retirement in Europe. Mannheim:Mannheim Research Institute for the Economics of Ageing (MEA).

Esser, I. (2004). Continued work or retirement? Preferred exit-age in Western-European countries. Stockholm: Swedish Institute for Social Research SOFI.

EU. (2003). Remain in or withdraw from the labour market? A comparative study on incentives. Brussels: European Commission, DG for Economic and Financial Affairs.

Euwals, R., Van Vuuren, D., & Wolthoff, R. (2004). Prepensioen en arbeidsparticipatie ouderen. Den Haag: Centraal Planbureau.

Fouarge, D., Schils, T., & Huynen, B. (2004). To retire or continue working? An analysis of the early retirement behaviour of Dutch workers. Tilburg: Institute for Labor Studies OSA.

Heinrich, G. (2000). Affluence and poverty in old age: Evidence from the European Community Household Panel. Differdange: CEPS/INSTEAD.

Holt, H., & Joergensen, M. (2003). Virksomheders sociale engagement: Aarbog 2003. Copenhagen: Institute for Social Research SFI.

OECD. (2003). Maintaining prosperity in an ageing society. Paris: OECD.OECD. (2004a). Education at a glance: 2004. Paris: OECD.OECD. (2004b). Reforming public pensions: Sharing the experiences of Transition and OECD

Countries. Paris: Organisation for Economic Co-operation and Development.OECD. (2005). Ageing and employment policies: Netherlands. Paris: OECD.Remery, C., Henkens, K., Schippers, J., & Ekamper, P. (2003). Managing an aging workforce and a tight labor market:

Views held by Dutch employers. Population Research and Policy Review, 22, 21-40.SZW. (2004). Kabinetsstandpunt: Stimuleren langer werken van ouderen: reactie op aanbevelingen van de Taskforce

Ouderen en Arbeid. Den Haag: Ministerie van Sociale Zaken en Werkgelegenheid (29 april 2004).Van Dalen, H., & Henkens, K. (2003). De dubbele moraal rond langer werken. ESB (31 Oktober), 514-516.Wolthoff, R., & Van Vuuren, D. (2004). Prepensioen en de arbeidsparticipatie van ouderen. De Actuaris(November), 16-17.

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