Female transition to retirement

Agnieszka Chłoń-Domińczak

Institute for Statistics and Demography SGH

Educational Research Institute

Outline

• Life course changes and challenges in the light

of population ageing

• Gender pension gap: current and future

perspective

▫ Changing labour market patterns

▫ Changing pension system design

• How to measure gender pension rights gap ?

Rationale

• In most of the countries there is a current

pension gap, measured by differences in

pension levels of men and women

• The gender gap is a result of:

▫ Gender differences in labour market

participation (wages, employment rates)

▫ Pension system design (retirement age, pension

formula)

Reserach objective

• To propose an index that would capture the

gender pension rights gap

▫ Forward-looking

▫ Taking into account changing labour market

patterns

▫ Taking into account changing pension systems

Table 4. Results of simulation - the sources of higher coverage of new minimum pension among women

Minimum pension indexation

20% 100%

Baseline scenarios:

Female 3.4% 45.3%

Male 0.5% 4.4%

Sources of differneces between men and women:

Influnce of pension age

Tenure - Female, Wage - Female, Retirement age - 65 (Male) 1.9% 29.6%

Explained difference (only due to retirement age): 1.0% 11.3%

Influnace of tenure and pension age

Tenure - Male, Wages - Female, Retirement age 65 (Male) 1.3% 17.8%

Explained difference (due to tenure and retirement age): 1.7% 23.1%

Explained difference (due to tenure) 0.7% 11.8%

Influnace of differences in lifetime wages (residual):

Explained difference between women and men (due to diffreneces in

wages): 1.3% 17.8%

Source: Own calculations

Sources of low pensions of women:

example of Poland

Source: Chlon-Dominczak and Strzelecki (2013)

Table 6. The comparison of the projections of the coverage of future pensioners by minimum pension

under different

Minimum pension indexation

20% 100%

Baseline scenario (OFE contribution 3,5% in the long run):

Female 3.40% 45.27%

Male 0.45% 4.41%

Without cutting OFE contribution (7,3%)

Female 2.90% 39.52%

Male 0.42% 3.40%

Extension of retirement age until 67

Female 1.06% 13.25%

Male 0.40% 3.42%

Source: Chlon-Dominczak and Strzelecki (2013)

Length of pension coverage depends both of on

the labour market entry and exit ages Spain Sweden

Age profile of employment rates

Hypothetical years in employment

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

0,80

0,90

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64

per

ce

nt

age group

1992 - women 2001 - women 2011 - women

0,00

0,10

0,20

0,30

0,40

0,50

0,60

0,70

0,80

0,90

15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64

per

ce

nt

age group

1996 - women 2001 - women 2011 - women

0

5

10

15

20

25

30

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

30

31

32

33

34

35

36

37

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Employment and wage gaps

remain…

0,0

5,0

10,0

15,0

20,0

25,0

30,0

eu 2

7

ee at

de cz fi sk uk nl

hu cy es

dk fr lv se lt ie mt

bg pt

be ro lu it pl si

Gender pay gap in EU countries, 2010

Source: EUROSTAT

Exit age from the labour market

50 60 70 80

Iceland

United States

Norway

Ireland

Portugal

Sweden

Switzerland

Spain

Australia

Netherlands

Canada

United Kingdom

Denmark

Finland

Germany

France

Greece

Belgium

Czech Republic

Hungary

Italy

Poland

Luxembourg

Austria

Slovak Republic

Women Men

-10,0 -5,0 0,0 5,0 10,0

Iceland

United States

Norway

Ireland

Portugal

Sweden

Switzerland

Spain

Australia

Netherlands

Canada

United Kingdom

Denmark

Finland

Germany

France

Greece

Belgium

Czech Republic

Hungary

Italy

Poland

Luxembourg

Austria

Slovak Republic

Change 2002-2009

Change in women’s labour force exit age,

2002-2009 Labour force exit age, 2009

Retirement age and early

retirement plans: case of Poland

48

50

52

54

56

58

60

62

64

199

0

199

2

199

4

199

6

199

8

20

00

20

02

20

04

20

06

20

08

20

10

ag

e i

n y

ea

rs

men women

0% 20% 40% 60% 80% 100%

50-54

55-59

60-65

65-69

definitely not probably not

probably yes definitely yes

does not apply/already retired

Changes in retirement age in Poland Early retirement plans: women

(GGS for Poland)

Changes in legal retirement age:

2011 vs 2040

55

57

59

61

63

65

67

69

mt hu lv sk cz lt bg ee si ro at be cy dk fr de gr ie lu nl pl pt es uk it se fi

Men in 2011 Women in 2011 Men in 2040 Women in 2040

Current vs. future replacement

rates – projected change

-40,0

-30,0

-20,0

-10,0

0,0

10,0

20,0

cy bg de ee at be lt dkuk nl si fi se es sk mt ie lu fr pt it hu lv ro cz pl gr

pe

rc

en

tag

e p

oin

ts o

f a

ve

ra

ge

wa

ge

Source: own calculation based on (DG Employment & Social Protection Committee

2012) with modifications for Poland, Italy and Lithuania for increased pensionable

ages of women

In many EU countries there is little income redistribution

in pension systems with tighter earnings-benefit links

0

20

40

60

80

100

120

nl at gr es lu be uk hu mt cy it ie bg dk pt sk de fi lt fr lv si se ee ro pl cz

TRR low wage earner TRR average wage earner

Source: (DG Employment & Social Protection Committee 2012) with modifications for Poland, Italy and Lithuania

for increased pensionable ages of women

Career breaks for child-care and

pension rights

Type of trend Countries

1. Increases from the full-career

case and decreases afterwards

(2): Germany, Italy

2. Stable during the child-care

breaks (no change)

(1) Ireland

3. Stable for first few care years

and declining thereafter

(6) Belgium, Czech Republic,

Luxembourg, Portugal, Spain, Malta

4. Decreases modestly from the

full career case

(6) Austria, Denmark, Finland, Greece,

Netherlands, United Kingdom

5. Stronger declines in

replacement rates

(11) France, Hungary, Poland, Slovak

Republic, Sweden, Bulgaria, Estonia,

Latvia Lithuania, Romania, Slovenia

Source: (D’Addio 2013)

Pension rights gap depends both on labour market

and pension system factors

Pension rights gap

Labour market

Employment years gap

Wage gap

Pension system

Career brak gap

Low wage redistribution

Pension indexation

Retierement age

differential

Pension Rights Gender Gap Index

𝑃𝑅𝐺𝐼𝑖 = 𝐸𝐺𝑖 ∗ 𝑊𝐺𝑖 ∗ 𝐶𝐵𝐺𝑖 ∗ 𝑃𝐿𝑊𝑖 ∗ 𝑃𝐼𝑖 ∗ 𝑅𝐴𝐺𝑖

where:

𝐸𝐺𝑖 is an employment years gap measured as a number of expected average years

in employment for women divided by 40 years (i.e. career length assumed in the

calculation of prospective theoretical replacement rates, for country i;

𝑊𝐺𝑖 is a wage gap calculated as (1 – gender wage gap), for country i;

𝐶𝐵𝐺𝑖 is a career break gap calculated as a ratio of TRR of women with 3-year

career break to TRR of male 100% wage earner, for country i;

𝑃𝐿𝑊𝑖 is a low wage earner pension factor calculated as a ratio of TRR of low wage

to TRR of male 100% wage earner, for country i;

𝑃𝐼𝑖 is a pension indexation factor calculated as a ratio of replacement rate after

10 years to current replacement rate of male 100% wage earner, for country i, and

𝑅𝐴𝐺𝑖 is a retirement age gap factor calculated as a ratio of TRR of woman at

different pensionable age to the TRR of male 100% wage earner, for country i.

Pension Rights Gender Gap Index

1 Slovenia 1 Slovenia 1 Slovenia

2 Denmark 2 Denmark 2 Denmark

3 Germany 3 Sweden 3 Germany

4 United Kingdom 4 Netherlands 4 Lithuania

5 Lithuania 5 Finland 5 United Kingdom

6 Netherlands 6 Portugal 6 Belgium

7 Belgium 7 Cyprus 7 Netherlands

8 Cyprus 8 Luxembourg 8 Czech Republic

9 Sweden 9 United Kingdom 9 Estonia

10 Austria 10 Germany 10 Ireland

11 Ireland 11 Belgium 11 Austria

12 Luxembourg 12 Poland 12 Cyprus

13 Finland 13 France 13 Malta

14 Czech Republic 14 Austria 14 Spain

15 Estonia 15 Latvia 15 Luxembourg

16 Bulgaria 16 Lithuania 16 Bulgaria

17 Spain 17 Bulgaria 17 Finland

18 France 18 Ireland 18 Sweden

19 Portugal 19 Romania 19 Italy

20 Italy 20 Czech Republic 20 France

21 Malta 21 Spain 21 Greece

22 Latvia 22 Estonia 22 Portugal

23 Poland 23 Italy 23 Slovak Republic

24 Slovak Republic 24 Slovak Republic 24 Hungary

25 Greece 25 Hungary 25 Latvia

26 Hungary 26 Greece 26 Poland

27 Romania 27 Malta 27 Romania

Overall Labour market Pension system 116,6

96,9

70,7

70,0

68,9

67,7

63,9

56,8

56,5

55,8

54,1

53,1

52,9

52,1

51,0

49,3

45,3

43,3

40,0

38,2

36,7

31,8

30,9

30,7

29,6

29,1

26,5

0,0 50,0 100,0 150,0

si

dk

de

uk

lt

nl

be

cy

se

at

ie

lu

fi

cz

ee

bg

es

fr

pt

it

mt

lv

pl

sk

gr

hu

ro

Distribution of EU 27 countries by

the domain specific indices

Labour market equality

High Medium Low

Pen

sion

sys

tem

co

mp

ensa

tio

n High

(4) SI DK UK NE

(3) DE LT BE

(2) EE CZ

Medium (3)

CY LU FI SE (3)

IE AT LU (2)

MT ES

Low (1) PT

(4) PL FR LV BG

(5) IT RO SK HU EL

Conclusions (1)

• Changing position of women in labour market

and family context

• Policy responses to population ageing include

both changes in labour market and pension

systems that affect gender differently

▫ increases in the labour market participation of

prime-aged women,

▫ prolonging working lives

▫ increasing labour market exit ages of women

▫ raising retirement age

▫ reducing the progressivity in pension formulae,

Conclusions (2)

• Full understanding of transition from work to

retirement requires the assessment of both sides of the

coin

• Women lose twice in most of the pension schemes –

because they earn less and because they have shorter

working lives

• Many researchers refer to these gaps, but rarely they

are seen as correlated phenomena – women with

shorter working lives have usually lower earnings at the

same time

• Gender is important in combined labour market and

pension system perspectives

Conclusions (3)

• The results of analysis show that countries that

have little gender differences in labour markets

also tend to have pension system policies that

are gender-friendly

• Countries with high gender differences, pension

systems often do not compensate them at

retirement

• There is a need for more life course

perspective in both labour market and

retirement policies, taking into account the

complimentary role of these policies

Part of this research was supported by European Commission 7th Framework Programme project "Employment 2025: How will multiple transitions affect the European labour market' (NEUJOBS)

References

• Chłoń-Domińczak, A. and Strzelecki, P.(2013), The minimum pension as an

instrument of poverty protection in the defined contribution pension

system – an example of Poland , Journal of Pension Economic and Finance

• Chłoń-Domińczak , A.(forthcoming), Female transition to retirement,

NEUJOBS working paper

• Chomik, R. & Whitehouse, E., 2010. Trends in Pension Eligibility Ages and

Life Expectancy , 1950-2050 (105).

• DG Employment & Social Protection Committee, 2012. Pension Adequacy

in the European Union 2010-2050

• Wöss, J. & Türk, E., 2011. “Dependency Ratio Calculator”. Simulation Tool

for the Interaction between Demography, Pensions and the Labour Market.

In OECD - Workshop on public pensions sustainability and disability

pensions procedures and reforms