Between labour market and retirement pension — flexible transition as a new paradigm for ageing societies?

Increasing the pensionable age due to rising life expectancy meets strong political resistance. For health and labour market reasons it will always be impossible for some to achieve full pension eligibility directly from employment. Even if early retirement options are not restricted the scope for an accumulation of earnings to fund an early pension is often narrowly defined. Consequently, it is impossible for early retirees to compensate for the reductions in the pension they receive. Contrary to the general tendency to increase the pensionable age an alternative reform proposal is currently under discussion in German social policy circles. This involves free choice of retirement at age 60; unlimited accumulation of additional pension entitlements whilst earning; actuarial deductions for early retirement; and consideration of life expectancy in making adjustments to pension awards. This solution relieves the public pension system financially, raises the attractiveness of senior citizens on the labour market, offers the opportunity for a self‐determined transition from work to retirement and reduces political resistance to pension reform. The effect on the labour market for senior citizens remains to be examined.     

The decline of substitute pathways into retirement: Empirical evidence from the Dutch health care sector

Early retirement schemes and disability insurance in the Netherlands have undergone several reforms in recent decades. The reforms have increased incentives for older workers to continue working and have decreased the roles of “substitute pathways” into retirement. This article gives an overview of the reforms and, using administrative data for workers in the health care sector, tests a number of hypotheses about the labour market participation of older workers. The results offer two main findings: i) that the Dutch reforms have indeed been effective, as the labour force participation rate of older workers has increased; and ii) the concept of “substitute pathways” has become less relevant as the use of disability insurance has been closed off as an exit route to early retirement. Nevertheless, caution is required before generalizing the implications of these Dutch findings to other OECD countries.     

Notional defined contribution pensions with public reserve funds in ageing economies: An application to Japan

Several developed and developing countries have recently adopted a notional defined contribution (NDC) approach to old‐age pension reform. The NDC is essentially a non‐pre‐funded defined contribution retirement system, in which contributions are credited with a “rate of return” related to aggregate payroll growth, and individual account accruals are maintained in a book‐keeping system. Payouts are annuitized based on the expected mortality of each succeeding retiring cohort. NDC plans may be identified with appropriately calibrated Pay‐As‐You‐Go plans in demographic equilibrium, but the two paradigms diverge when demographic shift is introduced. This paper investigates the key actuarial and economic implications of alternative NDC rules, with a particular focus on Japan, the world's most rapidly ageing economy. We examine the potential role for pension reserves in transitioning to an NDC system, and we show these can be used to smooth the impact of demographic transition to an older society. Finally, we show that countries such as Japan could elect to use pension reserves accumulated in the past to facilitate the transition to an NDC system.     

The effect of immigration in the retirement age reforms: learning from a numerical example

This article examines the role played by the low-skilled immigrant labour force in countries aiming to reform their public pension systems by postponing the pensionable age. With an overlapping-generations model in continuous time and a fully redistributive pension system, the results of this article suggest that immigration could imply a delay in the pensionable retirement age. Further, we find that the preference for a delay in retirement age increases with the labour productivity of both immigrants and native population.     

Global pension systems and their reform: Worldwide drivers,trends and challenges

Across the world, pension systems and their reforms are in a constant state of flux driven by a shifting focus, moving reform needs, and a changing enabling environment that reflect objective events but also changes in views and perception. The ongoing worldwide financial crisis and the adjustment to an uncertain “new normal” will make future pension systems different from past ones. The objectives of this article are: i) to briefly review recent and ongoing key changes that are triggering reforms; ii) to outline the main reform trends across pension pillars over the last two decades; and iii) to present key policy areas on which the pension reform community will need to focus to make a difference.     

The mandatory private pension pillar in Hungary: An obituary

In 1998, the left‐of‐centre government of Hungary carved out a second‐pillar mandatory private pension scheme from the original mono‐pillar public system. Participation in the two‐pillar system was optional for those who were already working, but mandatory for new entrants to the workforce. About 50 per cent of the workforce joined the second pillar voluntarily and another 25 per cent were mandated to do so by law between 1999 and 2010. The second pillar has not improved the financial stability of the social security system. Moreover, the international financial and economic crisis has highlighted the transition costs that are associated with moving, even if only partially, to a system of pre‐funding. In 2010, the conservative government de facto “nationalized” the second pillar, and it is to use part of the accumulated pension capital to reduce Hungary's excessive public debt and annual budget deficit and to compensate for income tax reductions.     

The gender impact of National Pension reforms in the Republic of Korea

This article examines the gender impact of National Pension reforms in the Republic of Korea. In 2007, the Korean government introduced an income-tested basic old-age pension scheme paying flat-rate benefits. It also introduced credited pension coverage periods for child rearing and changed entitlement conditions for divorcees and widows and widowers. This paper examines the impact of these policy changes for individuals with shorter working lives and lower wages, for survivors and for the traditional social protection role played by the family in Korea. Findings indicate that the reforms have some positive features. However, the reforms still offer better value for those with higher earnings and an uninterrupted employment history, both of which are more characteristic of male workers. Moreover, the important income security role played by the family is still strongly embedded in the provisions and the protection available to survivors remains weak.     

Tipping points: what participants found valuable in labour market training programmes for vulnerable groups

Graham JR, Jones ME, Shier M. Tipping points: what participants found valuable in labour market training programmes for vulnerable groups
Int J Soc Welfare 2010: 19: 63–72 © 2009 The Author(s), Journal compilation © 2009 Blackwell Publishing Ltd and the International Journal of Social Welfare. This article is based on face‐to‐face and focus group interviews with 72 people who have experienced ongoing difficulties integrating into Canadian labour markets, and who had completed a labour market training programme. Participants were representative of at least one (and often several) categories that inhibited labour market integration: low socio‐economic status, Aboriginal status, single parenthood, criminal justice history and being disabled. The major finding: respondents associated life skills rather than labour‐market skills with success in overcoming personal barriers to securing and maintaining employment. Life skills involved developing life meaning and interpersonal skills related to personal cognition and behaviours. Valued cognitions identified by participants were gaining a new perspective on life and realising that the past impacts the present. Valued behaviours identified by participants included actions associated with understanding personal characteristics and motivations, and building positive social support and social capital. These insights provide theoretically rich considerations for labour market training programmes and could considerably influence labour market policies and practices, particularly since most training programmes and policies are geared toward human capital (i.e. labour‐market skills) accumulation.     

The macroeconomic impact of reforming a PAYG system: The Portuguese case

Abstract   The article analyses the impact of various types of reform options on social security pension system financial sustainability and on a range of macroeconomic variables. The HERPOR model is used to consider the likely effects of parametric reforms of the existing pay-as-you-go system, as well as those of a systemic reform. The article concludes that the former are sufficient to ensure financial sustainability, although they should be accompanied by employment implementation measures. The article concludes that a fully pre-funded system does not seem to be a viable option for policy-makers in the redesigning of social security pension systems, due to the high transition costs involved.     

Old‐age protection for women in the Spanish pension system

The example of Spain confirms the common view that contributory pension systems reproduce inequalities between the sexes that result from the nature of labour market structures and the sharing of family responsibilities. In general, women who stay at home are not entitled to their own pensions and are dependent on benefits of lower value such as survivors' pensions (derived entitlements) or non‐contributory pensions. In turn, women who work outside the home accrue lower entitlements than men and, consequently, lower old‐age or disability pensions (personal entitlements). The purpose of this article is to examine the figures for pension distribution by sex in Spain, review some of the pension policies that have been implemented since 2000, and propose direct action for progress in the transition from derived entitlements to personal entitlements. These proposals are designed to promote sex equality, defined as the right to equal well‐being and financial security in old age.     

Political risk and pension privatization: The case of Argentina (1994-2008)

Proponents of pension privatization in Latin America argued that systems of private fully pre-funded defined-contribution individual accounts would be better insulated from politics than was the case with public pay-as-you-go pension systems. However as the Argentinean case demonstrates, most recently with the 2008 nationalization of its private individual accounts system, transferring pension management and investment to the private sector does not necessarily reduce or eliminate political risk. In fact, the implementation of systems of individual accounts creates a new set of political risks, in part because they are a potential financial resource for governments, especially during times of economic stress. This article describes the range of political risks inherent to individual account pension systems, with specific reference to Argentina's 1994-2008 experience with privatization.     

What works for whom? An analysis of active labour market programmes in Norway

This article examines whether some active labour market programmes (ALMP) targeted at social assistance recipients are more effective for some groups than for others in increasing self-sufficiency , i.e. gross earnings . The study focuses on the interaction between two types of programmes – employment programmes and training programmes – and the social charac-teristics of the participants. The data are derived from the pool of the entire population of social assistance recipients registered in Norway in 1995. The study adopts a quasi-experimental design. To handle selection bias, a matching procedure based on a propensity score approach is applied. Training programmes yield positive outcomes overall and for subgroups, whereas employment programmes produce no significant effects overall. However, for employment programmes there is an interaction effect between the likelihood of participation and outcome: beneficiaries with social characteristics (e.g. age, education, work experience) that are associated with a medium chance of participating experience a positive and significant increase in earnings. For those with lower and higher chances, the effect is negative. This points to the importance of conducting stratified analyses in effect evaluations. Thus, the results are also likely to be more relevant to policy makers.     

Moving targets: Target groups of active labour market policies and transitions to employment in Europe

This study drew on recurrent debates related to labour market mobility among the unemployed and those outside the labour force and asked to what extent active labour market policies (ALMP) increase employment in these two groups. By utilising new programme‐level data on ALMP, the study analysed the impact of core programmes directed towards registered unemployed; peripheral programmes that target the inactive part of the working age population; and mixed programmes targeting both groups. The programme data were combined with individual‐level panel data from the European Survey on Income and Living Conditions and analysed using multilevel analysis. The main results show that both resources devoted to programmes and their size were related to employment transitions. Transitions among the unemployed were mainly associated with spending on core programmes, whereas the inactive seemed to benefit from increased spending on all types of programmes, as well as increased scope of mixed programmes.     

Survivors' pensions and their impact on the Brazilian labour market

In many countries the regulations governing survivors' pensions were established in periods when female labour market participation was lower than at present. However, the current trend in many Latin American countries is for growing levels of female labour participation. In Brazil, where there are no restrictions on the concurrent receipt of retirement and survivors' pensions, and where until recently lifelong pensions could be obtained without any conditionality, not only has the accumulation of such benefits grown, but there are indications that these rules have had a negative impact on women's labour market participation. Analysis of the case of Brazil shows the need for social security regulations to adapt to labour market changes, and underlines the need to acknowledge that social security regulations can actually have an impact on the labour market.     

Semi‐conditional cash transfers in the form of family allowances for children and adolescents in the informal economy in Argentina

In 2009, Argentina introduced a new transfer programme for children and adolescents younger than age 18 (Universal Child Allowance) that extended coverage under the contributory programme for family allowances to include families in the informal economy and families of unemployed persons. This article describes this innovative programme, compares it with similar programmes in Latin America and analyses its impact on coverage and its possible effects on the welfare of the population. The results indicate that the extension of access to this type of benefit has reduced considerably the coverage gap for the poor and indigent and supports efforts to consolidate the operations of different and poorly coordinated transfer programmes.     

Care earnings in the United States and 24 European countries: The role of social policy and labour market institutions

Care occupations are gendered and remain relatively poorly paid, particularly in the United States. Prior research on the ‘care penalty’ primarily points to individual, relational, and market-valuation factors in explaining the relative earnings of care workers. This study integrates these explanations with a comparative institutional perspective. Using higher-quality data and methods than previous comparative research in the field—that is, harmonized micro-data from the Current Population Survey and EU-SILC from 2005 to 2016, country and year fixed effects models, and a counterfactual analysis—we find that national variance in labour market and welfare state institutions explains most of the difference in the relative earnings of reproductive care workers between the United States and European countries. Higher rates of collective bargaining coverage, stronger employment protection and welfare state spending contribute to higher relative earnings for reproductive care occupations, and lower relative earnings for high-status nurturant care occupations. Differences in the relative earnings of care workers appear to be mostly a construct of social policy and labour market institutions rather than individual, relational, and market-valuation factors.     

Employer‐oriented labour market policies in Sweden: Creating jobs and the division of labour in the public sector

In many European countries, greater importance is accorded to labour market policies in which employers are involved in activating unemployed people. Such employer‐oriented policies target employers’ demand for labour and attempt to influence their willingness to hire, train or guide (often disadvantaged) unemployed groups. Using data from a qualitative interview study of an employer‐oriented programme in a medium‐size city in Sweden, the present article aims to develop knowledge about how these policies are used to influence employers to hire unemployed workers and how jobs created in this context differ from regular jobs. The article argues that creating jobs through new arrangements for the division of labour, with the promise of relieving regular staff of unskilled tasks, may influence employers’ willingness to hire the unemployed when used alongside other kinds of policy instruments. However, the article also shows that this new division of labour, with programme participants performing mainly unskilled tasks, has been difficult to realize, as new staff gradually come to perform an increasing number of regular working tasks.     

France: working longer takes time,in spite of reforms to raise the retirement age

Examination of the French situation from a comparative European perspective exposes the country's poor performance with regard to the employment of seniors and the prolongation of working life. Despite a recent rise in the employment rate of 55–59 year‐olds, worrisome signs have appeared, such as the steep rise in unemployment for this age category; this is indicative of the increasing vulnerability of ageing workers in the labour market. This critical analysis of twenty years of French public policies related to older workers seeks to identify the reasons for France's lag in making working life longer. The principal reason seems to be that public policies have nearly exclusively focused on increasing the supply of senior labour without adequately taking into account incentives for stimulating corporate demand for it. The many pension reforms undertaken from 2003 to 2014 have sought to lift the institutional obstacles to working longer. Accordingly, they have raised both the legal retirement age and the requisite number of quarters of contributions for entitlement to a full pension under Social Security. But effective, active labour market policies for stimulating the demand for senior labour have been lacking.     

Understanding work enjoyment among older workers: The significance of flexible work options and age discrimination in the workplace

Although the number of older workers in the U.S. is increasing, there is a gap in knowledge on whether or not they actually enjoy working. This study, based on a conceptual framework focusing on job resources and demands, explored likely workplace determinants of work enjoyment among older workers aged 50 or over. Using the 2012 wave of the Health and Retirement Study, a partial proportional odds model was used to detect determinants of work enjoyment. Results showed that higher levels of work enjoyment were significantly and negatively associated with the level of perceived retirement pressure and promotion preference for younger workers, and positively associated with moving to less demanding positions. Self-employment showed a noticeable enhancement of work enjoyment. This study highlights the significance of flexible work options and age discrimination in the workplace in understanding work enjoyment later in life.