Calling older workers back to work

ABSTRACT

Population ageing in advanced economies could have significant macroeconomic implications, unless more individuals choose to participate in labour markets. In this context, the steep increase in the share of older workers who remain economically active since the mid-1990s is an overlooked yet encouraging trend. We identify the drivers of the rise in participation of the elderly relying on cross-country and individual-level data from advanced economies over the past three decades. Our findings suggest that the bulk of the increase in their participation is driven by gains in educational attainment and changes in labour market policies, such as the tax benefit system, and pension reforms. Urbanization and the increasing role of services also contributed, while automation weighed on their participation.

KEYWORDS:

• Automation
• elderly
• labour force participation
• pension

JEL Codes:

• J11
• J21
• O33

Disclosure statement

No potential conflict of interest was reported by the authors. The disclosure statement has been inserted. Please correct if this is inaccurate.

Notes

¹ For a discussion of earlier trends in retirement, see Blöndal and Scarpetta (1999) and Gruber and Wise (2000).

² See Blöndal and Scarpetta (1999), and Duval (2004), for cross-country analyses of retirement decisions.

³ The empirical approach in the paper is widely used in the cross-country literature on labour market. Jaumotte (2003), Genre, Salvador, and Lamo (2010), Blau and Kahn (2013), Cipollone, Patacchini, and Vallanti (2013), Thévenon (2013), Dao et al. (2014), and Christiansen et al. (2016) look into the determinants of female labour force participation and employment, and Blöndal and Scarpetta (1999) and Duval (2004) investigate the effects of retirement decisions.:

⁴ 2011 is the last year for which all variables have values.

⁵ The latter finding is robust to using measures of incentives for early retirement, such as the implicit tax on continued work or pension replacement rates.

⁶ Our findings are robust to applying the logistic transformation to participation rates; alternative corrections to standard errors; using five-year averages to avoid distortions arising from difficulties in controlling for cyclical effects and undetected local unit roots; excluding the global financial crisis; and dropping one country at a time.