November 18, 2020

Cluster-Seminar Public Finances and Living Conditions

Early retirement of employees in demanding jobs: evidence from a German pension reform

Date

November 18, 2020
12:30 - 13:30

Location

Online seminar via Cisco Webex

Speaker

Johannes Geyer
Workers in demanding jobs may be particularly negatively affected by an increasing statutory retirement age. We exploit a pension reform that raised the early retirement age of women from 60 to 63 years in Germany. Based on a large administrative social security data set we exploit the quasi-natural experiment using a regression-discontinuity approach. We find the same relative employment increase of about 25% in the age-group 60-63 for women exposed to low and to high demand after the reform. We do not find substitution effects into unemployment, partial retirement, invalidity pensions or inactivity. Access to early retirement benefits requires a high labor market attachment especially during the last years of the labor market career. We argue that this eligibility rule gives access to early retirement to a positive selection of older workers whose job demand does not restrict them to extend their working life. Policies which aim to insure workers exposed to high job demand against negative consequences of not being able to reach their statutory retirement age in employment should improve eligibility and pension claiming rules in disability and work inability pensions instead of offering them early retirement options with traditional eligibility rules.