Work and disability in old age: restrictions & incentives

This project analyzes work incentives and restrictions of older individuals and individuals with a work disability and investigates how they affect participation in and hours of paid work. Retirement reforms introduce tax credits, make deferring pension claims actuarially attractive, and increase the legal retirement age to stimulate labour market participation among older workers. In addition, provision of part-time work opportunities may also stimulate the labour market attachment of older workers. For disabled individuals, a lower benefit or stricter criteria to access disability benefits create incentives to resume working.

Older workers may be limited in their opportunities to work part-time because employers typically require a minimum number of hours of work for a specific job, or pension schemes do not allow flexible combinations of work and pension income. Partially disabled workers may have limited work capacity during their final years before reaching the retirement age, particularly if the retirement age is rising. Stricter criteria to access disability benefit can increase health problems and mortality risk.

First, we use survey data to investigate how pension incentives, a higher retirement age, and the provision of a partial retirement scheme affect preferred choices for working full-time or part-time beyond the early and legal retirement ages. We conduct a harmonized survey in the Netherlands, Germany, United States, and South Korea to carry out cross-national comparative analysis. The large institutional differences across the four countries create variation that help to understand the effects of retirement incentives on hours worked and retirement.

Second, we conduct a survey with employers in the Netherlands to investigate establishment level policies towards partial retirement and factors that are important for employers to offer part-time work opportunities. We compare the results with the results from a similar survey conducted with employers in the US.

Third, we use administrative data on individuals claiming a disability benefit in the disability insurance scheme (WIA), and investigate how a higher legal retirement age leads to problems due to limited remaining work capacity, increasing benefit claims. We also analyse heterogeneity in the effect of a higher legal retirement age health status and labour market characteristics, to identify groups at risk who are less likely to be able to cope with the increasing retirement age.

Fourth, we use administrative data on sick workers insured under the old (WAO) and new (WIA) disability insurance schemes to investigate whether the disability reform brought by the new scheme has increased health problems and mortality risk, reduced marriage formation, or led the children of those affected by the reform to rely less on social security support.’ 

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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