The effect of the statutory retirement age on spousal labor force participation

We investigate the direct effect of the oldest spouse’s statutory retirement age on the retirement behavior of couples. The Dutch statutory retirement age increased stepwise from 65 years and 3 months in 2015 to 65 years and 9 months in 2018. Using a regression discontinuity approach, we find a positive direct effect of the statutory retirement age on labor participation (extensive margin) and hours worked of both partners. More specifically, we find that about one third of the oldest spouses retire at the statutory retirement age. This has not changed much after the increase in the statutory retirement age. Moreover, we find that younger partners decrease their labor supply by up to almost 2 percentage points once the oldest spouse reaches the statutory retirement age. Male younger partners are twice as responsive than women. The responsiveness is also about twice as strong in high-income households than in low-income households. The responsiveness in terms of hours worked are somewhat smaller. Lastly, the original statutory retirement age of 65 still has a negative effect on the labor supply decision of the younger partner, especially when their older partner already reached the statutory retirement age. These results indicate that, in addition to the leisure complementarity of partners, social norms and reference points seem to affect retirement decisions.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.

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