The labor force participation of elderly men was decreasing during most of the 20th century. For example, France saw one of the most dramatic declines: the labor force participation rate of men in their early 60s dropped from close to 40% in 1980 to almost 10% in 1998. However, beginning in the mid-1990s, many countries saw a steady increase in the labor force participation of their elderly population. From 1998 to 2014, France experienced a 16% increase in the labor force participation rate of men aged 60–64. Some countries saw an even bigger increase. The Netherlands reached the nadir in 1993 when the labor force participation of elderly men in their early 60s dropped to 20%, and by 2014, it has increased by 44%. The participation of elderly women has also increased and to an even larger degree than men for many countries, but it lacks the U-shaped pattern that characterizes the experience of men.
The increasing participation of the elderly in the workforce is undeniable, and for many countries this recent trend could not have come at a more crucial time. Facing an aging population with rising life expectancy, many countries are worried about the fiscal sustainability of programs such as social security. With the elderly working longer, these fiscal pressures are undoubtedly relaxed. Therefore, it is important to understand the root causes of the increase in the labor force participation of the elderly. If certain policy reforms can encourage the elderly who can work to keep working, then implementing them will mitigate the demographic burden that many countries grapple with.
Social Security Programs and Retirement Around the World: Working Longer documents the increasing trend in labor force participation among older individuals and explores its possible causes. This book stems from the ambitious effort of the NBER International Social Security project to conduct cross-country analysis on how social security programs affect the labor force participation of older individuals. One of their latest projects – which culminated into this book – examines the trends in labor force participation rates among the elderly in the last two decades for 12 countries. Each chapter focuses on the experience of one country and is cogently written by researchers in that country. To make coherent comparisons across countries possible, all of the chapters explore the same prominent factors that potentially influence retirement decisions: trends in health and education, structural changes in occupation, the macroeconomic condition, country-specific public pension reforms, and the rising participation of women in the labor force.
The book suggests that there is little evidence that improvements in health and education are strong contributing factors to the increasing trend. Health of older individuals – as measured by mortality rates or self-assessments – has continuously improved for all 12 countries since 1980, but the participation rates for elderly men did not rise until the mid-1990s. Also, there is no strong evidence that countries with a larger decrease in mortality rates experienced a more dramatic increase in participation. Like health, the share of older men who finished high school or obtained a college degree has been increasing since 1980 for all 12 countries, even during times when the labor force participation was falling among older men. Although in some countries, such as Italy, The Netherlands and Spain, the improvement in education attainment accelerated in the 1990s, which may have contributed to the higher labor force attachment of older individuals. Going beyond descriptive evidence, the authors for Germany performed a decomposition analysis and showed that health and education do not explain the U-shaped pattern for men's labor force participation.
The book provides detailed accounts of the major policy reforms in each country that may have affected the elderly's labor force attachment. It then convincingly shows that recent reforms in retirement policies implemented in many of these countries could have played an important role in postponing the retirement of elderly individuals. For example, each time a reform to the eligibility age for retirement benefits was introduced in Italy, the participation rate of the age being affected also increases. A similar story prevails in Japan and the UK, where an increase in eligibility age also corresponded to a rise in the participation rate of the ages most affected by the policy change. The authors for several countries adopted more rigorous methods. For example, a structural model shows that pension reforms in Sweden increased the retirement age by 2.5 years.
Based on Schirle (Reference Schirle2008), the most intriguing explanation is that married couples may prefer to retire at the same time. This could explain the trend reversal in the labor force participation of elderly men, because starting in the mid-1990s, they were more likely to be married to women who also worked. As a result, countries with a large increase in participation of women in the workforce experienced a rise in participation of older men. For Canada, women's labor force participation can explain 33% of the increase in the participation rate of men during the last two decades. This effect is also non-negligible in the USA. Schirle (Reference Schirle2008) estimated that women's participation can explain a quarter of the recent increase in elderly men's labor force participation in the USA.
This book shines a bright light on the rising trend in the labor force participation of the elderly and provides clear evidence for its causes. Personally, I think the most valuable aspect of the book is the collection of pension reforms that were adopted across the 12 countries, which makes it an essential reference for researchers working on retirement policies – like myself. I have no doubt that researchers in other fields who are interested in the welfare of individuals near retirement age will also learn and find inspiration from the book.