Dissertation_Paula Aleksandrowicz_12 ... - Jacobs University
Dissertation_Paula Aleksandrowicz_12 ... - Jacobs University Dissertation_Paula Aleksandrowicz_12 ... - Jacobs University
2.3. Explanations at Individual Level The individual decision to retire has been approached from the labour supply- or protection-orientated perspective (pull factors) or from the labour demand or productionorientated perspective (push factors). The pull thesis has the longest theoretical and empirical tradition and states that the institutional levers which induce workers to choose early retirement can be altered. It focuses on the incentives and disincentives within the statutory pension system. Incentives for an early retirement are a flexible retirement age without actuarial deductions for early take-up, an ´implicit tax´ on continued employment (meaning that additional times of work are not translated into correspondingly higher benefits), reduced opportunities for combining gainful employment and benefit receipt, and generous unemployment benefits and disability pensions which can be received until retirement age. Decisions within the pull model are therefore clearly economic in nature and can be approached with the life cycle theory or with the hypothesis of securing the standard of living (Dinkel 1988). According to the first theory, workers act as to maximise the trade-off between consumption and income during life. They make informed choices about how long to save for one´s old age given their presumed life expectancy, their further career advancement and the interest rate on savings. Workers opt for early retirement if their oldage income will be reduced by less than actuarially neutral deductions. In case of exactly actuarially neutral deductions, the worker would be indifferent as to the timing of early retirement, claims the life cycle theory. The pull thesis is represented by Blöndal/Scarpetta (1999), Gruber/Wise (1999) and Duval (2004). In the opinion of Gruber and Wise (1999: 8-9) – who argue in line with the life cycle theory – an individual chooses to stop working if the tax penalty on continued work past reaching the eligible age for social security benefits is higher then the expected income gains. The larger the adjustment for the delay in receiving benefits, the larger the inducement to continue working. It is Gruber´s and Wise´s merit to have compared those ´implicit taxes on work´ across several countries. They came to the conclusion that tax rates on continued work are universally imposed (Gruber/Wise 1999: 30; they have however not included CEEC in the analysis). The lack of an appropriate adjustment of the future pension level to the age of exit also constitutes an incentive to retire early. The pension deductions 25
imposed in Germany, despite being budgetary neutral for the social security system, are not actuarially fair (Clemens 2004). Blöndal and Scarpetta proved the close interrelationship between the country-specific activity rates of persons aged 55-64 years and the disincentives of the old-age income provision systems. They also stated that individual factors influence the retirement decision, like health status, educational level or section of economic activity. The authors view an amendment of institutional rules on pension take-up as the solution to sinking activity rates of older workers. Socio-economic variables determine which pathway of early exit is chosen – „early retirement, disability retirement or unemployment retirement“ (Blöndal/Scarpetta 1999: 46) – but do not influence the sheer fact of early retirement. Blöndal and Scarpetta postulate therefore to remove retirement incentives inherent in all institutions of the social security system, not only in old-age security. In my opinion, Blöndal´s and Scarpetta´s analysis leaves out questions of implementation and appropriateness. A removal of economic incentives to early retirement will not have the desired effect if the living conditions of the retirees-to-be, their working conditions, the interests of their employers and the economic situation remain out of consideration. I also challenge the assumption that a social security system serves its function if older workers are deterred from early retirement regardless of their health condition or else face the risk of ´falling through the cracks´. Besides of push and pull factors (and, as will be shown in the next section, the action of social partners), aspects pertaining to family, personal goals in life or the value of leisure time became recognised as jump determinants of early exit (Jensen 2001, 2004). Rosenow and Naschold (1994: 32) associate the recognition of the positive aspects of retirement with a change in values over the last decades. That change, they argue, has diminished the role of employment as the central category in life and rendered the leisure option more acceptable. Retirement is increasingly being associated with a period in life which allows for the realisation of people´s personal interests, family responsibilities or voluntary work. With regard to Germany, Heinze et al. (1984:119) recognised already in the eighties that ´traditional´ work-related values as income security, diligence, subordination and discipline have been undermined by rising unemployment/diminished employment chances for young 26
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imposed in Germany, despite being budgetary neutral for the social security system, are not<br />
actuarially fair (Clemens 2004).<br />
Blöndal and Scarpetta proved the close interrelationship between the country-specific<br />
activity rates of persons aged 55-64 years and the disincentives of the old-age income<br />
provision systems. They also stated that individual factors influence the retirement decision,<br />
like health status, educational level or section of economic activity. The authors view an<br />
amendment of institutional rules on pension take-up as the solution to sinking activity rates<br />
of older workers. Socio-economic variables determine which pathway of early exit is chosen<br />
– „early retirement, disability retirement or unemployment retirement“ (Blöndal/Scarpetta<br />
1999: 46) – but do not influence the sheer fact of early retirement. Blöndal and Scarpetta<br />
postulate therefore to remove retirement incentives inherent in all institutions of the social<br />
security system, not only in old-age security.<br />
In my opinion, Blöndal´s and Scarpetta´s analysis leaves out questions of<br />
implementation and appropriateness. A removal of economic incentives to early retirement<br />
will not have the desired effect if the living conditions of the retirees-to-be, their working<br />
conditions, the interests of their employers and the economic situation remain out of<br />
consideration. I also challenge the assumption that a social security system serves its<br />
function if older workers are deterred from early retirement regardless of their health<br />
condition or else face the risk of ´falling through the cracks´.<br />
Besides of push and pull factors (and, as will be shown in the next section, the action of<br />
social partners), aspects pertaining to family, personal goals in life or the value of leisure<br />
time became recognised as jump determinants of early exit (Jensen 2001, 2004). Rosenow<br />
and Naschold (1994: 32) associate the recognition of the positive aspects of retirement with<br />
a change in values over the last decades. That change, they argue, has diminished the role of<br />
employment as the central category in life and rendered the leisure option more acceptable.<br />
Retirement is increasingly being associated with a period in life which allows for the<br />
realisation of people´s personal interests, family responsibilities or voluntary work. With<br />
regard to Germany, Heinze et al. (1984:119) recognised already in the eighties that<br />
´traditional´ work-related values as income security, diligence, subordination and discipline<br />
have been undermined by rising unemployment/diminished employment chances for young<br />
26
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