Shall I stay or shall I go? Late graduation and retirement decision

Early retirement from regular employment provides a major challenge to social and health policies in Europe. As people older than 60 will comprise close to one-third of the population in several European countries over the next two decades, a shrinking number of economically active people will have to support a growing number of economically dependent elderly people. There is therefore a political focus on the need to maintain workers longer in employment. Using the Labour Force Survey ad-hoc module (2006) on the transition from work to retirement, this study investigates the role of a late graduation on the decision of workers aged 50 and above to stay longer on the labour market. Overall, we find that graduating after the age of 40 has a positive and statistically significant effect on the planned age to retire, measured in absolute terms. It also plays its expected role on the relative planned age to retire by decreasing the probability of retiring before the normal pensionable age and by increasing the probability of retiring after the normal pensionable age. Moreover, our results highlight that this positive effect of a late graduation on the absolute planned age of retirement is mainly true in countries with a low degree of flexibility and a high degree of generosity of their early retirement schemes, such as Spain or France. Hence, the effect of a late formal upgrade of skills on an increase in the absolute planned age to retire is stronger at the margin in countries where the pension system acts as an incentive for not remaining on the labour market beyond the official pensionable age. As a consequence, we find that the relative effect on the probability of planning to delay the retirement age beyond the normal age is more significant in countries with highly flexible but less generous early retirement schemes (e.g., the UK).