Are we doing enough to discourage early retirement?
AbstractIncreasing the effective retirement age contributes to the sustainability of pension systems. However, oftentimes policies aiming at rising employment rates of older workers fall short in delaying retirement. This seems to be the case with retirement age flexibility reforms in Portugal. We analyze the recent Portuguese history of incentives to retire. For 1990-2006 we find that individuals faced very high implicit taxes on working with the result that half the workers had already left the labour force before age 65. We then look at the Social Security reforms in 2007 and find that the incentives to continue working became even smaller than they already were. We conclude that increasing the labour supply of older workers in a system with flexible retirement age needs policies with more aggressive use of penalties and bonuses than what decision makers were willing to accept.
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Bibliographic InfoPaper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 11-220.
Date of creation: Jan 2011
Date of revision:
Early retirement; Pensions; Social Security;
This paper has been announced in the following NEP Reports:
- NEP-AGE-2011-11-28 (Economics of Ageing)
- NEP-ALL-2011-11-28 (All new papers)
- NEP-LAB-2011-11-28 (Labour Economics)
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