Pension Reforms, Longevity, and Late-Life Employment: Evidence from Sixteen Countries

Employment rates for workers aged 55–64 increased by an average of 28.5 percentage points across sixteen countries between 2004 and 2019, with Austria, Italy, and the Netherlands experiencing increases larger than their entire 2004 employment rate. We examine what explains these dramatic gains and their substantial heterogeneity across countries and demographic groups. Using harmonized Health and Retirement Study data, we document three key empirical patterns. First, employment increases concentrated among women, healthier individuals, and more educated workers. Second, contrary to prior research, changes in weekly hours per worker are mixed rather than uniformly negative, with gains occurring primarily at the extensive margin. Third, employment growth accelerated during 2013–2019 compared to 2007–2013. While existing research examines longevity and pension reforms as separate channels, we show their interaction is quantitatively important. Longevity improvements amplify pension reform effects: when survival probabilities increase, actuarial adjustments for delayed claiming provide higher benefits collected over longer periods, strengthening work incentives. We formalize this mechanism in a lifecycle framework yielding testable predictions about margins of adjustment and demographic heterogeneity. Countries experiencing both pension reforms and substantial longevity gains show employment increases 15–20 percentage points larger than countries with reforms alone. This interaction helps explain why responses were exceptionally large in some countries, why growth accelerated after 2013, and why effects concentrate among healthier and more educated workers. Our findings suggest pension reform effectiveness depends critically on demographic context. Because effects concentrate at the extensive margin, policies raising retirement ages are more effective than hours flexibility policies.