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Retirement Age under Unequal Longevity and Work Capacity

Author

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  • Hindriks, Jean

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

Abstract

Retirement ages are rising in many countries to offset the challenges of population ageing, but people's capacity to work for more years in their later working life is unclear and unequal. If low-skilled workers enter the labour market earlier, work in more arduous jobs, and die earlier, a uniform increase in the statutory retirement age can disproportionately hurt them. This paper shows analytically how a two-sided actuarial adjustment in a PAYG pension system can protect workers retiring early due to arduous careers while preserving incentives to work longer and support financial sustainability. A simulation calibrated to Belgium accounts for income-related differences in premature mortality and longevity to estimate the cost of compensating arduous work and the pension adjustments needed for budget neutrality. The simulations suggest that the pension gain for compensated workers in the lowest income quintile is about three times the pension loss in the highest quintile, with this ratio varying with mortality and longevity gaps.

Suggested Citation

  • Hindriks, Jean, 2026. "Retirement Age under Unequal Longevity and Work Capacity," LIDAM Discussion Papers CORE 2026020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2026020
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    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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