Changes in Extended Unemployment Benefit eligibility age: evidence from Finnish register data

We examine how changes to Extended Unemployment Benefit, an early retirement pathway for long-term unemployed workers in Finland affects labour market outcomes, using three reforms for identification. In 2003, minimum eligibility age was raised from 57 to 59, in 2010 to age 60 and in 2014 to age 61. We show that among individuals previously employed in the private sector the 2003 reform had the largest effect: cumulative employment by age 63 increased by 10 months, unemployment declined correspondingly, and earnings increased by €39,700 (in 2024 prices). While the 2014 reform increased cumulative employment by 3.2 months and earnings by €14,500, we find only limited evidence that the 2010 reform increased employment and earnings. Among individuals previously employed in the public sector, only the 2003 reform had an effect, increasing employment by 2.7 months but having no impact on earnings. We show that the composition of the long-term unemployed changed over time: whilst most remained low-educated former manual workers, later cohorts included larger shares of tertiary-educated former professionals. Moreover, we find earlier reforms affected a broad group of unemployed individuals, whereas later reforms disproportionately affected highly educated professional employees. Our findings highlight the need to pay particular attention to heterogeneity in response behaviour when assessing reforms to early retirement pathways and to consider their cohort-specific distributional consequences.