NCPA - National Center for Policy Analysis

Let Them Retire Early and They Will

October 23, 2003

Give male workers in industrial nations enough pension money to retire early and they do. Delay the age at which they are eligible for retirement under national social security programs, and many older employees will keep working. These are the key findings of a new study from the National Bureau of Economic Research.

The authors analyzed 12 advanced countries throughout Europe and the United States. In each of these nations, there is a sharp jump in the number of workers who retire in the year after they can first receive Social Security benefits, despite variation in that age across nations. For example:

  • Such a "spike" in retirement occurs at age 60 in France, but age 62 in the United States.
  • In both cases, this accords with the initial availability of benefits.
  • Also, the more lucrative the retirement benefits, the bigger the retirement spike.
  • A reform that delays first eligibility for benefit by three years would likely reduce the proportion of men aged 56 to 65 who are out of the labor force by between 23 and 36 percent.
  • This is especially true for many European nations where benefits are available well before age 60; keeping these workers in the labor force will delay a demographic collapse.

The authors conclude that changes in the provisions of social security programs would have very large effects on the labor force participation of older workers.

From: David R. Francis, "Social Security Causes Early Retirement," NBER Digest, July 2003; based upon Jonathan Gruber and David Wise, "Social Security Programs and Retirement Around the World: Micro Estimation," Working Paper, No. 9407, December 2002, National Bureau of Economic Research.

For NBER abstract

http://papers.nber.org/papers/w9407

 

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