Unemployment benefits and older workers Jan C. van Ours
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Transcript of Unemployment benefits and older workers Jan C. van Ours
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Unemployment benefits and older workersJan C. van Ours
Tilburg University & University of Melbourne
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Setting the stage
• International comparison of (un)employment rates by age and gender
• Developments over time for the Netherlands
• UI benefits for older workers• Changes in entitlement & eligibility• Unemployment effects: inflow and
outflow
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Employment rates 200925 to 54 years 55 to 64 years
Men Women Men Women
Netherlands 90.7 79.6 61.7 43.6
UK 85.4 74.4 66.1 49.3
Germany 86.1 75.4 63.8 48.6
France 87.8 76.8 41.4 36.7
United States 81.5 70.2 65.2 56.4
OECD 84.7 65.3 64.4 45.1
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Unemployment rates 200925 to 54 years 55 to 64 years
Men Women Men Women
Netherlands 3.0 3.3 4.0 3.6
UK 6.8 5.2 6.0 2.8
Germany 7.6 6.9 8.0 8.0
France 7.2 8.2 6.5 6.0
United States 9.2 7.6 7.2 6.0
OECD 7.6 6.9 6.2 5.4
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Employment rates 55-64 years
1994 2006 2009
Men 40.7 55.4 61.7
Women 17.5 35.6 43.6
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Older workers in the Netherlands
• Unemployment rates workers aged 55-64 comparable to prime age workers
• Employment rates older workers substantially lower but increasing over the past decade
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Should we worry?
• Unemployment rates older workers low• But:
– Low job separation rates– Low job finding rates– Long-term unemployment
• UI benefits as retirement pathway• Unemployment could be lower• Role of unemployment benefits
– Eligibility criteria– Entitlement
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Labor market older workers
• Improvement of employment rates:– Change in pension system from early
retirement “pay as you go” to early retirement actuarially fair
– Incentives for unemployed workers• Focus of this presentation• Quantitatively maybe not so important• Showing older workers are influenced by
incentives
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Unemployment benefits
Two major changes in UI benefits in the Netherlands:
1. Change in entitlement: reduction of Potential Benefit Duration – not age specific
2. Change in eligibility: introducing search obligations – age specific
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Entitlement rules - old
• Several types of benefits:– Short term: 6 months– Wage dependent: up to 3.5 years– Extended: 2 – 3.5 years
• Unemployed after 57.5 years– Receive UI benefits for 7.5 years – up
to old age pensions– Spike in the inflow into unemployment
beyond age 57.5
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Entitlement rules - new
• August 11, 2003 (weekend): extended benefits were abolished
• Incentive to become unemployed shortly after age 57.5 disappeared
• Spike after age 57.5 disappears
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Eligibility criteria - old
• Worked 26 out of 39 weeks prior to unemployment
• Received wage at least 52 days in the 4 calendar years during the 5 years prior to unemployment
• Register at the employment office• Have to accept a ‘suitable job’• Actively search for work – but only up to
the age of 57.5• Drop in job finding rate after age 57.5
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Eligibility criteria – new
• Search requirement after age 57.5 was reinstalled
• Drop in job finding rate at age 575. disappears
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“Natural experiment”• Before – after comparison• Below – above age 57.5 1. Before – below 57.5: cycle before2. Before – above 57.5: cycle before + age 3. After – below 57.5: cycle after4. After – above 57.5: cycle after + policy +
age• (2-1) = age effect• (4-3) = age effect + policy effect• (4-3) – (2-1) = policy effect
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Graphical analysis
• Age at inflow has important effects on entitlement and eligibility rules
• Policy change affect the incentives• After age 57.5:
– Inflow does not go up– Outflow goes up
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Inflow by age 2005
0
50
100
150
200
250
56.5 57 57.5 58 58.5
Age at inflow
Inflow
into
unem
ploym
ent
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Inflow by age 2001-02
0
50
100
150
200
250
56.5 57 57.5 58 58.5
Age at inflow
Inflow
into
unem
ploym
ent
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Annual inflow
2001-02 2005 Diff.
56.6-57.5 1571 2257 +686
57.6-58.5 2189 2488 +299
Diff. 618 231 +387
Diff. (%) +40 +10 -30
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3 months prob to find job - 2004
0
2
4
6
8
10
12
55.5 56.0 56.5 57.0 57.5 58.0 58.5 59.0 59.5
Age at inflow
Probab
ility
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3 months prob to find job - 2002
0
2
4
6
8
10
12
55.5 56.0 56.5 57.0 57.5 58.0 58.5 59.0 59.5
Age at inflow
Probab
ility
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3 months prob to find job
2001-02 2005 Diff.
55.6-57.5 8.1 8.3 +0.2
57.6-59.5 4.8 6.5 +1.7
Diff. -3.3 -1.8 +1.5
Diff. (%) -40 -20 +20
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Graphical analysis - again
• Age at inflow has important effects on entitlement and eligibility rules
• Policy change affect the incentives• After age 57.5:
– Inflow does not go up– Outflow goes up
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Conclusions
• Labor market position of older employed workers is not bad
• Probability to loose their job is small• Once unemployed probability to
find a job is small too.• Low unemployment rates: small
inflow rate * long durations
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• Even for older workers incentives seem to work
• It is possible to reduce inflow into unemployment and increase outflow from unemployment