Finland: OEDC Working Paper Calls for Narrowing Extended Unemployment Benefits for Older Workers

An OECD working paper finds that, different working-age benefits in Finland reduce work incentives and hold back employment. In Pareliussen, J. and H. Hwang (2018), "Benefit reform for employment and equal opportunity in Finland", OECD Economics Department Working Papers, No. 1467, OECD Publishing, Paris, Finland's extended unemployment benefit for older workers are one of several major disincentives being called out for replacement.

As pointed out in the working paper:

In Finland, those aged above 61 on the day their unemployment insurance expires qualify for extended unemployment benefits until the statutory pension age (the “unemployment tunnel”). The unemployment tunnel increases inflows to unemployment substantially, as employers tend to target dismissals to eligible individuals, and because eligible workers may voluntarily choose to use the tunnel. Furthermore, the tunnel reduces outflows from unemployment, as extended eligibility to unemployment benefits discourages job-search. The tunnel is often used as a bridge to ECO/WKP(2018)15 31 retirement, in practice extending benefit eligibility indefinitely. Indeed, the incidence of unemployment peaks at the age of 62, and the unemployed aged 62 or more tend not to search for jobs (Kyyrä and Pesola, 2017; OECD Economic Survey of Finland, 2016).

While pension reform is increasing the retirement age, its effects are not as significant as they could be because the tunnel hasn't narrowed as much:

A pension reform taking effect in 2017 raises the statutory pension age gradually from 63 to 65 years before linking it to life expectancy from 2030onwards,and increases the age threshold for the unemployment tunnel from 61 to 62 years. Increasing the pension age has put the pension system on a sustainable trajectory, but ageing costs are still expected to show up in unemployment, health and longterm care expenditures. The reform is expected to raise the average retirement age by one year, but only increase time in employment by five months due to higher unemployment.

Source: OECD Working Papers (May 25, 2018)

OECD Encourages Poland To Promote Longer Working Lives as Vital to Improving Poland’s Future Prosperity

According to the latest OECD report on aging societies, while the percentage of old to younger groups is projected to nearly triple from 22% in 2012 to 63% in 2050 in Poland, the proportion of older people in Poland who are working still remains well below the average for OECD countries. Thus, the OECD concludes in "Working Better with Age in Poland" that "further reforms to encourage active aging and longer working lives are needed in Poland. Employers need to do more to improve working conditions for older workers and reduce the large gender gap in employment.”

The OECD found that, in 2013, the employment rate of 55-64 year olds was 41%, compared with the OECD average of 55%, and it was only 9% for the age group 65-69, compared with the OECD average of nearly 20%. Among its recommendations, the OECD says Poland should:

• Help more women stay longer in the labour market. Further development of care facilities is required to help older women combine work with family responsibilities. Women’s labour market conditions and future pensions should be reformed.
• Concentrate on preventive measures in occupational health services. Local health services should also have prevention and early identification of health risks as priorities.
• Make social dialogue a driving force in the design and implementation of policies to prolong working lives, for example, through projects in the “Solidarity Across Generations” programme, which was renewed in 2013.
• Align employment protection legislation (EPL) across all age groups by abolishing the special protection rules for older workers. This should however be combined with reinforced active labour market measures for older jobseekers to facilitate their quick reintegration into employment.

Source: OECD Press Release (March 27, 2015)

Switzerland: OECD Reports Calls for Greater Efforts To Help Older Workers Stay at Work

The OECD has issued a report finding that Switzerland should do more to help older people, especially women, work longer in order to meet the challenge of a rapidly aging population. According to "Working Better with Age in Switzerland," while Switzerland has one of the highest employment rates for older workers in the OECD (in 2012, 70.5% of Swiss aged 55-64 were in work), the rate is much lower for women (61.5%), particularly if they are non-graduates (49%). In addition, the report notes that, once older workers lose their jobs, it is often difficult for them to get back into the labor market: 59% of unemployed Swiss workers aged over 55 had been out of work for more than 12 months in 2012, up from 40% a decade ago and above the OECD average of 47%.

Accordingly, the OECD recommends that Switzerland (in order of priority):

• help women by promoting their employability, make it easier for them to balance work and family life throughout their careers and remove work disincentives in the tax system and the pension system;
• make training more attractive for low-skilled workers and encourage enterprises to keep training them until the end of their careers;
• encourage social partners and pension funds to reduce incentives for early retirement in their second pillar schemes;
• support the action of the Public Employment Service in helping older workers, particularly aged 60-64, find stable jobs;
• improve the targeting of social assistance budgets for the older unemployed to help them back into work;
• encourage social partners to link pay more to experience and performance than age;and
• combat age discrimination (which remains legal in Switzerland, and is quite common.

Source: OECD News Release (October 23, 2014)

Netherlands: OECD Report Calls for Greater Efforts Encouraging More People To Work Later in Life

The Netherlands must encourage more people to work later in life in order to help it meet its growing challenges of a rapidly aging population and rising social spending, according to the OECD. In its report "Ageing and Employment Policies: Netherlands 2014: Working Better with Age," the OECD says that while reforms over the past decade, such as raising the pension age, have already had an impact—so that the share of 55-64 year olds in work has increased significantly to just over 60% in 2013 (above the OECD average of 55%)—the Netherlands remains well behind the best OECD achievers, ranking only 16th for the employment rate of 55-64 year olds among the 34 OECD countries.

Among its recommendations, the OECD says the Netherlands should:

• promote longer contribution periods in second-pillar pension schemes and increase flexibility in withdrawal and combinations of pension and work to encourage longer careers;
  
• reduce the maximum duration of unemployment insurance benefits combined with better activation of all unemployment benefit recipients;
  
• keep replacement rates (the ratio of benefits to former earnings) of sickness and disability benefit well below 100%, and give access to wage-compensation already in the sickness benefit period for re-entry to new jobs with a lower wage;
  
• ensure that new practices among innovative firms in the Sustainable Employability program are promoted and progressively become national standards;
  
• mobilize more fully labor resources by supporting initiatives to facilitate working on a full-time basis for part-time workers.

Source: OECD News Release (April 16, 2014)

Update: Ministry of Social Affairs and Employment of the Netherlands Press Release (April 16, 2014)

Norway: OECD Issues First Country Report on Encouraging Labor Participation by Older Workers

The OECD, as part of its aging and employment policies program to review of policies to encourage greater labor market participation at an older age by fostering employability, job mobility, and labor demand, has issued its first country report. In "Ageing and Employment Policies: Norway 2013. Working Better with Age," the OECD finds that Norway is better placed to cope with population ageing than most other countries, but that it could still do more to improve incentives and opportunities for people to stay working longer which would help ensure the country’s long-term future.

According to the report, Norway has the fourth-highest employment rate for the age group 55-64 in the OECD area, at 71% in 2012, but Norway’s labor market has a large share of older people on disability benefit: 19.6% of those aged 55-59 in the first quarter of 2012, and 30.5% of those aged 60-64. Among other things, (1) old age pensions for disabled people are to a large extent calculated as they were in the former pension system, and economic incentives to work are not much changed for public sector employees, (2) there is not enough consistency in the setting of age limits in the accrual of additional pension rights, employment protection legislation and other rules concerning mandatory retirement, and (3) even if most older workers in Norway are in stable and high-quality jobs, they experience a very low hiring rate, one-third of the OECD average.

The report recommends that Norway:

• align second-pillar pension schemes for public sector employees with the main principles of the reformed national insurance scheme;
• strengthen gate keeping to the disability scheme, in order to reduce inflows;
• ensure greater age neutrality in employers’ personnel decisions, starting with the hiring process. An objective could be for the hiring rate of older workers in Norway to reach the OECD average;
• simplify and co-ordinate age limit rules, with a view to removing age as a mandatory reason for retirement;
• Ensure that the legislative and organisational framework is neutral with regard to part-time and full-time jobs, and support initiatives to promote a “full-time culture”.

Source: OECD Press Release (June 21, 2013)

OECD Pension Outlook: Work Longer Before Retiring and Smaller Public Pensions.

The OECD says that governments will need to raise retirement ages gradually to address increasing life expectancy in order to ensure that their national pension systems are both affordable and adequate. Even so, the OECD report "Pensions Outlook 2012" finds that reforms over the past decade have cut future public pension payouts, typically by 20 to 25%.

According to the OECD, over the next 50 years, life expectancy at birth is expected to increase by more than 7 years in developed economies. The long-term retirement age in half of OECD countries will be 65, and in 14 countries it will be between 67 and 69. The report states that increases in retirement ages are underway or planned in 28 out of the 34 OECD countries, but these increases will only keep pace with improved life expectancy in six countries for men and in 10 countries for women. Thus, OECD calls on governments to consider formally linking retirement ages to life expectancy, as in Denmark and Italy, and make greater efforts to promote private pensions.

Private pensions are not a panacea either, as OECD notes that in countries where public pensions are relatively low and private pensions voluntary, such as Germany, Ireland, Korea, Japan and the United States, large segments of the population can expect major falls in income upon retirement.

The report also includes the first comprehensive evaluation of national defined contribution systems. These are:

now a central feature of many countries’ pension systems. Among other recommendations, the report argues that it is critical to set the minimum or default contribution rate in Defined Contribution systems at an appropriate level.

Contributions to these systems need to be high enough so that together with public pensions they generate sufficient income at retirement. While Australia is moving in the right direction by increasing its contribution rate from 9% to 12%, it remains too low in countries such as Mexico and New Zealand (6.5% and 3%, respectively).

Source: OECD News Release (June 11, 2012). See also, OECD, Media Brief.

OECD Pension Reforms Report Also Focuses on Older Workers

The OECD has published Pensions at a Glance 2011: Retirement-Income Systems in OECD and G20 Countries, focusing on pensions, retirement and life expectancy. Among other things, while by 2050 the average pensionable age in OECD countries will reach 65 for both sexes, life expectancy is rising even faster, outstripping the increase in pension ages by about 2 years for men and 1.5 years for women. However, as governments rein in public pension spending rising as a result of population aging, OECD warns that income from work and from private pensions and other savings.will need to fill the gap, so that ensuring that there are enough jobs for older workers remains a challenge.

According to OECD Secretary-General Angel Gurría, "Countries need to do more to fight discrimination, to provide training opportunities for older workers and to improve their working conditions . This would help employers adapt to a greyer workforce."

In addition to providing comparative indicators on the national pension systems provided in the report of the 34 OECD countries, as well as for Argentina, Brazil, China, India, Indonesia, Russian Federation, Saudi Arabia and South Africa, the report includes special chapters on issues including life expectancy, trends in retirement and working at older ages, and ways to help older workers find and retain jobs.

For example, in highlights about France, the report notes:

In addition, the participation rates of older workers aged 60 and over is low: only 19% of men aged between 60 and 64 years participate in the labor market in France compared to 54.5% on average across countries OECD. This percentage is even lower in the age group 65-69: 5.5% in France compared to 29.3% on average in the OECD. For the long-term success of reforms change in the attitudes towards older people is necessary. Employers, both private and public, must learn to see older workers as a real asset and avoid discrimination towards them, invest in their training and adjust labour market conditions and hours of work when needed.

Source: OECD News Release (March 17, 2011)

France: OECD Data Suggests Keeping Older Workers Working Key To Protecting Pension Systems

An Organization for Economic Co-operation and Development (OECD) look at pensions in France and abroad suggests that making it possible for older workers to keep on working is key to making pension systems more affordable. According to OECD numbers, in the 1950's, in OECD countries, there were around 7 workers on average for every retiree, but that, by 2010, this ratio had fallen to 4 to 1, and that, by 2040, this will be only 2.2 to 1.

Comparing France to other states, OECD says that In Sweden and Switzerland 7 out of 10 people aged over 50 work, while in France the figure is one in two. In addition, the the OECD average for years spent in retirement is just over 18 for men and just under 23 for women, but the French people have the longest retirement--28 years for women and 24 for men.

Source: OECD "Pensions in France and abroad: 7 key indicators" (April 10, 2010)

OECD Report on Netherlands Includes Focus on Increasing Participation of Older Workers

The Organisation for Economic Co-operation and Development(OECD), in issuing its "Economic survey of the Netherlands 2008" making assessments and recommendations on the main economic challenges faced by the Netherlands, has specifically focused, among other things, on the role of older workers in the Dutch economy. Although it finds that it has made a strong comeback, the economy is now facing labour shortages, related to the greying of the population and the continued weak labour market-participation of several groups.

OECD recommendations include the adoption of incentives to increase participation in the labour market, including at older ages, so as to widen the revenue basis and, to encourage older workers, strengthen job search requirements and continue making the tax-benefit system more work-friendly.

In his remarkes at a joint press conference held with the Minister of Economic affairs, OECD Secretary General Angel Gurría said:

To further increase participation of older workers, the government should move ahead with its planned reforms and make them more encompassing. Particularly, the new levy on pensioners who stopped working before the official retirement age could be implemented faster and not be applied only to higher income levels. In addition, measures should be taken to reduce the possibility of using the unemployment benefit system, in combination with generous severance payments, as a transition into early retirement.

Sources: OECD Executive Summary (January 31, 2008); NIS News Bulletin " OECD Urges Netherlands to be Tougher on Welfare Recipients" (February 1, 2008)

OECD Issues Call for Better Protection of Occupational Pension Systems

Member countries of the Organisation for Economic Co-operation and Development (OECD) have agreed on new guidelines for governments and regulators designed to improve how certain types of pension funds are run with a view to making employees’ pensions more secure. The OECD Guidelines on Funding and Benefit Security in Occupational Pensions contain a series of recommendations concerning regulation of the funding of occupational pension plans, and in particular defined benefit pension schemes.

Issues covered by the guidelines include the funding and valuation of pension plans and protection of employees’ interests in company pension schemes in the event of their employer or the company that manages their pension plan going bankrupt. The guidelines also call on tax authorities to consider raising maximum funding levels, so as to allow pension funds to build up reserves that will protect them against a downturn in asset values.

According to OECD Secretary-General Angel Gurría, “[p]eople are living longer and need to be sure that their pensions are safe.” The guidelines "will be helpful to OECD countries to ensure that occupational pension plans offer secure retirement benefits to their members.”

Source: OECD News Release (May 10, 2007)

OECD States Governments and Businesses Erried in Pushing Early Retirements in 1990's

Virginia Galt reports in the Globe and Mail that new research by the Organization for Economic Co-operation and Development (OECD) suggests that governments and employers made a mistake, "which has returned to haunt them," by introducing early retirement schemes in the 1990s to push out older employees.

“Many older workers were induced to leave by very generous early retirement schemes, but relatively few young people were subsequently hired in their places,” John Martin, the OECD's director of employment, labour and social affairs, said at a forum in Toronto Thursday.

Now, with overall unemployment rates down but youth jobless rates still well above the international average of 6.6 per cent, employers are starting to complain about shortages of skilled labour, and policy makers are grappling with how to keep more of their experienced older hands in the work force.

Source: The Globe and Mail "Early retirement schemes a mistake, OECD says" (June 15, 2006)

OECD Issues Summary Report on Aging and Employment Policies

The Organisation for Economic Co-operation and Development (OECD) has issued a report--"Live Longer, Work Longer"--that draws out the main lessons that have emerged from the OECD's 21 country reviews in its series on "Ageing and Employment Policies." To help meet the daunting challenges posed by employment and social policies, practices and attitudes that discourage work at an older age, work needs to be made a more attractive and rewarding proposition for older workers. This report disucsses, among other things, work disincentives and barriers to employment, removing work disincentives and increasing choice in work-retirement decisions, changing employer attitudes and employment practices, and improving employability.

Source: News Release OECD (February 13, 2006)