Labour Law, Social Norms and the Early Retirement Decision: An Empirical Study

Abstract

The study examines the influence of values, social norms and labour law and social security institutions on the decision to exit the labour market and to give up job security and even some income security for early retirement. The paper analyses transitions out of work into various alternative routes of early retirement including unemployment and disability, using comparative panel data in 23 countries including the Baltic States and many East-European countries. The data come from EU-SILC 2005-2008, matched with EVS data for 2008. The results confirm the well-known impact of the generosity of old-age pensions on early retirement but also show the influence of individual values and social norms. Benefit generosity has a larger impact on the early retirement decision of the low-skilled than the high-skilled. The effects of individual values and the early and statutory retirement age as set by labour law and social security regulations appear to differ by gender but not by education or skill level. Social norms have a substantial effect which is however shown to be different for men and women in some instances and more important for the early retirement decision of the high skilled worker than the low-skilled worker, whereas some commonly shared values in society such as a high work ethos exerts a stronger effect on the low skilled workers’ retirement decision.