Abstract
We examine whether easy and early access to old-age benefits induce older workers to become inactive. We use Polish LFS data. We find added worker effect prevailing over discouraged worker effect. The latter arises after a few quarters and is asymmetric. Females permanently leave the workforce. More males leave the workforce in contractions than re-enter in expansions. If old-age benefit becomes the main source of income, the worker (after 1 year) is 8 to 20 times more likely to exit the market than unemployment or social welfare beneficiaries. Our findings support higher retirement age—the age when workers become eligible for old-age benefits. JEL classification: J14, J22
Highlights
1 Introduction We ask the following question: to what extent does easy and early access to old-age benefits contribute to the low participation rates of older workers? We examine this question in the framework of work discouragement
5 Conclusions In this study, we performed an empirical analysis of the discouraged worker effect among older workers
We broadened the standard definition of this effect to identify to what extent easy and early access to old-age benefits contributes to the widely observed low participation rates among older workers
Summary
We ask the following question: to what extent does easy and early access to old-age benefits contribute to the low participation rates of older workers? We examine this question in the framework of work discouragement. Significant correlation coefficients of the expected sign (i.e. in line with the discouraged worker effect) were between the following (Table 10 in the Appendix): (i) female participation rates and GDP lagged by 10 periods. Dependent variable: quarterly female participation rate (45+) or male discouraged worker rate (45+) asignificant at the 5% level; bsignificant at the 1% level Source: authors’ calculations; data sources: LFS and Central Statistical Office Poland the dummy variable. It equals one from the period when the cyclical component of GDP reaches a peak until the trough and zero elsewhere. The models experienced poor statistical properties, and we have not identified any other influential variables that could indicate the discouraged worker effect
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