The Labour Market for Older Workers: Mechanisms and Institutions

Abstract

European labourmarkets are ageing. The share of older workers in the labourmarket is increasing strongly because of the combination of the ageing of the population and the increasing participation rate of older workers. The ageing of society and the resulting pressure on the pension systems have led tomany reforms to encourage longerworking lives, as advocated by OECD (2006). Part of these reforms have been successful and the participation rate of persons aged 55–64 in the EU27 has increased to 55% in 2013 (Fig. 1). The participation rate of older workers increased even stronger in the Netherlands. The share of older workers will continue to rise as the increase in the statutory pension age will become effective in the upcoming years in many countries. The labour market for older workers is special because of the low re-employment rate in case of unemployment. Unemployment in itself is not a special problem as for persons aged 55–64 the rate is only 8% in 2013 in the EU27. For youngsters aged 15–24, the rate is much higher with 23%. For the Netherlands, the unemployment rate of the elderly of 6% is also low compared to 11% for the youngsters. The special feature of the labour market for older workers becomes clear once they get unemployed. Their re-employment rate is low and their long-term unemployment risk is high (Koning and Raterink 2013). Their horizon to retirement becomes shorter and shorter, leading to a so-called endgame effect (Saint-Paul 2009; Cheron et al. 2011) including low search efforts and low human capital investments. Furthermore, older workers are at risk of getting stuck in old occupations with low prospects and limited job satisfaction (Autor and Dorn 2009; Bosch and Ter Weel 2013).