Trend Reversal of Old-Age Labour Force Participation in Germany

Retirement ages in industrialised countries have been rising over the last three decades as more people work later into their lives. This column focuses on Germany, examining this trend and the contributing factors. Despite comparable trends in health, educational attainment, and spouse’s labour force participation, these three factors do not appear to explain the rise in retirement age. Instead, changes to public pension rules seem to be the key driver.

Life expectancy has risen dramatically almost everywhere in the world. At the same time, the retirement age has fallen in industrialised countries, putting enormous pressure on their pension systems. More recently, however, working in later life has made a comeback. Employment rates of people aged between 55 and 64 have increased in most OECD countries since the late 1990s (OECD 2017), in a stunning reversal of the long declining trend that began in the early 1970s. The average employment rate for people of this age in OECD countries was 44% in 2000, and reached 58.4% in 2016.1 Will the current rising trend in labour force participation continue, reducing the negative consequences of ageing on fiscal sustainability, or will participation slow down again?

Explaining the causes of this stunning reversal of labour force participation at older ages is the current aim of the International Social Security Project (ISSP).2 The project scrutinises the interactions between social security schemes and retirement behaviour, covering 12 western industrialised countries (nine EU countries, the US, Canada, and Japan).

In this column we focus on Germany (Börsch-Supan et al. 2017), the country that has experienced the greatest increase in the employment rate among the 55-64 age group. Germany used to exhibit a relatively low level of old-age employment (38% in 2000 for the 55-64 age group). Fourteen years later, this rate has reached a stunning 69% (OECD 2017). Figure 1 shows this trend reversal among German men over 55. The picture is more complex for women, who experienced a rather constant increase among the 55-59 age group and a mild reversal among the 60-64 age group (Figure 2).

– Naked Capitalism

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