In contrast to this expected role, public pension programs may discourage older people from remaining in the labor market. Meanwhile, studies have shown that raising the voting age increases labor force participation. We focus on respondents who had worked as an employee in the private or public sector up to a year prior to the survey year (i.e. after excluding self-employed persons).
In the Employees' Pension Insurance (EPI) programme, which covers corporate and public sector employees, a gradual extension of the eligibility age was achieved during the study period. To calculate SSW, we assume that the annual discount rate for all individuals in the sample was 3%. 3 Note that we focus on respondents who had worked as an employee in the private or public sector (i.e. excluding the self-employed) up to one year prior to the survey year.
This shift in the age at which the ITAX peaked can be attributed to the raising of the age of eligibility for wage-proportionate benefits from 60 to 61.
Model specification
ITAX peaked at age 60 for men in the 1947 and 1950 cohorts, showing that they were most motivated to retire at that age, while ITAX peaked at age 61 for men in the 1947 and 1950 cohort 1953. First, SSA's negative effect on ITAX diminished significantly, meaning that the core component of the public pension program was not a major barrier after voting age. This negative effect of the means test persisted until age 60, although the effect diminished somewhat after age 65.
In addition to ITAX, which is an important explanatory variable, we include the relationship between SSW and lifetime earnings relative to wages earned one year ago and a binary variable for full-time work one year prior to the survey. Experience in full-time work is likely to increase the likelihood of continuing with it. Specifically, we replace a three-variable for the elderly's choice of work and pension with a continuous variable of working hours per week (which is set to zero if you retire).
Most importantly, ITAX is positively associated with retirement and part-time work and negatively related to full-time work; A 1% increase in ITAX reduces the probability of full-time work by 0.166 percentage points and increases that of retirement and part-time work by 0.132 and 0.034 percentage points, respectively. SSW is negatively associated with full-time work and positively associated with retirement and part-time work. In contrast, lifetime income and full-time work one year before the survey are positively associated with full-time work and negatively associated with retirement and part-time work.
Caregiving reduces the likelihood of full-time employment, while having a spouse and higher education increases it. ITAX has a positive effect on retirement, as in men, but its magnitude (0.043) is significantly smaller than in men (0.132); furthermore, ITAX is not significantly related to full-time or part-time work. This regression analysis does not account for the discontinuity of hours worked between full-time and part-time work, but the results suggest a negative effect of current programs on the labor supply of older adults.
Simulations 1 Assumptions
Counterfactual ITAX
The evolution of the hypothetical ITAX with age under each reform, averaged over the male cohorts, is shown in Figure 4. The actual ITAX, shown as a measure of performance, changes from negative to positive at age 50, as shown in Figure 4. If if the means test is removed, the increase in ITAX at age 60 will be significantly reduced and ITAX will remain close to zero until age 64.
ITAX will become slightly positive at age 65, reflecting the reduction in the severity of the earnings test after age 60 and over due to the increase in the threshold for reducing benefits. Finally, extending the wage subsidy will reduce the tax bill for those aged 65 to 69; the extent of the expected tax reduction is similar to the abolition of the salary test. Raising the eligibility age to 70 will result in a much different evolution of ITAX with age.
Individuals' incentive to work declines over the age of 50, reflecting a reduction in the discounted value of additional future benefits, which cannot be claimed until age 70. The counterfactual ITAX will begin to decline at age 60, mainly because: (i) delaying retirement will not only increase future pension benefits, but also result in savings caused by not paying the NPI premium and ( ii).
Simulated impacts of decisions about work and retirement
The difference between the two age groups is probably due to a higher threshold for an earnings-tested reduction in pension benefits as well as lower salary income levels for 65-69-year-olds. The extended eligibility age is expected to reduce the probability of withdrawal by 6.3 and 5.9 percentage points for men aged 60-64 and 65-69, respectively. This pension reform is also expected to encourage more men to switch from part-time to full-time work than is achieved by abolishing the earnings test.
These larger consequences are reasonable given that an increase in the eligibility age will automatically be accompanied by the removal of the earnings test until that age and a reduction in lifetime pension (SSW) benefits. The effect of extending the wage subsidy will be limited to the 65-69-year-olds, and the extent will be very similar to that achieved by abolishing the earnings test for this age group. This is in line with the result that the two reforms will lead to a similar ITAX for the 65-69-year-olds, as can already be seen in Figure 4.
Compared to the results for men, the simulated impact of pension reforms is more modest for women. Specifically, the abolition of the means test has a negligible impact on both age groups; this presumably reflects the limited and insignificant relationship between ITAX and women's work/retirement decisions, as observed in Table 3. Another possible reason is that a significant proportion of women work part-time, which is the case for an earnings-tested reduction limited. in pension benefits.
However, raising the eligibility age appears to encourage women to stay in the workforce and transition from part-time work. In these simulations we do not take into account the positive impact of higher labor participation on the benefits resulting from the 'macroeconomic shift'. This is based on the assumption that each individual views the institutional parameters as exogenous.
Simulated impact on hours worked
Using a single index of implicit taxes (ITAX), which includes various aspects of public pension and other programs, we investigated how the older workers' decisions about work/retirement and hours worked are influenced by them. Based on these estimation results, our simulation results underlined the potential impact of pension-related policy reforms on the elderly's work/retirement decisions and hours worked. The impact on women's decisions is found to be somewhat limited; this probably reflects their more diversified lifestyles, but the impact is likely to become more remarkable as older women gain more opportunities to work as full-time workers.
First, the simultaneity of retirement decisions and benefit claims is ignored in this study. The fact that working retirees form a highway from being part of the workforce to retirement suggests that the two decisions are not identical. An analysis of shared retirement decision-making and claim behavior is necessary to fully understand the behavioral responses of the elderly to social security incentives.
In particular, a revision of the Elderly Employment Stabilization Act requiring firms to either drop the mandatory retirement age or raise it to 65 (effective April 2006) probably confounded the results of pension reforms in the years last. Third, we focused on respondents who had worked as an employee up to a year before the study survey, because our regression models were supposed to examine the probability of staying in the labor force or leaving it. In reality, however, we note from the LSMOA data set that there are some individuals who resumed work after being out of the labor force for a while.
Despite these limitations, the results of this study suggest that policy reforms that are supposed to reduce the negative effects of current pension schemes on work could potentially encourage older people to stay longer in the workforce and promote a shift away from part-time work. work for full-time work among the elderly. In addition, higher revenues from pension premiums and personal taxes are likely to help increase the adequacy of the public pension program by raising benefits and devoting more resources to helping the frail elderly. This study was carried out as part of the project "Investigation of the medium to long-term social security system" carried out at the Research Institute for Economics, Trade and Industry (RIETI).
Formula of the earnings test for the pension benefit: Zaishoku Rorei Nenkin
Formula of the wage subsidy for the elderly: Konenrei Koyo eikzoku Kyufukin
The impact of superannuation eligibility age on retirement and program dependency: evidence from an Australian experiment. The labor supply effect of the abolition of the earnings rule for older workers in the United Kingdom. Revisiting the labor supply effect of social security income testing: new evidence from its elimination and reinstatement in Japan.
The labor market behavior of older people: analysis of the impact of the "Earnings test" and new "Early withdrawal" rule. Results of the multinomial logistic model to explain retirement, part-time work and full-time work for men (N = 30,804). Results of the multinomial logistic model to explain retirement, part-time work and full-time work for women (N = 21,711).
