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As in the other countries in this volume, the employment rate in Germany for those aged 55 to 69 had been declining in recent decades, and then began to rise dramatically. Among the 12 countries involved in this volume, Germany has experienced the largest increase in the employment rate of the 55-69 age group. This chapter investigates the role of structural policy changes since 1980. We summarize the institutional changes and pension reforms in Germany that may account for the trend reversal, and calculate an implicit tax on working longer. We find that for both men and women the increase in the employment rate coincides with a reduction in the early retirement incentive. The reduction of incentives mainly stems from the introduction of actuarial deductions for early retirement. In recent years the employment rate additionally increased due to the abolishment of specific early retirement pathways.

Inflation-adjusted spending on means-tested subsidies has increased sharply since 2007, and most of the growth was due to changes in eligibility rules, and increases in subsidies per eligible person, rather than increases in the number of people who would have been eligible under pre-recession subsidy rules. In 2007, the non-elderly parts of the safety net paid about $10,000 in benefits per person-year that non-elderly heads of household or spouses were unemployed. By the end of 2009, the annual subsidy rate per person-year unemployed was up to $16,000. As a result, the average private returns to employment are substantially less than they were in 2007. One result of the chapter is a monthly time series for the overall safety net's marginal income tax rate from the point of view of the average marginal worker.

We describe the history of state pension policy in the UK since 1948 and calculate summary measures of the generosity of the system over time and the degree to which it created implicit taxes on, or subsidies to, work at older ages. The time series of these measures, calculated separately for ’example-type’ individuals of different birth cohorts, education and sexes, are then related to the time-series of employment rates at older ages for the equivalent types of individuals. The generosity of the system rose over the period as a whole but has fallen in recent years, and in contrast to many countries there were generally never large implicit taxes on work arising from the state pension system. What implicit subsidies there were in the years immediately before the State Pension Age have been gradually eliminated and the system is now broadly neutral with regard to work incentives. Exploiting variation in pension wealth and work incentives across different cohort-education-sex groups, created by the timing and phasing of pension reforms, we show that both pension wealth and the implicit work disincentives in the pension system are correlated with employment outcomes for men, with the expected negative sign.

In this chapter, we analyze the association between financial incentives and retirement decisions using aggregate data over four decades in Spain. We first compute expected social security benefits from each possible retirement pathway at ages 55 to 69 for a representative worker for each cohort falling in this age range in our observational period. We allow representative workers to differ by marital status, gender, and earnings level. We calculate an implicit tax rate on employment, a measure that weights the gains and losses from working one additional year for each representative worker, and we examine its correlation with employment rates for older workers. The results suggest that financial incentives play a role in explaining the retirement patterns of both employed and unemployed workers.

Employment rates of older men and women in the U.S. have been rising for the past several decades. Over the same period, there have been significant changes in Social Security and private pensions, which may have contributed to this trend. In this study, we examine how the financial incentive to work at older ages has evolved since 1980 as a result of changes in Social Security and private pensions. We find that the implicit tax on work after age 65 has dropped by about 15 percentage points for a typical worker as a result of Social Security reforms; incorporating the change in private pensions, the decline is larger. We provide suggestive evidence that the evolution of retirement incentives has affected retirement behavior.

This is the introduction to the ninth phase of the project on International Social Security. This project, which compares the experiences of 12 developed countries, was launched in the mid-1990s following decades of decline in the labor force participation rate of older men. The first several phases document that social security program provisions can create powerful incentives for retirement that are strongly correlated with the labor force behavior of older workers. Subsequent phases have explored how disability program provisions affect retirement, whether there is a link between older employment and youth unemployment, and whether older individuals are healthy enough to work longer. In the two decades since the project began, the dramatic decline in men’s labor force participation has been replaced by sharply rising participation rates. Older women’s participation has increased dramatically as well. Over this same period, countries have undertaken numerous reforms of their social security programs, disability programs, and other public benefit programs available to older workers. Here we explore how the financial incentive to work at older ages has evolved from 1980 to the present. We highlight the role of reforms in these changing incentives and examine how changing incentives may have affected retirement behavior.

Since the mid-1990s in Canada, the employment and labor force participation rates of older men and women have increased steadily. In this study, we document Canadian trends alongside measures of the incentives to continue working at older ages embodied in Canada’s social security programs. The social security benefit an individual or couple receives largely depends on their career earnings. We demonstrate that Canada’s programs offering means-tested benefits play an important role in the incentives one has to continue working at older ages. While the main pension program (the Canada Pension Plan) offers higher annual benefits when labor force departure and claiming are delayed, every dollar gained by a low-income senior in annual CPP benefits results in a loss of means-tested benefits. We represent this as an implicit tax on continued work. Since the late 1980s, it appears this implicit tax has been declining.

This chapter traces labor market reforms in Belgium over the last four decades. While Belgium was long characterized by low employment and labor force participation rates of the elderly male population, there was a reversal of this trend as the country witnessed a continuous increase in employment rates of older men from the early 2000s on. This chapter provides estimates of retirement incentives for a selected set of typical worker profiles across time and socioeconomic groups and links these series to the labor market performance in Belgium. The results show that the numerous retirement and social security program reforms have had a marked impact on incentives at the micro level. At the aggregate level, results are less clear-cut given the extreme diversity of programs and features in the Belgian institutional context.

A dramatic trend reversal in employment rates of 60-64 year olds has occurred in many OECD countries, where a declining employment rate in the 1980s and early 1990s has reversed since the mid-90s and has been increasing ever since. This “U-shape” in elderly employment is also present in Denmark. We examine how much of the reversal of labor market trends among the elderly can be attributed to the changing incentives of the social security program. We find that the subsidies to continuing work just before the earliest eligibility age and the subsequent tax discouraging working just after the earliest eligibility age in Denmark have been reduced substantially, mainly as a result of the 1999 reform, the 2006 Welfare agreement and the 2011 Retirement reform. In addition, results of simple aggregate regression models show a significant negative and robust relationship between the implicit tax rate and the employment rate and a role for incentives in explaining the trend reversal in the Danish labour market. Thus, in the Danish case a reduction in the tax force to retire early has contributed significantly to the reversal in employment among the 60-64 age group.

This chapter discusses the labor force participation reversal at older ages over the recent decades and relates it to pension reforms that were particularly relevant in Italy since the early 1990s. The combination of high public debt and remarkably fast population ageing, due to the low fertility rate and long life expectancy, prompted important changes in the Italian social security system. We compute retirement financial incentive measures in the public pension system and show how these vary by age, year, income and education. We also show how the incentives system depends on the specific features of the earnings profiles of Italian workers by comparing them with those that they would obtain if the earnings profiles were similar to those in the common case considered in this volume.

We show how the economic incentives to remain in the labor force induced by Sweden’s public old-age pension system and disability insurance program have changed between 1980 and 2015. The most important changes are the major reform of the income tax system in 1991; introduction of earned income tax credits in a series of reforms starting in 2008; a reform of the old-age pension system replacing the old defined benefit scheme with a notional defined contribution scheme; introduction of gradually more stringent eligibility rules for disability insurance; and a change in mandatory retirement rules in 2001. Based on earnings histories for different hypothetical individuals corresponding to groups by gender and educational attainments we calculate the following measures: the replacement rate, social security wealth, the accrual in social security wealth from working one additional year, as well as the implicit tax rate on working longer. We then investigate to what extent the observed changes in these measures concur with changes in employment rates among older workers.

This chapter shows that employment and hours changes 2007–10 were not uniform across demographic groups, but rather fell in amounts related to changes in log self-reliance rates. Self-reliance rate changes tended to be less for persons who were capable of earning a lot and for members of dual-earner or childless households because they were less likely to qualify for safety net programs. Self-reliance rate changes were also less for elderly people. Meanwhile, hours per capita tended to fall more for less educated groups, and tended to increase for elderly people. A more surprising finding is that work hours fell significantly less for married people, even when controlling variables related to demographics and industry. The marital status gap is especially large among women. The education pattern of work hours changes varies by marital status, as predicted by the theory that the expanding social safety net was a major force reducing aggregate work hours.

Over the last fifteen years, France has experienced a reversal of older workers’ labor force participation and employment rates. Changes in health, life expectancy or education levels over the period are trend variables and thus cannot explain this “U-shaped” time profile. Pension reforms and associated changes in monetary incentives to retire are a more plausible explanation. Their impact is measured by the implicit tax rate on working longer, which combines induced changes in the level of benefits and the fact of foregoing one year of these benefits. We also account for changes in the relative importance of alternative pathways to normal retirement. Pension reforms and access to these alternative pathways have moved in ways that can account for a significant part of the “U-shaped” pattern of older workers labor force participation.

There have been a vast number of social security reforms aimed at increasing employment at older ages over the last two decades in the Netherlands. We examine the eligibility criteria and the generosity of the different social security programs from 1980 until 2016, and the changes during this period in the implicit tax rates on working longer at older ages induced by these programs. The reforms mainly lead to more stringent eligibility criteria for, and reduced generosity of, social security programs. Our empirical evidence suggests that these reforms are likely to have contributed to individuals working longer, but it is difficult to pinpoint which reforms have had the largest effects. In addition, we examine the importance of the state pension eligibility age (SPA) for working longer and show that the recent increase in SPA has increased employment. Planned increases in SPA for the current workers are likely to further increase employment at older ages.

We examine how the change in the trend of the employment rates of the elderly has been associated with changes in incentives of social security and its related programs in Japan since the 1980s. We compute the tax force to retire early, using the institutional parameters and synthetic earnings profiles, and juxtapose the tax force measures and the elderly employment rates during 1980 and 2016. Our results suggest that a reduction in the tax force to retire early due to a series of social security reforms has been associated with the recent recovery of the employment rates for men aged 60 years and over as well as the increasing upward trend in the employment rates for women aged 55 to 64 years.

Friedman was the leading public proponent for an all-volunteer military. This chapter traces his influence upon the national debate over conscription, which culminated in Friedman’s service on the Gates Commission. Friedman’s argument relied on economic reasoning and appeal to cost-benefit analysis. Central was his conjecture that the social cost of the military draft, which imposed an “implicit tax” on draftees, exceeded that of the all-volunteer military. This was supported by the work of Walter Oi. Friedman’s position attracted support both within the conservative movement and from across the political landscape, allowing him to build coalitions with individuals otherwise in disagreement with his politics. With the social context ripened by the Vietnam War, Friedman’s argument gained a wide audience and echoed in influential circles, reaching policymakers in Washington and Martin Anderson on the Nixon advising team. The successful institution of the all-volunteer armed force in the USA reflected Friedman’s intellectual entrepreneurship.