Labour mobility and retirement

Agar Brugiavini, Mario Padula, Giacomo Pasini, Franco Peracchi

Svendborg, 20-21 July 2010

Work history and pensions

Workers retiring under the same pension regime might receive very different benefits

Timing and length of unemployment spells: Gaps in career associates with gaps in contribution

Number of jobs and job tenure If benefits are not fully portable, higher mobility leads to

lower pension rights “Smoothing” due to social security systems design

This paper: relates incidence and duration of unemployment, tenure in a job, to replacement rate at retirement

12

34

56

# o

f jo

bs

per

indiv

idual

SE DK ED WD Nl BE FR CZ AT IT ES GR PL CZ

Male Female

Number of jobs per individual, by gender

Men have more jobs than women North-South gradient in labour mobility

Number of jobs per individual, by cohort

General pattern: labour mobility is higher for younger generations

02

46

8# o

f jo

bs p

er

indiv

idual

SE DK ED WD NL BE FR CH AT IT ES GR PL CZ

<1935 1935-1945 >1945

Number of job changes with at least 6 months of gap

0.5

1# o

f lo

ng n

on-e

mplo

ym

ent spells

SE DK ED WD Nl BE FR CZ AT IT ES GR PL CZ

Male Female

Most changes job-to-job: SE women have 5 jobs in their life, but just one long gap out of employment

Women more likely to have non-employment spells (maternity)

Average number of years spent in unemployment

02

46

years

in u

nem

plo

ym

ent

SE DK ED WD Nl BE FR CZ AT IT ES GR PL CZ

Male Female

Based on individuals who experienced at least one unemployment episode

Women at risk of longer unemployment spells We pool unempl and looking for a job with unempl and not

searching

Employment duration distribution

SE, DK: many jobs, many short spells IT, ES, CZ, GR: few jobs, no search, no short durations Long right tails

0.0

5.1

.15

.20

.05

.1.1

5.2

0.0

5.1

.15

.20

.05

.1.1

5.2

0 10 20 30 40 0 10 20 30 40

0 10 20 30 40 0 10 20 30 40

SE DK NL BE

FR CH AT IT

ES GR PL CZ

ED WD

Density

years of tenureGraphs by North-South recoded country

Replacement rates by country

IN: only retired individuals who moved from main job into retirement. No other pathways (e.g. disability)

Reduced cross coutry variability compared to career patterns: smoothing due to Socail Security Systems design

No significant gender/cohort differences within country (small sample?)

0.1

.2.3

.4.5

.6.7

.8.9

1R

epl

ace

men

t Ra

te

SE DK ED WD NL BE FR CH AT IT ES GR PO CZCountry

Country

Unemployment and replacement rates

More unemployment episodes lead to lower replacement rates

Longer unemployment episodes lead to lower replacement rates

SE

DK NL

BE

FR

CH

AT

IT

ES

GR

PL

CZ

ED

WD

.6.7

.8.9

Rep

lace

men

t Rat

e

1.5 2 2.5 3 3.5Average unemployment duration per individual

Country means Fitted values

SE

DK

NL

BE

FR

CH

AT

IT

ES

GR

PL

CZ

ED

WD

.6.7

.8.9

Rep

lace

me

nt

Rate

.05

.1

.15

.2

.25Unemployment spells per

individualCountry means

Fitted values

Employment and replacement rates

POSITIVE LINK between number of jobs and replacement rate

NO LINK lenght of empl spells and replacement rates (once Greece is not considered)

SE

DKNL

BE

FR

CH

AT

IT

ES

GR

PL

CZ

ED

WD

.6.7

.8.9

Rep

lace

men

t Rat

e

1 2 3 4 5Employment spells per individual

Country means Fitted values

SE

DK NL

BE

FR

CH

AT

IT

ES

GR

PL

CZ

ED

WD

.6.7

.8.9

Rep

lace

men

t Rat

e

10 15 20 25 30Average job tenure per individual

Country means Fitted values

Job-to-job changes signal career/earnings/contribution improvements

Legal old age pension at retirement and replacement rates

SE

DKNL

BE

FR

CH

AT

IT

ES

GR

PL

CZ

.6.7

.8.9

Repla

cem

ent R

ate

58 60 62 64 66Legal old age pension

Country means Fitted values

Where govt induce to work longer, positive effect on benefits

Formula effect: depend on how career lenght enters benefit computation

“Filling” effect: longer career compensate for gaps

Conclusions

Labour mobility varies across Europe, with a North-South gradient

Work life histories affect pension entitlements

GAPS matter: number of unemployment episodes and their duration reduce replacement rates

LABOUR MOBILITY signal career improvement, not weak labour market attachment: faster career, faster contribution accrual

Labour market de-regulation is not detrimental for income at retirement, provided it is tempered by policies that limit long-term unemployment