About the Project
Projectleader: Raymond Montizaan and Andries de Grip
Current research team: Ineke Bijlsma, Andries de Grip, Didier Fouarge, Raymond Montizaan, Vegard Skirbekk
Funded by: Netspar kennisnetwerk voor pensioen en oudedagsvoorziening (2016)
This project analyzes the relationships between, on the one hand, workers’ tasks, vitality and human capital development and, on the other hand, the various transitions from work to retirement and individual health in the increasingly dynamic and flexible Dutch labor market. The project builds on (1) unique matched employer-employee survey panels we developed in collaboration with APG, (2) the CPB-ROA Netherlands Skills Survey (NSS) and (3) register data from hospitals and general practitioners which are matched to administrative data on labor and retirement of Statistics Netherlands. The project includes three lines of research.
First, the project generates a thorough understanding of the broader societal impact of pension policies. We estimate the causal effect of past pension reforms in the Netherlands on various related transitions from work to unemployment, bridge jobs, part-time retirement, self-employment, and full-retirement, as well as to employment after mandatory retirement.
Second, we will focus on these interrelationships from both an employer and employee perspective as retirement patterns are affected by both supply and demand factors. The incorporation of the employer perspective allows us to uniquely establish the importance of employers’ preferences, their tasks allocations and investments in the human capital of their older workers for individual retirement behavior and workers’ vitality.
Third, we use the matched register data on health, labor and retirement to analyze general as well as heterogeneous effects of pension reforms on a variety of health outcomes and mortality and to identify the main mechanisms behind these health effects.
KEY RESEARCH QUESTIONS
Our project focuses on the following three research questions related to the above mentioned two lines of research:
- What is the impact of the tasks workers have, their human capital development and their vitality on the selection of different pathways from work to retirement in our changing retirement system?
- What is the impact of employers’ tasks allocation in jobs, skills demands, and human capital investments on older individuals’ vitality and employment prospects?
- What are the short-term and long term effects of the Dutch pension system reforms on health of older employees and retirees? And how heterogeneous are these short-term and long term effects?
RELEVANCE TO PENSION PRACTICE IN THE NETHERLANDS
Population aging and the increasing life expectancy challenges the sustainability of pension systems and has led to pension reforms in most industrialized countries. The sustainability of pension systems has been further challenged by the 2008 financial crisis. In response to these challenges, governments, social partners, insurance companies and pension funds have strong incentives to increase the labor supply of older generations. A major concern to these stakeholders is whether these policies will increase inequality in income and health outcomes and increase of health costs. The policy debate in the Netherlands has emphasized that low-skilled workers with health issues or those who perform demanding physical or cognitive job tasks cannot be expected to retire later due to health reasons. It is therefore of vital importance to improve our knowledge on how various health conditions, different jobs tasks and skill investments during the life cycle are related to retirement transitions, and on the degree to which human capital investments can alleviate the impact of demanding tasks and health conditions.
Whereas earlier research operationalized health in global terms, we focus on a great variety of health conditions. The available panel data in combination with several pension reforms that provide natural experiments allows us to analyze the different causal directions of the relationship between health and retirement patterns. This enables us to analyze which health conditions provide serious barriers to continued employment. Locating in which sectors people with these health conditions mostly work will provide pension funds with useful information on the potential effectiveness of financial incentives to stimulate continued employment.
A unique feature of this project is that we analyze the short term and long term health responses of employees to substantial retrenchments in their pension rights. It is highly relevant to get a good overview of potential positive and negative health effects of continued employment. Governments and health insurance companies can benefit from more insights in the size and composition of the group of Dutch workers who will have to continue working in poor health due to the retrenchment in their pension rights, and therefore face a high risk of further deterioration of their health. In particular, chronical health risks are costly to individuals, insurance companies and the society as a whole.
Moreover, pension funds and insurance companies benefit from better knowledge of the impact of continued employment on the increase in life expectancy of their customers. Pension funds can profit from new insights into the determinants of employees’ retirement decisions, while the results will help decision makers to design and implement tailor-made pension system interventions that avoid unnecessary reductions in well-being of vulnerable groups in society.
Finally, a novel feature of this project is that we approach our topic from both an employee and employer perspective. This employer perspective has largely been ignored so far. For a good understanding of the retirement process, however, both labor demand and supply factors have to be explored and discussed. This project aims to fill this gap in the literature and policy debate.