Older Workers in Europe – A significantly larger increase in employment than the one observed for the general population (1997‐2011)

European welfare states are under stress: demographic and social changes are leading to increasing demands in terms of expenditures at a time when the population in working age is shrinking. In the face of this observation, academic economists have been promoting the idea of increasing the employment rate of the elderly as one key policy area. With the arrival of the Open Method of Coordination and the Lisbon criteria in 2001, this policy objective has also been put on the agenda of policy makers – either explicitly or implicitly.

The present paper provides a fresh look at the question using European Union Labour Force Survey micro‐data. It innovates with respect to the literature in two areas. First, it takes a comparative approach between Belgium and its neighbors France, Germany and the Netherlands. Second, it extends the usual benchmarking based on employment rates alone to also include hours of work data.
Our results are twofold.

First, we construct probit models of employment and show that older workers aged 50+ have by and large a significantly larger increase in employment than the one observed for the general population over the time period 1997‐2011. Our findings indicate some “catching‐up” phenomenon with older cohorts looking increasingly like prime‐age ones. We find substantial differences between men and women, pointing to the need to take the gender dimension into account when considering labor market policies. We further find that vulnerable groups, such as less educated and first‐generation immigrants, fared less well relative to the reference groups.

Second, we complement the employment rate analysis by an hours‐of‐work analysis. More specifically, we investigate to which degree – if any – there has been substitution between employment and hours of work for the individuals under study. For this purpose, we estimate a Heckman selection model and evaluate the changes in hours of work. The results show that for some groups in the 55‐64 age bracket, reductions in observed average hours of work can be as important as 8% for the case of Belgium.

To evaluate the relative importance of the above factors, we complete the analysis by a micro‐ simulation approach that decomposes the change in total hours of work for the various age‐sex groups into a demographic, extensive (employment) and intensive (hours) margin. Our results indicate that in the period of observation, changes in employment rates have been sufficiently strong to offset any negative hours of work tendencies.

Chosen excerpts by Job Market Monitor. Read the whole story at  Old-age employment and hours of work trends: empirical analysis for four European countries