Women's Retirement and Pension Reforms: Insights from Research
Discover the impact of pension reforms on women's retirement plans through research conducted by Tito Boeri at Bocconi University. Explore the gender employment gap, labor market dynamics, and factors influencing women's labor supply and retirement decisions. Gain insights into the complexities of pension systems and their implications for gender disparities in retirement.
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PENSION REFORMS AND WOMEN RETIREMENT PLANS Tito Boeri Bocconi University, Fondazione Rodolfo Debenedetti, Netspar and IZA
Background Two papers on the interactions between labor markets and pensions: T. Boeri and A. Brugiavini (2009), Pension Reforms and Women Retirement Plans. Journal of Population Ageing, 1(1), 7-30. T. Boeri and V. Galasso (2010), Is Social Security Secure with NDC? in Holzmann and Farmer (eds). NDC Systems around the World, forthcoming.
Outline The Employment Gap in Italy The never ending Pension Reform and associated derailment risks Career breaks decisions before and after NDC Labour market dualism and the gender pension gap never ending Gender and retirement
A stubbornly large gender employment gap Trend Relative Employment/Population Rate of Women 1970 1975 1980 1985 1990 1995 2000 2005 2008 Australia Austria Belgium Canada Denmark Finland France Germany Ireland Italy Japan Netherlands New Zealand Norway Portugal Spain Sweden Switzerland UK US EU15 0.48 0.57 0.47 0.50 0.63 0.76 0.55 0.53 0.37 0.36 0.61 0.31 0.41 0.48 0.50 0.32 0.67 0.51 0.55 0.55 0.49 0.53 0.58 0.50 0.58 0.70 0.81 0.59 0.57 0.38 0.39 0.60 0.37 0.46 0.60 0.54 0.35 0.75 0.54 0.61 0.61 0.51 0.58 0.59 0.54 0.66 0.77 0.86 0.65 0.61 0.41 0.43 0.62 0.44 0.52 0.70 0.57 0.37 0.84 0.57 0.66 0.69 0.55 0.64 0.63 0.60 0.74 0.83 0.90 0.69 0.64 0.46 0.47 0.65 0.53 0.62 0.78 0.63 0.40 0.91 0.60 0.72 0.75 0.60 0.71 0.69 0.66 0.80 0.86 0.92 0.73 0.69 0.53 0.50 0.68 0.63 0.73 0.84 0.69 0.44 0.96 0.65 0.78 0.80 0.65 0.76 0.74 0.72 0.84 0.87 0.92 0.77 0.75 0.62 0.53 0.69 0.71 0.79 0.88 0.75 0.51 0.97 0.69 0.82 0.83 0.70 0.79 0.78 0.77 0.86 0.88 0.91 0.80 0.79 0.69 0.57 0.70 0.77 0.81 0.90 0.79 0.57 0.95 0.74 0.84 0.85 0.74 0.81 0.82 0.78 0.88 0.89 0.94 0.84 0.83 0.75 0.64 0.71 0.81 0.82 0.92 0.83 0.68 0.93 0.83 0.84 0.84 0.78 0.83 0.83 0.82 0.90 0.89 0.93 0.87 0.84 0.79 0.66 0.72 0.85 0.84 0.93 0.84 0.75 0.93 0.85 0.84 0.85 0.81 Mean St. Dev. 0.51 0.12 0.55 0.12 0.60 0.13 0.66 0.14 0.71 0.13 0.76 0.12 0.79 0.10 0.82 0.08 0.84 0.07
Peaking at 50 Women-Men Employment Gap per Age Group 35 30 25 20 Italy 15 US EU15 10 France 5 0 -5 Source: OECD, 2009
Pensions and Labour Supply Women s labour supply is more responsive to changes in the internal rates of return of pension systems (Blundell et al. 2002; Disney 2004) Why? Differences in preferences Intra-family bargaining Productivity in home-production Longer life expectancies Gender differences in working-careers (Claire 2004; Baxter 2001)
Gap Years per retired individual Bank of Italy Survey of Household Income and Wealth. Difference between years of potential activity (since beginning of career) and years of contribution, as stated by the individuals. ITALY Men Women Age\Education Low Medium High Low Medium High <50 50 55 56 60 61 65 66 70 71 75 >75 1.35 2.61 3.87 7.72 9.79 11.05 11.67 0.38 1.34 2.01 3.16 5.74 5.56 6.21 0 0 1.87 3.38 10.8 13.19 13.57 13.31 14.55 1.43 2.02 5.44 8.11 7.25 7.11 7.47 1.36 0.89 0.79 0.79 2.36 3.33 2.25 0.6 1.51 1.34 1.95 2.07 Source: own calculations on the SHIW data, 1989 2002 waves
Summary The Gender Employment Gap in Italy The never ending Pension Reform and the associated derailment risks Career breaks decisions before and after the NDC Labour market dualism and the gender pension gap and retirement
The 1995 Pension Reform It introduced a notional defined contribution (NDC) system from a Defined Benefit (DB) system Pension benefits are automatically linked to an average of lifetime earnings, adjusted actuarial coefficients by some
How the system operates + 1 n 1 n = + w j (1 ) p w g i = j i = + 1 i 1 m = + 1 i (1 ) = 1 i Where: p is the pension benefit is the contribution rate on labour earnings (wi) n is the number of years of contributions g is the rate of return on the contributions (moving average of GDP growth) is the annuitisation (coefficiente di trasformazione) is an imputed indexation rate m is the expected length of retirement
Many decisions still to be made PENSION REFORMS AFTER 1995 Year Description The "Prodi Agreement" speeds up the increase in the early retirement age, harmonises public and private pension regimes and increase pension contributions paid by self-employed workers. Introduction of new compulsory pension contributions for all self- employed workers not covered by existing compulsory schemes. Enforcement of controls on invalidity pension recipients to verify their medical conditions. Minimum pension is increased to 516 euro. The Law of Reform of the Pension System, fully implemented only in 2008, progressively increases retirement age, makes it possible to accumulate pension benefits, earned income and supports development of supplementary pension schemes Introduction of a "Super bonus" for workers in the private sector who, having acquired their pension rights between 2005 and 2007 will decide to continue working afterwards. Reform of the supplementary pension system, providing for the transfer of workers' current end-of-service allowance (trattamento di fine rapporto, TFR) to occupational pension funds unless the workers object. 1997 1998 1999 2001 2004 2005 2005
Future Challenges Completenessand Design of reforms: Long and unfair transition (up to 2032) Revision of coefficienti di trasformazione Indexation of pensions Front loading Which Growth rate? Wage or GDP growth? Vintage Pensions
Social Security Wealth before and after the 1995 Pension Reform Social Security Wealth (SSW) according to the pre- reform (red line) and the post-reform legislation (blue line) Men Women
Outline The Gender Employment Gap in Italy The never ending Pension Reform and derailment risks Career breaks decisions before and after the NDC Labour market dualism and the gender pension gap and retirement
Effects of gap years on planned retirement decisions before/after NDC In the long transition to NDC, 3 groups Senior: workers with more than 18 years contributions in 1995, fully exempted from the NDC reform Mid-senior: workers with less than 18 years contributions in 1995, moving only pro- quota to the new regime Junior: people starting to work after 1996, hence entirely under the new regime
The never ending transition ITALY Pensione garantita con il sistema retributivo 100 80 60 NDC DB (%) 40 20 0 Age in 1996 SWEDEN Pensione garantita con il sistema retributivo 100 80 NDC DB 60 (%) 40 20 0 Age at the time of the reform
Effects of gap years on planned retirement decisions before/after NDC +.83 +2.81 1.98
Diff-in-diff Mid Men +2.81 Senior Men +.83 Difference in differences: + 1.98 Mid Women +3.66 Senior Women +2.44 Difference in differences: + 1.22
Multivariate Analysis: Men Pooled OLS
Summarizing The shift from DB to NDC increased planned retirement. Men more reactive than women to changes in pension rules, but women more affected by gaps in career. Binding constraints related to eligibility to early retirement reduce the women to changes in pension rules. responsiveness of
Outline The Gender Employment Gap in Italy The never ending Pension Reform and derailment risks Career breaks decisions before and after the NDC Labour market dualism and the gender pension gap and retirement
The Wage Gap and Dualism Median wage - temporary job Blue collar 1000 1200 800 600 400 200 20 30 40 50 60 70 Age Males Females Median wage - permanent job Blue collar 1400 1200 1000 800 600 20 30 40 50 60 70 Age Males Females
Pension simulations We consider two representative individuals respectively entering with temporary contracts (case A) and with permanent (case B) contracts and simulate their future pension benefits for both men and women. We concentrate on individuals with upper secondary education. Their wage profile is calculated using European Household Panel data obtained by pooling the 1994-2001 waves. Commission
Pension simulations Labour Market Prospects - MEN 2100 1900 1700 1500 Dual work career: - 25-28: Temporary Job (Co.co.pro.) - 29: Unemployed - 29-31: Fixed Term Job - 32: Unemployed - 33-34: Fixed Term Job - 35-65: Permanent Job 1300 1100 Dual Worker 900 Permanent Contr. Job 700 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 Labour Market Prospects - WOMEN 1700 1500 1300 1100 Dual Worker 900 Permanent Contr. Job 700 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65
The gender Pension Gap NOTIONAL DEFINED CONTRIBUTION SYSTEM GENDER PENSION GAP Gdp Growth Retirement Age Dual Worker Permanent Job 67 65 60 67 65 60 67 65 60 13,44% 13,68% 14,20% 13,38% 13,64% 14,18% 13,35% 13,61% 14,17% 23,89% 24,14% 24,68% 23,83% 24,10% 24,67% 23,79% 24,07% 24,65% 1.5% 1.2% 1.0% DEFINED BENEFIT SYSTEM GENDER PENSION GAP Retirement Age Dual Worker 65 10,12% 60 12,11% Permanent Job 20,24% 22,42%
Final Remarks Breaks decisions of women more than men After NDC stronger effect of career breaks on retirement women Labour market dualism is an additional source of discontinuous careers and lower pensions particularly under NDC Issues of adequacy: problem of pension rules (actuarial increase and/or of labour market rules? in career affect retirement decisions of after 65?)
