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Unemployment benefits and older workers Jan C. van Ours Tilburg University & University of Melbourne.

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Presentation on theme: "Unemployment benefits and older workers Jan C. van Ours Tilburg University & University of Melbourne."— Presentation transcript:

1 Unemployment benefits and older workers Jan C. van Ours Tilburg University & University of Melbourne

2 Setting the stage International comparison of (un)employment rates by age and gender Developments over time for the Netherlands UI benefits for older workers Changes in entitlement & eligibility Unemployment effects: inflow and outflow

3 Employment rates 2009 25 to 54 years55 to 64 years MenWomenMenWomen Netherlands90.779.661.743.6 UK85.474.466.149.3 Germany86.175.463.848.6 France87.876.841.436.7 United States81.570.265.256.4 OECD84.765.364.445.1

4 Unemployment rates 2009 25 to 54 years55 to 64 years MenWomenMenWomen Netherlands3.03.34.03.6 UK6.85.26.02.8 Germany7.66.98.0 France7.28.26.56.0 United States9.27.67.26.0 OECD7.66.96.25.4

5 Employment rates 55-64 years 199420062009 Men40.755.461.7 Women17.535.643.6

6 Older workers in the Netherlands Unemployment rates workers aged 55-64 comparable to prime age workers Employment rates older workers substantially lower but increasing over the past decade

7 Should we worry? Unemployment rates older workers low But: – Low job separation rates – Low job finding rates – Long-term unemployment UI benefits as retirement pathway Unemployment could be lower Role of unemployment benefits – Eligibility criteria – Entitlement

8 Labor market older workers Improvement of employment rates: – Change in pension system from early retirement pay as you go to early retirement actuarially fair – Incentives for unemployed workers Focus of this presentation Quantitatively maybe not so important Showing older workers are influenced by incentives

9 Unemployment benefits Two major changes in UI benefits in the Netherlands: 1.Change in entitlement: reduction of Potential Benefit Duration – not age specific 2.Change in eligibility: introducing search obligations – age specific

10 Entitlement rules - old Several types of benefits: – Short term: 6 months – Wage dependent: up to 3.5 years – Extended: 2 – 3.5 years Unemployed after 57.5 years – Receive UI benefits for 7.5 years – up to old age pensions – Spike in the inflow into unemployment beyond age 57.5

11 Entitlement rules - new August 11, 2003 (weekend): extended benefits were abolished Incentive to become unemployed shortly after age 57.5 disappeared Spike after age 57.5 disappears

12 Eligibility criteria - old Worked 26 out of 39 weeks prior to unemployment Received wage at least 52 days in the 4 calendar years during the 5 years prior to unemployment Register at the employment office Have to accept a suitable job Actively search for work – but only up to the age of 57.5 Drop in job finding rate after age 57.5

13 Eligibility criteria – new Search requirement after age 57.5 was reinstalled Drop in job finding rate at age 575. disappears

14 Natural experiment Before – after comparison Below – above age 57.5 1.Before – below 57.5: cycle before 2.Before – above 57.5: cycle before + age 3.After – below 57.5: cycle after 4.After – above 57.5: cycle after + policy + age (2-1) = age effect (4-3) = age effect + policy effect (4-3) – (2-1) = policy effect

15 Graphical analysis Age at inflow has important effects on entitlement and eligibility rules Policy change affect the incentives After age 57.5: – Inflow does not go up – Outflow goes up

16 Inflow by age 2005

17 Inflow by age 2001-02

18 Annual inflow 2001-022005Diff. 56.6-57.515712257+686 57.6-58.521892488+299 Diff.618231+387 Diff. (%)+40+10-30

19 3 months prob to find job - 2004

20 3 months prob to find job - 2002

21 3 months prob to find job 2001-022005Diff. 55.6-57.58.18.3+0.2 57.6-59.54.86.5+1.7 Diff.-3.3-1.8+1.5 Diff. (%)-40-20+20

22 Graphical analysis - again Age at inflow has important effects on entitlement and eligibility rules Policy change affect the incentives After age 57.5: – Inflow does not go up – Outflow goes up

23 Conclusions Labor market position of older employed workers is not bad Probability to loose their job is small Once unemployed probability to find a job is small too. Low unemployment rates: small inflow rate * long durations

24 Even for older workers incentives seem to work It is possible to reduce inflow into unemployment and increase outflow from unemployment


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