Michele Belloni

Training and wages of older workers in Europe

The financial deficits of many social security systems caused by ageing populations and stagnating economies are forcing workers to retire later from the labour market. An extended working life, combined with rapid technological progress in many sectors, is likely making older workers’ skills obtained in school obsolete. In this context, lifelong investment in training is widely recognised among the international research and policy community as a key element to increase or at least limit the decline in productivity of older workers. This paper investigates the relationship between training undertaken by European older workers and their wages, relying on the Survey of Health, Ageing and Retirement in Europe. There is no evidence of training wage premium for older workers residing in many European countries including Denmark, Sweden, Belgium, the Netherlands, and Switzerland. Very high premiums are instead found for Austria, Germany, Greece and Italy. It is, however, likely that these high premiums are overestimated due to training endogeneity and sample selection bias.

Retirement Choices in Italy: What an Option Value Model Tells Us

Using Italian data this study estimates the option value model in order to quantify the effect of financial incentives on retirement choices. As far as we know, this is the first empirical study which estimates the conditional multiple-years (CMY) model put forward by Stock and Wise (1990). This implies that we have accounted for dynamic self-selection bias. For the subsample of females the CMY model yields plausible estimates of the preference parameters such as the marginal utility of leisure. This last parameter is typically underestimated if one does not take into account the self-selection problem. From our results it becomes clear that dynamic self-selection results in a considerable downward-bias in the estimate of the marginal utility of leisure. We also performed a simulation study to gauge the effects of a dramatic pension reform. It turns out that the underestimation of the marginal utility of leisure translates into a sizable overprediction of the impact of the reform. For males we also obtain plausible estimates. The results for males should be interpreted with caution because we are not able to fully correct for dynamic self-selection bias.

The Option Value Model in the Retirement Literature: The Trade-Off between Computational Complexity and Predictive Validity

This study gives an overview of retirement modelling, starting from the single-period consumption/leisure model up to the recent life-cycle multiple-decisions and joint retirement models, paying particular attention to the role played by the option value model in the economic literature on retirement.

Age and Productivity. Human Capital Accumulation and Depreciation

This NEUJOBS research report focuses on links between age, productivity and lifelong learning. Various data sources (EU-SILC, LFS, Structure of Earnings Survey, SHARE, ELSA, SHARELIFE) and methodological approaches were used in this report. Our analysis identifies clusters of countries with common characteristics of age-earnings profiles (for certain groups of employees) and allows for an explanation of those differences. Some differences can be attributed to the share of sectors, education types, and occupations in country-specific employment. Others are due to labour market institutions and the (dis)incentives to work at older ages provided by social security systems. Additionally, the dynamics of earnings after age 50 differ less between educational and occupational groups than at earlier ages. We show that the dynamics of average wages are strongly influenced by the timing of entering and leaving labour market. An estimation of the impact of LLL on productivity (measured by earnings) at older ages shows that for employees aged 50+, participation in training increases wages in the short-term.

The Effect on Mental Health of Retiring During the Economic Crisis: Mental Health and Retiring During the Crisis

This paper investigates the causal impact of retirement on late-life mental health, a growing concern for public health, because major depressive disorders are the second leading cause of disability. We shed light on the role of economic conditions in shaping the effect of retirement on mental health by exploiting time and regional variation in the severity of the economic crisis across 10 European countries during 2004-2013. We use data from four waves of the Survey of Health, Ageing and Retirement in Europe and address the potential endogeneity of the retirement decision to mental health by applying a fixed-effects instrumental variables approach. The results indicate that retirement improves the mental health of men but not that of women. This effect is stronger for blue-collar men working in regions that have been severely hit by the economic crisis. These findings may be explained by the worsening of working conditions and the rise in job insecurity stemming from the economic downturn: under these circumstances, exit from the labour force is perceived as a relief. Copyright

The Effect on Mental Health of Retiring During the Economic Crisis

This paper investigates the causal impact of retirement on late-life mental health, a growing concern for public health, since major depressive disorders are the second leading cause of disability. We shed light on the role of economic conditions in shaping the effect of retirement on mental health by exploiting time and regional variation in the severity of the economic crisis across 10 European countries during 2004-2013. We use data from four waves of the Survey of Health, Ageing and Retirement in Europe and address the potential endogeneity of the retirement decision to mental health by applying a fixed effects instrumental variable approach. The results indicate that retirement improves the mental health of men but not that of women. This effect is stronger for blue collar men working in regions that have been severely hit by the economic crisis. These findings may be explained by the worsening of working conditions and the rise in job insecurity stemming from the economic downturn: Under these circumstances, exit from the labour force is perceived as a relief.

Gender Difference in Retirement Income and Pension Policy - Simulating the Effects of Various DB and DC Schemes

This analysis evaluates the relative pension positions of men and women, under different characterisations of their respective working lives and pension designs. Both Defined Benefit (DB) and Defined Contribution (DC) schemes are considered, as well as a few variants of their basic pension formula, each exemplifying a stylised normative framework. Not surprisingly, the working career is the most relevant factor in determining the relative retirement income of women with respect to men; pension systems can compensate, but only up to a point. As for a comparison between DB and DC systems, taken without explicit redistributive measures, the latter can fare better than the former in providing a more equal distribution of retirement income between men and women, because it removes the greater return to steeper earnings profiles, more characteristic of men. The introduction of a minimum pension provision in the DB system improves the relative position of women with discontinuous or poor careers, while, in DC systems, a formal recognition of women’s care activities through pension credits seems less effective than neutralising their longer life expectancy in the determination of the pension benefits using unisex longevity tables.

Measuring and Detecting Errors in Occupational Coding: an Analysis of SHARE Data

Abstract This article studies coding errors in occupational data, as the quality of this data is important but often neglected. In particular, we recoded open-ended questions on occupation for last and current job in the Dutch sample of the “Survey of Health, Ageing and Retirement in Europe” (SHARE) using a high-quality software program for ex-post coding (CASCOT software). Taking CASCOT coding as our benchmark, our results suggest that the incidence of coding errors in SHARE is high, even when the comparison is made at the level of one-digit occupational codes (28% for last job and 30% for current job). This finding highlights the complexity of occupational coding and suggests that processing errors due to miscoding should be taken into account when undertaking statistical analyses or writing econometric models. Our analysis suggests strategies to alleviate such coding errors, and we propose a set of equations that can predict error. These equations may complement coding software and improve the quality of occupational coding.

Becoming Self-Employed at Ages 50: True Entrepreneurship or Exclusion from (Wage-) Employment?

▸ Job satisfaction of shifters into self-employment informs us about their risk of social exc lusion ▸ Those who shift into self-employment are the more motivated wage-employed seeking higher j ob satisfaction ▸ Social exclusion is not a likely outcome to those who shift into self-employment ▸ Institutional features, such as the differential inclusion of self-employed and wage-employ ed into unemployment insurances and the level of employment protection, also explain these shifts

Does training help retaining older workers into employment

The long-term increase in longevity, coupled with the progressive compression of morbidity experienced in Europe in the last decades, improved the well-being of many older individuals. However, a failure to adjust the retirement age has exposed poor households to financial distress (Angelini et al. 2009). Staying longer in the labour force may be a solution to preserve an adequate level of resources and limit the risk of economic deprivation, it is also an effective mean to maintain social ties and foster an active life. However, working longer requires investment in human capital over the life cycle (Mahyew & Rjkers 2004), as acquired skills become obsolete as time goes by. The rapid technological progress prevailing in many sectors makes training the older workforce the only effective policy to prevent skills obsolescence (Bishop 1997, Belloni & Villosio 2014). The aim of this chapter is to investigate whether participation in training helps keeping older workers (aged 50–65) in employment. In particular, we use Wave 4 and Wave 5 of SHARE to test the effect of training participation in 2010 (Wave 4) on changes in labour market status between 2010 and 2012 (Wave 5), controlling for a rich set of observable individual characteristics. Information on self-reported current economic status allows us to distinguish between six labour force states: employed or self-employed, unemployed, permanently sick or disabled, retired, homemaker and “other”. To measure training participation we exploit a question in Wave 4 (part of the module “Activities”) which asks respondents whether they attended any educational or training course in the last twelve months.