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Retirement Models and Debates

RN01S04

Thu 27. 8.  16:00 - 17:30
room FA 202

The effect of retaining bonuses on retirement timing — retaining older workers in Norway

RN01

Hermansen, Aasmund; Midtsundstad, Tove
Fafo Institute for Labour and Social Research, Norway

The combined effect of rising life expectancy and declining fertility implies the looming financial crisis of the public pension systems and has made “ageing” a dominant topic on the policy agenda (Hofäcker, 2010, Walker and Foster, 2013, Walker and Maltby, 2012). The prominent solution being advocated to face the challenges arising with an ageing workforce and people “living longer” is “working longer” (OECD, 2006, Phillipson, 2013). Offering a retaining bonus to older workers with the option of withdrawing a contractual pension (contractual early retirement pension AFP) has become a widespread retention measure in Norwegian companies. The aim of this article is to examine whether offering a retaining bonus impacts the likelihood of opting for an early retirement. We use a difference-in-differences approach in combination with a linear probability model and data for the period 2000–2010. The analysis shows an overall average increase in the likelihood of a 61- or 62-year-old worker retiring early in the next two years of their employment during the period under consideration. However, among older workers employed in companies offering a retaining bonus there has been a decrease in the likelihood of opting for an early retirement. The effect of offering a retaining bonus is evident both before and after controlling for selected individual and company characteristics.