This study analyses the effects of raising the statutory minimum retirement age from 60 to 62 – as introduced by the 2010 reform – on career progression / professional trajectories and the budgetary balances of the unemployment insurance and pension systems. The aim of this type of reform is to extend the working lives of older people in order to reduce pension expenditure and increase social security contributions; however, the reform may lead to increased reliance on other schemes such as unemployment insurance. The authors apply a double-difference method to administrative data, comparing the 1950 and 1954 cohorts. The results show an increase in unemployment benefit claims between the ages of 60 and 62, due mainly to an extension of the duration of unemployment benefit payments, which increases expenditure. At the same time, the reform has boosted employment between the ages of 60 and 62, thereby increasing social security contributions. Positive effects on employment before the age of 60 are observed, particularly for employees nearing the end of a stable career in large firms. The overall impact on the annual financial balance of the unemployment insurance scheme is negative but very small: at most €36 million, with the increase in revenue offsetting the additional cost resulting from the rise in the number of people receiving unemployment benefits.
Impact of the 2010 pension reform on the financial sustainability of the unemployment insurance scheme
The aim of the study is to assess the impact of the 2010 pension reform on unemployment benefit claims at the end of a person’s working life and, by extension, to measure its effects on the financial sustainability of the system.
Reference IPP Report No. 61
Presentation
Key Results
- The analysis focuses on individuals who worked for at least one month between the ages of 50 and 55 and who
mainly paid contributions to the general scheme before the age of 50. - For individuals not eligible for the ‘long career’ scheme, the increase in the AOD led to a
increase in employment of 20 to 25 percentage points between the ages of 60 and 62, and a rise of 12 to 15 percentage points in the probability of receiving unemployment benefit. For individuals eligible for the ‘long career’ scheme, the restriction on access to the scheme from 2009 onwards led to a positive effect on employment before the age of 60 (+30 percentage points) with a limited increase in the duration of unemployment claiming benefits. - The reform also has effects even before the age at which entitlement begins, with a fall in unemployment receiving benefits and an increase in employment from the age of 57. This effect is particularly noticeable among those who are well-established in employment and working in large firms.
- The financial impact of the 2010 reform on unemployment insurance is broadly neutral. Individuals ineligible for the ‘long-career’ scheme contribute negatively to the balance, whilst others contribute positively. For the 1954 cohort, the financial impact is positive but modest (+€38 million) compared with the gains for the pension funds (around €5.4 billion).
- By extrapolating these effects up to the age of 62, the authors show that the annual cost to unemployment insurance is at most €36 million.
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