Palmore et al. 1985 ... _-\.s ;;. :- _ '·- oi- ·- modeU · g. the magnirude of unemployment due to early. :-"'. ...... Organizational Psychology, New York: John Wiley, pp.
Eu ro pean Societ ies 4(4) 2002: 393-418 ©2002 Taylor & Francis Ltd ISS N 146 1-6696 pri nt 1469-8307 online
fl
Routledge
2~ Taylor& frand~GrOI..Ip
EARLY EXIT FROM THE LABOUR FORCE BETWEEN EXCLUSION AND PRIVILEGE Unemployment as a transition from employment to retirement in West Germany Matthias Knuth and Thorsten Kalina Work and Technology Institute, Gelsenkirchen, Germany
ABSTRACT: Over the past twenty-five years, unemployment has been growing conti n uously in West Germany. In th is study one of the reasons for growi ng unemployment is analysed : unemployment of older people in their transition from employment to retirement. First, the different possibilities of transitions into retirement are explained within the framewerk of social security regulations . Taking this legal framewerk as a starting point, early retirement passages are then modelled with the lAB unemployment subsample. lt will be shown that- due to the long duration of these unemployment episodes- early retirement contributed considerably to the rise of total unemployment. Early retirement patternswill be broken down by economic sub-sectors and establishment size. lt turnsout that this kind of unemployment originates primarily from large establishments in manufacturing and extractive industries. Multivariate analysis presented at the end of the paperalso includes personal characteristics such as gender or skills and income Ieveis. ln the light of these findings, the 'push' and 'pull' hypothesis common in explaining early exit are discussed. Drawing on the statistical findings as weil as on the institutional analysis, it is argued that both ki nds of factors are at work . Key words: labour force and employment ; size and structure; retireme nt ; retireme nt pol ici es; une mployment insu ran ce
1 lntroduction
_-ill oYer Europe the shares of older people in the papulanon are growing. It i now widely accepted tha t this conrinuing Iang-term rrend is becoming a key furure challenge. The relarion of people older than 60 to people aged _o to 60 ,\-ill change from 3 -._ in 1991 to 72. 7 in _039 for
DOI: 10.1 080/ 146 1669022 000022 351
393
EUROPEAN SOCIETIES 14 12
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Unemployment rates of the age group 50-64 (1999)
Source: Europä ische Kommission (1999).
Germany (cf. Riphahn and Schmidt 1997: 113). Furthermore, the life span people spend in employment is getting shorter due to earlier ex.its of older and la ter inflows of younger people. As this trend i occurring in countries with different institutional and regulatory frame,\·orks it seems to be a fundamental phenomenon in modern industrialized societies (cf. Kohli et al. 1991: 1f.) independent of labour market regulation and welfare regime. By contrast, employment rates of older people differ widely between European countries, and so does the more appropriate indicator of age gaps in employment rates 1 (European Commission 2001: 22). nemployment rates of older people differ even more over Europe, with Germany at the top, followed by Spain, France and Finland (cf. Figure 1). There appears to be no simple and clear consistency between these phenomena: though 'champion' of old-age unemployment, Germany is not leading the European record of unemployment in general. The Netherlands are among the top five in terms of the age gap in employment rates but they have the lowest unemployment rate of older workers. The status and statistical category in which older people will be found if they are not working depends on the exit options affered to them and the way people use them in different countries.
I 394
The difference between the employment rates of prime-age and older workers is a more appropriate indicator because, in a country with an overal1 employment rate below the EU average, a below-average employment rate of older workers would have to be expected.
.:.: : · =·: · om th e labour force
Figure 2.
K UTH & KA LINA
Pathways to retirement
The way societies deal with the problern of ageing workforces varies between externalization, internalization and market strategies. In the concept of internalization the regulatory framework supports older employees remaining in work. Externalization strategies shift the risks of older employees to the social security system (cf. Rosenow and Nasehold 1994: 289f.). Social security systems can support such a strategy by generaus conditions for entering disability pensions, by affering premature old-age pensions, by income supplements for older workers reducing their hours of work ('gradual retirement') or through special conditions of unemployment compensation for older workers (cf. Rosenow and N asehold 1994: 292 ; Kohli et al. 1991: 6). An overview of pathways to retirement is presented in Figure 2. As the following analysis will demonstrate, Germany can be characterized as following the externalization strategy. The G erman system of early exit is shaped by comparatively restrictive conditions for disability pensions, generaus conditions of unemployment compensation for older workers and a premature old-age pension conditioned on prior unemployment. The following article aims to explain the interaction of the latter two provisions in institutional terms, to assess their impact on the Overalllevel of unemployment in Germany, and to analyse which personal and company characteristics are governing options for a pathway to retirement via unemployment. In order to understand early retirement it is useful to conceive of it as a process consisting of two steps which may be separated in time and which imply two decisions in which different actors or systems of regulation must converge: the separation from employment is enacted between the
395
EUROPEAN SOCIETIES
employer, the employee, and possibly employee representatives, and it takes place in the framework of labour law. The successful claiming of a pension is govemed by pension statutes and by doorkeepers like doctors in the case of a disability pension. A reciprocal influence between conditions and (dis-)incentives associated with these two steps is most likely tobe assumed but it is not clear prima facie whether companies urge older workers into a pension or into unemployment or whether the prospect of a pension lures older workers out of employment. In the Iiterature on early retirement these different views can be found in the distinction between 'push' and 'pull' arguments (cf. Kohli etal. 1991: 9f.;Jensen and Kjeldgaard 2001: 3f.; Riphahn and Schmidt 1997). We can find push factors on the Ievel of individuals and companies, for example poor health, working conditions, shrinking of intemallabour markets or rationalization (cf. Palmore et al. 1985; Talaga and Beehr 1989; Kohli et al. 1989; Naegele 1983; Kohli et al. 1991). Pull arguments are typical for econometric analysis. The emphasis of this research rradition is on incentives for retirement on the institutional Ievel, especially the public pension system (cf. Riphahn and Schmidt 1997; Börsch-Supan and Schmidt 200 1; Gruberand Wise 1999). Reference will be rnade to the e different '-iews in the conclusions of the article, and its ma.h1 - n · _ will be contrasred ''-ith results of other research. 02:: ~- abo -- marke ta · tics gi,·e but scanty clues with respect to the :::._: ·.:: o: e-o - :· e.x:i-. _-\frer ha,-ing e:.-ploited this evidence in Section 2, a ·an o -i bac~o-round in social security regulations, .=::-:::: - ~ ..-~ · I"le - cha acterize the data set which was used for more ~ .:::?::..~ --~ ·_-::.:. TI e ec ·an will also e),:plain how the data have been - .:::~- - ~ o :-c":- .,
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Figure 3. Unemployment by age groups, West Germany, 1984- 2000 Source: Official Bulletin of the Federal Employment Agen cy. © Inst it ut Arbeit und Technik 200 1.
lt can be concluded frorn Figure 4 that the gap between the shares of the relevant age group in the population of working age and in the active labour force has widened in the course of the 1990s. T his partial decoupling of ernployrnent frorn dernographic change has led to a highly over-proportional growth of unernployrnent of the age group 55 to und er 60 in cornparison to their share in the population. The increase of wage
Percentages of the age group 55 to under 60 ...
25
r----------------------------------------------------... in the population 16-65
... of the wage and salary earners
20
. . . of the reglstered unemployed ... of unemployed plus reclple nts of compensation in tolerated inactivity (58+)
-
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15 r-------------------------~~~~--------------------
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Figure 4.
r-----------------------------------------------------
Percentages of the age group 55 to under 60 in different categories of the population (West Germany, 1976- 2000) Source: Federal Employment Agency; Statistisches Bundesamt. © Institut Arbeit und Technik 2001 (information on employment by age categories is not yet available for the year
2000).
398
Early exit from th e labour
e
replacements related to jobl figures and specifi c to the age ::: o::_ : ~ : Some explanation seems o be ~ ~=:: :-. could unemployment of pe o _ age rise so tremendously in a co ' -:·· ' =~= ==-:: lation favours employee of olde a:::e .;_::only be explained by the unique Ge.
.
2.2 Unemployment and ea rl y ret ire regu lations
Whereas, in Gerrnany, the statutory age of retirement i 6 -, only \·ery few people actually work until they reach this age. 2 M any people are no Ionger in the labour market when they approach pensionable age, 3 and, during the period analysed, there were - and, with some restrictions, there still are 4 - many ways to a pension before statutory retirement age, namely: • Persons who cannot work because of chronic illness or disability receive a special category of pension until they are transferred to an old-age pension - prematurely at 60, if they managed to pay contributions for a sufficient period before the disability stopped them from working, and otherwise at 65. • All women had the option of retirement at 60 if they had contributed to the social security system for a sufficient number of years during the second half of their working lives. • Both genders could receive a pension at 63 if they had paid contributions for at least 35 years. • For men without recognized disability, unemployment Iasting for at least 12 months was, until recently, the only way of entry to a pension at the age of 60. 5 2. The share of employees who acrually worked umil they were 65 had already d"indled to abou " per cen be "ore 1990 I \"übbeke 1W9: l OS an d ha.s go e dou e,· :Unhe since en. C:-. 22._;;,o h_- ._'-C _2""' : : _. ~3 . 3. For~--=
EUROPEAN SOCIET IE S
1EJ Pensions at statutory retirement age (65 years)
800
f --
0 Early retirement after 35 years of employment (63) 1111 Disability pensions (60) 0 Early retirement for women (60) 1111 Early retirement for unemployed persons (60)
-
200
0
;; ~
"'~ ~"' od o ~ e:.:~ bility for unemployment benefit is exha ed. 7. Unemployrnent benefi .-lrhi~lo.r:r.g~~- is b:u:-.: o;: ==;- __ ::::;: ~- -- ~ :---=:butions granred for ~:-iods "e;x---:k5 o:: : =~ =-~- _ -"-= - _: butions and (_) ao;: e. T.:::e =~ ~ - = : : comributions ; • ; : ;e::;.,-: , -
_
EUROPEAN SOCIETIES
of economic sub-sectors, establishment size and skills level, a data setwill be required which allows event history analyses along the employment, unemployment and retirement histories of individuals. Forthis purpose, we have used the IAB 8 employment sub-sample (IABES) 1975-95 . This is a scientific use file with anonymaus data on 1 per cent of all employees registered by the social insurance system within the given period of 21 years. Nearly 8 million records provide evidence of the employment histories of nearly 560,000 persons. Some information on the establishments9 by which the social insurance registrations were filed have been supplemented, as well as data on periods during which the individuals in the sample claimed unemployment compensation of some sort or received rraining allowances from the Federal Employment Service (for details, cf. Bender et al. 2000). Though rieb in nu mbers and in its longitudinal quality, certain restrictio of this da ta set should be considered. In our context, the following will be relenm: ere · no po iti,-e information on entering an old-age pension. It .· be in erred tha a person who quits either employment or ernploymem ca mpen ation at a pen ionable age and never _ ~ be: g e:nplo~·ed or recei,i.ng cornpensation has actually In reality. this person rnay al o have died or (in ed o her or hi counrry of origin .10 . . : ' da a of indi,iduals are only given by ' ~ .: .- : ::-z. - o: ..- c2._.· aLd month. Furthermore, the whole time .: -2 ~ :..:.. .::,-ic·· "· :::d.S been randornh- hifted b\· a constant _ -- _;_::.: _- : ::Ze :_ ·:,,-: ::.:.· :.... que tion. random between individuals). uration of spells is preserved, but e pell in the calendar is randornly . ~-:-X . .-\s CO · e ,ue:1ce. oe ag of persans computed to be associ2~t' · wi:h a cerrai1 e•em like. for example, disappearance from the data · e· ed as a prm:y for retirernent, are scarrered araund the true value, but " i th rneans unchanged . 3 As for the type of ernployment rel ationships, the administrative procedure from which the sub-sample is derived records only ernployrnent 8. IAB (Institut für Arbeitsmm·kt- und Berufsforscbung) is the research instimte of the German Federal Employment Service. 9. Establishments are the organizational and regional units in which the employment relationship is rooted. In the case of single-site companies, they will be identical with the fim1. 10. In practice, the latter will in most cases coincide with the beginning of the pension period which, unlike unemployment compensation, does not require residence.
402
Ea rly ex it fr m
e Ia
employment in German:- wa ~b; _ (Knuth 1999: 13 ) 1 ~ during the pe. ·od O'·-~=-~c ~ == - 4 As for unemployrnem, the data et con · - o:-~:.- ~~during which some kind of compensation w . the Federal Employrnem Service. _-\ pe on wi ou a =ob~~ _e"'· ..; -::= work may be registered as unemployed withour being en ·cled o ar1:· compensation - which was the case for more than . 0 per cem of unemployment entrants in 1995 (IAB 2000: 61 ). On the other hand, as explained before (Section 2.1), compensation claimants aged 58 or older may be exempt from seeking work and will, therefore, be excluded from official unemployrnent statistics. In the data set used, however, they will appear as drawing compensation - which is exactly what is desired in the context of this analysis. From here on, in explaining the methods and findings of our statistical analysis, the term 'unemployrnent' will refer to the drawing of an unemployrnent-related wage replacement which is not identical with official unemployrnent statistics. 5 Since information on unemployment compensation is unreliable in the data set before 1980 (Ben der et al. 1996: 2 7), our analysis is restricted to the period from 1980 to 199 5. As from 1991, the IABES contains also data of employrnent relationships in East Germany. Being interested in the whole period covered by the sample, we have restricted our analysis to employrnent and unemployment
11. Pensions of civil servants with the privileged status of Benmte, ofjudges and of military personnel are directly guaranteed by the state. Therefore, no social security contributions are paid for them, and their emplopnent relationships are not recorded in the social security S}·stem . Their possible earh· retirement i regula ed "ithin their special pension S}·srem and does not require prior unemplo; enL Tne;- wocid :::: be eligible fo r unemployrnenr cornp=sa .0:1. l::.a·.-=g ~;: ; ~.l..i::ee.: • ha,ing paid unemplo:-m= Ulsurar.ce :::o::::= · .:= -,_ 12. The rnost nume::uus ca:e 5 o:-y o : '"0:-· ·e::-; -
a
EUROPEAN SOCIETIES
careers that evolved exclusively in the old Liinder - individuals with one or more records from the New Liinder were excluded. 13
3.2 Modelling employment episodes
The relevant group to be identified comprises older people who experience persistent unemployment as the final stage of their careers after stable attachment to a particular establishment. Consequently, for the purpose of this analysis, an 'employment episode' is one during which the employee stays with the same employer. German labour and social ecuriry legislation allow for interruptions during which the employment rela ·an hip is suspended while the labour contract remains in effect. 14 · erruption of the employment relationship are regarded here as :-...; ued a chmenr ro the firm because return to the original employer -;:eed. \\nen calculating the dura tions of employment and un_ ". __ : _ ...,...,::~ - ep· -odes. inrermittenr periods tha t were 'bridged' according :..-;:- -..:..:es · v- explain d were not counred as length of tenure or as
. a _- underes tima te long-term . -:-, · o · ' e:nplo~menr begins after each -rrati,·e or purnove nature - - - ·: · ~ :,;, . ..:..:-"ly a -~ ::, > == :o -::::. - -;: o - e Employmem enice, fa ilure to ~ ~ o Z::.:. -· .o g· :as · g -ickn erc. In the l-\BES, such ae · g which the person is neither -a ·an. For the purpo e of this analysis, : :.:..'1e::np;oy::nen- are joined inro a continuous episode if such orr thar it can be a sumed tobe of the technical nature just - 'bed . C ing the legal maximum of punitive suspension from
-= · --::::-:
13. This implies that a person bom in West Germany who took a job in East Gem1any after the unification will be excluded from the analysis - whereas a person bom in East Germany who was not employed in the East after unification but moved to work in the West will be included and appear as a new entrant to the labour force. 14. Examples are maternity leave and military service, both irrelevant to the age categories under consideration, as weil as periods of sickness beyond the six weeks during which the employer is obliged to continue paying remuneration, which is more relevant here.
404
EPISODE I
Speil I
(i ~
z
.
SpeD 2
Time.
Figure 6.
Modelling displacement-related unemployme nt ep isod es
compensation (12 weeks = 84 days) and rounding off for intervening holidays and administrative delays, we arrive at a tolerance of 90 days. So if there are no more than 90 days between two compensation periods and if no employment is reported to intervene in the lacuna, these two periods are interpreted as one uninterrupted episode of unemployment (see Figure 6). Applying this rule repeatedly, several spells of drawing compensation can be joined into one unemployment episode. As pointed out before, the duration of this episode will be computed as the sum of spells of which it is made up; any lacunae are not included in the count of duration.
3.4 Modelling displacement-related unemployment episodes
In order to categorize unemployment inflows and the subsequent unemployment episodes by the characteristics of the last employer, we have to establish rules in which case to link unemployment to previous employment episodes and in which case to refrain from doing so. Sirnations for which this distinction is relevant include the follo\\·ing: 1
EUROPEAN SOC IE TIES
seem appropriate to link their unemployment to the company that happened to be the last employer. 3 Some persans might experience a 'downward spiral' of increasing job insecurity, where displacement from one job which used to be stable leads to another job which turns out to be less stable, and so on, until they finally end up in long-lasting unemployment. Again, it would be inappropriate to link this type of unemployment to the last employing establishment because the final unemployment appears tobe the result of an unstable career rather than the outcome of the last employer's pract:ice.
In order to soh·e these problems, and in accordance with the rule for g unemployment spells together, we have refrained from assuming 2 · - · wi the la emplo~·er if a lacuna of more than 90 days occurred .::w::c e end o the la t emplo~111ent episode and the beginning of an e. episode. Thi oh·e problern (1) above. In order to solve _ d.;]_d ~ . we conrrolled or the relationship between the en be efit and the duration of the prebe at lea t n•ice as long as -- _ · -==- - :--=::::-: ::2··e 'ea..-r: .. ili whole benefit ent:itlement with =- .--..::y ~ :::_ ~:: :::-: __:od o: a\\ · g unemplo~111en t aid that o e than 90 davs will be e · ame employer. e ·-ode obsen·ed in the ·o· ~ -
can be described in rablishment and will ployment' :- ·=:1g ro the rules spelled out above, ~:- i:- · · ual · rmer employer and ,,..-hich will, there.: :-:::. .: :-:::;e-u · ·o a· ·cont:ingen unemployment' . .-\pptying thi Ye!)· consen·at:ive est:imate of displacement-related unemployment, percentages between 3 5 and 46 per cent of total unemployment were derived (see the two lower sect:ions of Figure 7 together). During an economic upswing, displacement-related unemployment declines more markedly than contingent unemployment, thus causing the share of the latter to rise. In other words, in a period when fewer 'fresh' unemployed are produced through company downsizing or closures, the origin of unemployment becomes less visible, and a larger proportion of unemployment appears to be of a 'contingent' nature.
406
Early exi t fr om the labour o
e
3.5 Modelling unemployment rela ed displacement-related unemploym ent
ea
Building on the definitions de,·eloped aixrn:. :::::.:- ::to be identified may be defined as indinc ,~ ' : 1 who enter an episode of displacemem -relared nition in Section 3 .4) at an age reas onabl~- clo·e cally set at 55 or more beca use before ) _ we unemployment episodes to extend until retiremem; 2 who were never again observed tobe in employmen t subject to social security contributions; 3 whose unemployment episode extended until they reached a pensionable age and who then disappeared from the sample altogether. A pensionable age would be 60, when the earliest possible age-related pensions may start. Because of the characteristics of the data set explained above the age variable is blurred, therefore tolerance had to be allowed for cases where the computed age of exit from unemployment was 59. Proposition (3) requires that the unemployment careers of early retirees are observed for some time which emails the problern of right censoring. If some of the time series presented below end before 1995, the last year of the IABES, this is because the values for the last years have been omitted in order to keep the impact of right censoring in tolerable Iimits.
4 Impact factors for taking up unemployment related to early retirement 4.1 The distribution of unemployment types
Using the model criteria defined above, the total unemployment that occurs each year (total days spent drawing unempl o~-mem com. e. ::a ·o can be split into three murualJy exclusi,-e catego:-i -:::
2
3
EUROPEAN SOC IET IES 100
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80
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nemoloymen , 1980-93 , West Germany - " ste1 Ka li na .
Figure 7. T he years in or throughout which ung e i ode of unemployment - -how their full statistical
r
5. In a survey of unernployed carried out in spring 2000 about 15 per cent of the respondents saw thernselves as bridging time till retirement, therefore not being ready for re-ernployment (cf. Brixy et al. 2002).
408
0.025 ~r================--------- - Ag ri
, ex::::~ t-e: ~
- - Manutacturing
=ry
0.020
- - Servi ces re :ed ---+--- Servi ces related to
c
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. - a - Services related to
Q)
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1980
Figure 8.
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
Early retirementlemployment ratio by economic sub-sectors, West Germany,
1980-93 Source: lAB employment sub-sample 1975-95; analysis by Thorsten Kalina, IAT.
4.2 Early retirement/employment ratios by sub-sectors
In order to facilitate bivariate descriptions of unemployrnent related to early retirement, an indicator is needed which is neither affected by changes of the composition of the labour force over time (e.g. in terms of gender, age or skills Ievel) nor by changes of its distribution over types of establishments (e.g. the growing share of smaller establishments and of the service sector in total employment). As a basic concept for solving this problem, early retirement/employrnent ratios are suggested. For any given year, the numerator of this ratio is made up of all the days spent in early retirement-type unemployrnent, while the days spent in employrnent form the denominator. This indicator tells how many days of unemployment due to early retirement are produced by certain categories of establishments or experienced by certain categories of employees, relati;-e to the number of days of employment ob en ·ed in the same categor·~- and the same year. T he indicator expresses omething irnilar to unemplo~ e r rates. By contra t, ho,\·e,·er. it can be b o ·e do • _- c a.:-a .e~...::::; - ~ : the emplo~ing estab · hme t.. or o. ·_- b_-. e _ ::o ~'- a_"-2 .::":-'.._"...: ·. Plotring the early re · e e · \·ery di;-ergen pa e charact eristi
• •
- -=
EUROPEAN SOCIETIES
• It sticks out very clearly that manufacturing is primarily responsible for the rise of unemployment of the early retirement type. So it appears that the far-reaching restructuring which manufacturing and the extractive industries underwent in West Germany after the unification boom led to a sky-rocketing of early retirement. Because of the relatively important role manufacturing still plays in Germany, this had a strong impact on the economy as a whole. Relatively less unemployment related to early retirement originates from the service sectors in general. However, there is considerable variation between them. Services related to infrastructure and transportation (wa ter and energy supply, transports by rail, road, air or vessel; mail and relecommunication services) which experienced some degree of restrucruring in the early 1990s already (and much more since then) fashioned eir disrnissals into unemployment as early retirement in more than oneöfth (-2 per cent) of the unemployment volume- whereas this was still :mo t unheard of in services for households andin personal services (e.g. health services, childcare, education, hotels and restaurants, arts and eclia).
he im pact of establishment size
The pa ttem of early exit from the labour force via unemployment is c. h- related to establishment size (Table 1). Firms with 500 and more e--ployees have much higher shares in displacement-related unemploy:::uezr ( 1.6 per cent) and in early retirement (55 .4 per cent) than should · ;: expected given their share in the total employment volume (26.8 per e::r . Fo~·-s even per cent of unemployment linked to this size category :.s cue 0 early retirement .
easuring the relative impact of different factors by logistic egress ion
.1
From the descriptive analysis it can be concluded that unemployment due to early retirement has increased to a maximum share of 11 per cent in the total unemployment volume of 1993. Early retirement seems to be concentrated in large establishmentsandin manufacturing. These factors, however, are closely interrelated in reality: manufacturing tends to be organized in !arger units. The question to be pursued in this section is which of these factors play a role of their own, independent of the entanglement with other factors. Logistic regression analysis will allow to
410
Early exit fr om the labour o e
TABLE 1. Shares in unemployme nt types a d eGermany, 1993 Establishment size category
J ::-~
Shares in employment volume
S ares - :;:.: 1
(%)
(%)
-
~...---
-
volume
--=-=- ..---(?o)
( "o)
1 to 19 20 to 99 100 to 499 500 and over
25.38 22 .86 23 .90 26.83
10.22 11.29 20.87 55.43
23 .40 20. 39 21.68 31.61
11.72 14.84 25.8 1 4 7.03
Total
98.97
97 .81
97 .08
-27 .00
Note: Differences to 100 per cent are due to missing values. Source: lAB employment sub-sample 1975-95; analysis by Thorsten Kalina.
establish the significance, direction and strength of influence of each variable. Since the possible shifting of relative impacts over time was beyond the scope and budget of this investigation, the analysis was restricted to a single year of reference. Forthis purpose, 1990 was selected as the most recent year that still allows a sufficient period of observation in the data set without right-censoring problems interfering too strongly in the analysis. From the IAB employment sub-sample, individuals with the following characteristics were selected: they were employed in West Germany at some point or during the entire year of 1990 at full-time level. In that year, they were aged 54 16 or over. If they were to experience early retirement via unemployment this should be observed in the data set which covers the period until 199 5. For these persons, the impact of economic sub-sector, establishment size, gender, income and skills level on the probability of experiencing unemployment of the early retirement ~-pe wa calculated . The oYerall results of the logistic regre sion are pre emed in derail in fill uth and Kalina (2002 ). _-\s the 'goodne -of-6 · e which · _ e:e -e - ee s ows. th e model can e:-..-plain the prope i~- o ~- · g · .o..a.:-.y :-"'::i;-c-"'::::-:-c:.l:::..: un employment to a highl)- igni~ ~ that turned out to be irni Figure 9. The rnargina
EUROPEAN SOCIETIES lncome4
lncom 3
lncome
~lncome2
Ski II
College or
Gender
unlvers~
degree
Men
Services related to ousehold and perso s Services related to potitical transactions
Services related to ~onomic Iransaction Services related to nterprises
Sector
Services related to nfrastructure and tra sportation Constructlon indus ry Agrlculture 500 and over
Establishment size - 15.0
-10.0
20-99
-5.0
0.0
5.0
10.0
15.0
Percent - '"lS
""Xl03I is calculated for persons aged 54 and over in the year 1990, who worked full·time.
~
ca:egories: lncome group 1; unskilled ; women; manufacturing ; enterprises with 1-1 9 employees.
So.....---:s A3 ernployment sub-sample 1975-95; analysis: Thorsten Kalina , IAT.
•
•~
~
e 9.
are sifnificant al the 1% Ievel.
Ch ange of probability (in per cent) for early retirement-type unemployment by
,-:; · a:J e categories compared to reference categories (an ly significant categories); West ~=r•any,
1990
ecirement for single variable categories compared to the reference egory. Conceming establishment size, the smallest category (1-19 employees) wa chosen as a reference. Moving on to the next size category, other - ors unchanged, will reduce the probability of early retirement by merely 3 per cent, whereas the size category of 100-499 is almost at par wir.h r.he reference category and therefore not shown in the graph. H oweYer, working in an establishment with 500 or more employees will increa e the probability of early retirement by more than 10 per cent as compared to the reference group. So the basic finding of the descriptive analysis concerning !arge establishments is confirmed, but part of the impact of size is absorbed by other variables, presumably sector being the most powerful one. Belanging to the sub-sector of manufacturing and extractive industries was taken as the reference category for sub-sectors. In accordance with the descriptive analysis, the probability of entering early retirement is lower in any other sub-sector (cf. Figure 9). Of the four service subsectors, notably services for households and persans as well as services to the 'polity' (government, social security, political parties, trade unions, employers' organizations, churches and religious associations, other notfor-profit and non-governmental organizations) stand out with low probabilities of effecting unemployment of the early retirement type.
412
Early exit f rom t he la bou
r e
... '
---
.:1.
•• -
daily income, from \\·hich fi,·e grau -· _ the population, were constructed . - The an . _:s :;: bility of experiencing early retiremem-type · e;:n :o:.-::;:;::::: .: ::.....5 ;: :::- - ~ groups with higher income, ·with the excep ·an o: -~e ~ 5 '-~z- - _ -:: group which is therefore not represemed in Figure 9. Skill matters only at college or university le,-el which red c _ bility of early retirement by 6.5 per cent as compa red ro rhe re~e :-en e category of the unskilled. The difference between unskilled an d killed is not significant. Early retirement via unemployment has become a universal pattern for the rank-and-file blue- or white-collar worker; its use is not restricted to externalizing the unskilled. The gender difference is smaller than would be expected from analysing the social security framework: being a man increases the probability of using unemployment for an early retirement transition by only 4 per cent. The remaining gender difference which appears in descriptive statistics not presented in this article is brought about by other variables, presumably the different gender composition of sub-sectors.
5 Summary and discussion
In spite of employment protection legislation that sets privileges according to tenure and age, unemployment as a final and long-lasting stage of previously stable employment careers has become widespread in Germany, topping the European record of unemployment in old age. In 1993, the most recent year allowing reliable calculations with the data available when the analysis was made, this type of unemployment amounted to almost 11 per cent of the total West German unemployment volume. The variables which turned out to have the strongest impact on the probability of individuals to experience this type of premature transition into retirement are economic sub-sector and establishment size. \\'ith manufacturing on the lead of early retirement records. the decrea ing importance of this sector the rise of en-ice and the inc ea ing i::npo ance of smaller e tabli hmen mürh t brin!!: so e :-e ·e- ·
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EUROPEAN SOCIETIES
mature. There is some indication of this in the finding that services related to enterprises (e.g. advertising, accounting, lawyers, security) and services related to economic transactions (commerce, finance, insurance, real estate) appear tobe less distant from the industrial pattems of early retirement than the other three service sectors (cf. Figure 9). The role of unemployment in retirement pattems is discussed in the Iiterature in two ways: according to the 'pull' theory, unemployment is a gateway for individuals towards retirement, and unemployment compensation serves as a substitute for an even earlier pension; according to the 'push' theory, older workers are made redundant because of selective human re ource policies which also prevent their re-employment. On the rnacroeconomic le,·el, high un employment rates prevent re-employment, · g older unemployed retire early. Testing the lauer hypothesis, chrn.id (199 - ) conclude that unemployment rates have no =~· .: : - ~ w.-: - ·e. ce o the retirernem age of older people. Consequently the ·pull' theOI:· whi ch has also been . _ a:Jcl ~ chmid (_001 ). T her concludefor West G .:.- - _:- ~-~~ ·::.:'::::::_ .oy::r:e=r :S a;: imponan pathway to eligibility for
...:o:: · h · a the micro b·el), e_; -h_- employers, after tacisci. _ - =- ......w=: -: ~=~~o::- .!..::C -s-.ze o: - e - bli hrnem. ·pu h · rnen more ::a" ='o p more rhan the lower, except for th e - - = ~::-:- · - cc~ e =.loo . I a:;:>pea indubi table, then, tha t sorne self-selec....;o go ·eme · by ·pull' facto rs is at work. On the other hand, if 'pul!' were e whole tory ector and size of th e ernploying establishrnent should not ha,-e an infiuence ofhigher magnitude than personal characteristics. Early exit has served as the predorninant safety valve through which the vast structural change from a heavily industrialized towards a developing service economy and from !arge establishments towards smaller units of work has been effected with relatively little social conflict. So this is clearly a 'push' element. Institutional analysis at micro Ievel, not presented in detail in this article, demonstrates how 'push' and 'pull' interact in the concrete process of workforce reductions. Without the employer's 'push' decision to dismiss, anyone entering unemployment by quitting his job on his own _ .
_.: =~ · e ::ee
414
Ear ly exit from t he labour o ce
will be excluded from receinng unemplo~-:::1 Furthermore, ,.;thout redundancy paymen status of unemployed '1\ill be financialiy u; a whose decisions may be influenced b~- nego ·a ·ocs. :~ =:::e o .c acts as a gatekeeper to the full bl ings of me . :...:_:· S:· ::,,;::::. • c.: -: ::= ' -o supplements. On the other hand it is thi ·pt:.11' w· workers - some happily, some grudgingly - a e? ? ·-~ c: -~;: employer's decision (and often also the moral p h o -younger colleag-J.es without resorting to the legal possibilities they \YOuld usually ha,·e. Is there a prospect for change? Vlith effect from _000 Germany inrroduced reforms that will stepwise phase out early pensions for warnen or by virtue of unemployment until 20 11. During the transition period, early pensions can be 'bought' by accepting lower payments. As from 2012, the earliest old-age pensionwill be available at the age of 62, and it will 'cost' a reduction of 10.8 per cent in monthly payments. So these reforms do create some disincentives against early pensions, and they abolish the attractiveness of unemployment as an entrance ticket into an earlier pension. The aim of the reform is raising the average age at which people start drawing a pension. This new framework, however, does not guarantee that people will actually be employed until higher ages. Even if unemployment will be no Ionger a prerequisite of an early pension it can still be used to bridge time between employment and the pension, as women in our sample demonstrate so clearly. The most recent analysis of employment rates, unemployment and pension entries of older people (Koller 2001) remains indecisive as to whether the pension reforms have already effected a reversal of the trend or whether the observed variations merely reflect temporary demographic relief18 and a period of economic growth at the end of the 1990s. Tampering with the pension system - namely raising the statutory retirement age beyond 65 , as repeatedly proposed by some politicians will only result in lower pensions for people who can still afford to retire early or in shorter pension periods . The key question that ocial and employment policies haYe to deal ,,;th i ho'l\· to po iti,·ely in uence companies' employment policie o.:is-a - ~·is older employe . Public aware has been gro"mg in this fiel . bu pr2 ·cal . o=' - ·s -egre b y- ill. 'Gradual retiremen · l-ll~err.. i!-:.er. . , : . - · ~~o.: ,·atiYe potential '1\;th reg-
