The impact of changes in the age at pension eligibility on retirements on grounds of poor health

Michaël Boissonneault, Netherlands Interdisciplinary Demography Institute (NIDI) and University of Groningen
Joop de Beer, Netherlands Interdisciplinary Demographic Institute (NIDI)

Many European countries are postponing the age of eligibility to retirement benefits. This decision rests on the assumption that the older worker from tomorrow will be more able to work than the one from today. American workers are already being confronted with such policy changes: people born before 1938 are entitled to full retirements benefits from age 65, while those born on or after that year see the full entitlement being gradually postponed to older ages. We investigate the impact of those changes first elaborating on the concept of work ability, which represents the balance between the personal resources that enable to work and the work characteristics that workers have to cope with. Then, we introduce the concept of potential career, which is the career people have when they do not have to retire early because of poor health. To adjust to the changes described above, the younger American cohorts extend their potential careers. However, the extent to which those longer careers are realized depends on changes in work ability. Using a multistate model, we test 1) whether work ability is higher for people born in or after 1938 than for those born before and 2) whether the younger cohorts are more often confronted with unrealized careers resulting from the interaction between changes in work ability and in potential careers. Also, people with different education levels may differ according to their level of work ability and in terms of how they adjust to the changes in policy. The two questions are therefore answered distinguishing between the level of educational attainment. We discuss the results in terms of the effectiveness of the changes in the age at eligibility to retirement benefits as well as in terms of the impact such measures have on inequalities in front of work and retirement.