Page 8 - IDEA Duchodova studie

EXECUTIVE SUMMARY

The aim of this analysis is to identify the risks and possible obstacles
associated with faster increases in the statutory and effective retirement ages
in the Czech Republic. The study provides the first detailed quantitative insight
on the phenomena of retirement and old-age-related departures from the
labour market in the Czech Republic, and employs unique, internationally
comparable data from the SHARE survey.

Our analysis reveals that the older generations in the Czech Republic still
exhibit a number of differences when compared with equivalent generations in
more developed countries of Northern and Western Europe. Socio-economic
conditions, educational attainment, occupational structure, and health status
are still lower in the Czech population as a result of the country's historical
development during the 20th century. On the other hand, there have been
rapid and noticeable improvements in these areas in recent years, and these
characteristics are fast approaching the standards seen in the more
economically developed countries of the EU.

Our findings provide little support for the notion that the early effective
retirement age in the Czech Republic can be attributed to inferior personal and
socio-economic conditions among the country's older population. Instead, our
analysis indicates that early retirement and departure from the labour market
are driven by the institutional setup and incentives induced by the country's
tax, welfare, and pension systems, and most likely also by employment policies
that affect both workers and employers' expectations.

The prevailing lower incidence of employment among older men and women
in the Czech Republic, compared to more developed EU countries, can be only
very partially attributed to differences in personal characteristics. We
document that individuals' health deteriorates much more slowly than the age
profile at which people retire and leave labour market. We find that the local
incidence of unemployment relates to retirement patterns for women, but not
for men. Finally, retirement and employment age profiles are significantly
affected by statutory early retirement conditions.

Our analysis does not identify any major risks from raising the retirement age
further above its current levels. Our simulations show that were the Czech
population, with its demographic, health, and socio-economic characteristics,
to be subjected to the Swedish institutional system, the whole employment gap
for men and around 80% of the gap for women would disappear. While the
efficiency and social gains from eliminating this underuse of human capacity
are not directly observable, they are both substantial and essential for the
sustainability of the welfare state in the Czech Republic.

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