Page 13 - IDEA Study 7 2015 Working Beyond Pensionable Age

In order to choose an appropriate, focused policy to increase employment among the elderly, it is important to distinguish whether retirement and its timing are voluntary or involuntary. Involuntary retirement could be enforced by an individual's health status, or that of a partner or family member, and could also be caused by the situation on the labour market, if for example the individual either loses his job or is presented with an offer of higher severance payment if choosing to retire sooner. On the other hand, voluntary retirement occurs when the individual leaves the labour market and becomes a pensioner simply because he wants to – for example, because he has reached statutory retirement age, his spouse has reached statutory retirement age, or he wants to spend more time with his relatives (typically grandchildren). As far as voluntary retirement is concerned, there are no obstacles to continuing to work; the individual stops working and retires because he wants to retire and the system allows it. In the case of involuntary retirement, there is no space for institutional incentives for the elderly to work, via the tax, benefit or pension systems, because higher remuneration cannot convince elderly people who have been forced to retire to work. Instead, there is space for other types of incentives and policies, which help to employ the elderly or improve public health. However, institutional incentives via the tax, benefit and pension systems can increase employment among the elderly if the elderly retire voluntarily. In this case, institutional incentives may be beneficial, because individuals who retire voluntarily do not face any obstacles to work, but are simply not sufficiently incentivized to keep working. Institutional incentives to work, such as tax credits for the working elderly, increase the remuneration elderly individuals receive from their work, which may persuade them to postpone their exit from the labour market. The graphs that follow provide evidence that voluntary retirement plays an important role in the Czech Republic, and confirm that institutional incentives for the elderly to work are an appropriate policy to adopt in the Czech Republic. Graph 4 depicts the reasons for retirement. Since 1990, 70–80 % of individuals have reported voluntary retirement (each year), 10–20 % reported health problems as their main reason for retirement and 10–20 % retired each year owing to difficulties finding a job. Health and employment problems are typical reasons for retirement among individuals retiring early (before reaching the statutory retirement age). The graph shows that the share of voluntary retirees has been quite stable since 1990. Therefore, graph 4 supports our hypothesis that there is room for institutional incentives for the elderly to work in the Czech Republic. 11