Page 23 - IDEA Study 7 2015 Working Beyond Pensionable Age

the past may not be eligible again. Therefore it is natural, and in accordance with practice, to assume that unemployment benefits do not form a standard part of the net participation tax rate. Graph 11 shows that the average net participation tax rates of prime age individuals, who are not eligible for early retirement, are slightly higher, almost comparable with the net participation tax rates of individuals eligible for old age pensions. In other words, these groups are presented with the similar tax and benefit system incentives to work although their temptation to leave labour market significantly differs. Pensioners increased temptation to leave labour market is not offset by higher incentives to leave labour market. A comparison of the net and gross participation tax rates for these two groups suggests that the magnitude of social benefits sacrificed does not significantly influence their incentives to work. The social benefits sacrificed are, however, important to individuals eligible for early retirement. Economically inactive members of this age group can collect their old age pension early, while working members of the same age group cannot collect their pension benefits early while still working. Therefore, working individuals of early retirement age must sacrifice their potential early retirement pension income. Their net gain from work is lower by the value of the early retirement pension they sacrifice, and the incentive for them to work is therefore lower. This is shown in graph 11 by the significantly higher net participation tax rate among individuals eligible for early retirement. Graph 11: Average net participation tax rate conditional on age and gender Source: SILC 2012 for the Czech Republic, TAXBEN, own computations Net participation tax rate evolution and availability of unconditional income (old age pension) should cause that individuals will retire immediately after reaching age, when 21