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Early retirement as a labor force policy:
an international overview
In grappling with the problems posed by high and persistent unemployment which continue to plague the countries of Western Europe and North America, an array of labor market policies have been implemented to lower or at least contain the ranks of the unemployed. Such policies aim at influencing the supply of or the demand for labor.1
Stimulating demand traditionally has been the main policy tool against joblessness. In recent years, however, there has been a noticeable trend away from demand expansion out of fear of rekindling the inflationary spiral. Instead, there has been a growing reliance on supply-oriented measures, such as restrictions on labor migration from abroad, repatriation of foreign guest workers, reduction of hours of work, work sharing arrangements, and increases in the legal working age and the number of years of mandatory schooling. The most frequently employed among such methods, however, have been policies to induce early retirement through various social security schemes.
These early retirement programs, many of which were initially formulated to achieve broad social goals rather than labor market equilibrium, have taken several forms: (1) prerecession schemes, originally introduced within the framework of social policies to benefit older workers, which have been expanded or more aggressively pursues;2 (2) other types of schemes, such as disability programs, into which economic and additional health criteria have been introduced;3 and (3) specific recession-oriented measures to promote premature retirement which were established in response to chronic high rates of unemployment of the 1970s and early 1980s. In practice, however, it is often difficult to distinguish among these three categories.
This excerpt is from an article published in the March 1987 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 Wage subsidy schemes, a measure designed to boost the demand for labor, were discussed in Economic Commission for Europe, Economic Survey of Europe in 1983 (New York, United Nations, 1984), pp. 38-54.
2 For example, under the Social Security system, retirement with actuarially reduced benefits prior to age 65 was initially made available to women in 1956 and in 1961 to men. With the United States in the midst of a recession in 1961 and suffering from almost 7-percent unemployment, it was recognized that unemployed older workers would encounter enormous difficulties in finding jobs.
3 It should be noted that the expansion of disability programs was also partly a consequence of the changing definition of good health; thus, eligibility criteria for disability have been loosened not only for employment reasons.
Labor Force Statistics from the Current Population Survey
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