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					  Contrasting the Retirement Options in Germany

  Dipl.-Wirt-Math. Maria Lewicki


  Chair of Public Finance and Public Management



                                                               SAVE – PHF Conference 12.07.2012




1 KIT – Universität des Landes Baden-Württemberg und                         Chair of Public Finance and Public Management
  nationales Forschungszentrum in der Helmholtz-Gemeinschaft                                             www.kit.edu
    Agenda

      Motivation

      Previous research

      Data and Hypotheses

      Analysis
         Descriptive statistics
         Regression Model
         Results

      Conclusion




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    Motivation

      Increasing worker to retiree ratio

      Several public pension system reforms

      Pensions 2010: 57.9% with deductions

      Trend towards early retirement




      Is an amendment able to change the common behavior?




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    Previous research

      Similarities within Europe in relation to individual factors; differences in social
      security system design (Debrand and Sirven, 2009)

      Higher qualified individuals stay longer in employment; many early retirees
      were unemployed before retirement (Hoffmann, 2007; Coppola and Wilke, 2010;
      Himmelreicher, 2009)

      Employment rate 55+ increases continuously: age of exit from the labor market
      decreases        cohort effect; Manager and simple service provider work the
      longest (Brussig, 2010-04/2010-05)

      Women and less productive worker tend to retire early (Coppola and Wilke, 2010)

      Good working conditions and good health defer retirement (Piekkola and
      Deschryvere, 2005)



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    Hypotheses

    I.    The retirement decision is determined by push factors as well as social,
          educational and economic attributes of the individual.



    II.   Early and deferred retirement are determined by the same factors with
          opposite sign.




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    Data set

      German Alterssurvey (DEAS)

      Third wave 2008: 8.200 individuals, 6.205 questioned for the first time

      Age: 40-85

      Computer Assisted Personal Interview and self-completion questionnaire




      Selection of individuals 55+ drawing an old age pension (# 2.014)




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    Retirement age




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    Retirement classes




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    Motives for employment termination *

                                           Reached legal retirement age

                                           Operational reasons

                                           Health reasons

                                           Became unemployed

                                           Family reasons

                                           Stop working as early as possible

                                           Other reasons

                                           Enough time for myself

                                           Caring another person

                                           Otherwise double burden to heavy

                                           Partner has retired
    * Multiple responses possible

9                                              Chair of Public Finance and Public Management
                                         *
     Motives for an ongoing employment




                                                       Fun at work


                                                       Contact to other people is
                                                       important for me

                                                       Want to have still a task


                                                       Actual financial situation


                                                       Other reasons




                                             # 130 persons (6.5%)
     * Multiple responses possible

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     Multiple logistic regression

       Goal: Modeling & estimation of occurrence probabilities

       Dependent variable Retirement (early retirement, regular retirement, deferred retirement)


       Occurrence probability for category r:




       For reference category c holds:

       Equivalent:



       Logarithmic chances (Logits) model relation between category r and reference
       category c.

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     Independent variables

     Socio-demographic       Employment                    Socio-economic
     Gender                  Economic sector               Household income group
     Number of children      Company size                  Assets
     Education               Profession                    Savings
     Martial status          Employed as retiree           Own pension
     Region                  Total years of job            Partner‘s pension
                             interruption
                             Situation before retirement




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     Significant Odds-ratios
                                                                           Early retirement                   Defered retirement
            Odds-ratio for a contrast                                      Model 1       Model 2   Model 3    Model 1       Model 2      Model 3

            female to male                                                 4.118***     4.864***   4.757***   0.160***       0.290***
            West to East Germany                                           1.941***     2.727***   3.868***   4.718***       2.699***    2.222*
            high education to none                                                                 6.271*     3.430*
            middle education to none                                                               12.084**
            low education to none                                                                  8.784**
            one child to five or more                                      1.682*
            economic sector: agriculture to public sector                               0.532**
            company size: < 5 employees to 2.000+                                       0.580*
            company size: 20-99 employees to 2.000+                                                0.522*
            company size: 200-1.999 employees to 2.000+                                 0.632*     0.480**
            profession: helping family to worker                                                                             8.167**
            profession: self-employed to worker                                                    11.817*
            profession: clerk to worker                                                 0.700**    0.432***
            situation before retirement: employed to house                                                                   0.170***    0.221***
            wife/man
            situation before retirement: partial retirement to                          4.237***   5.924**                   0.127***
            house wife/man
            situation before retirement: unemployed to house                            4.796***   8.261***                  0.106***    0.177**
            wife/man
            situation before retirement: preretirement to house                                                              0.128***
            wife/man
            situation before retirement: disability pension/long-                                                            0.150***    0.556**
            term sickness to house wife/man
            no job interruption to 6 years or more                                      2.080**    2.199*
            1-2 years job interruption to 6 years or more                                          2.604*
            up to 850€ own pension to more than 1.250€                                                                                   4.586**
            up to 850€ pension husband/wife to more than                                                                                 0.307*
            1.250€
            851€-1.250€ pension husband/wife to more than                                                                                0.332**
            1.250€

            * = p-value < 0.1; ** = p-value < 0.05; *** = p-value < 0.01
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     Results I

       Socio-demographic characteristics
           Women tend to retire early
           Deferred retirement independent of gender
           West Germans tend to retire early as well as to defer retirement
           Probability of early retirement increases with education (but not monotonic! ->
           medium qualification is most likely)
           Deferred retirement independent of education level
           Number of children and martial status not significant




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     Results II

        Employment characteristics
           Economic sector not significant
           The smaller the company size the lower the probability to retire early
           Worker have a twice as high probability for early retirement as a clerk
           Self-employed have 11x higher chance to retire early as worker
           Employment after retirement has no influence on the retirement decision
           Unemployment before retirement increases the chance by 8x for early retirement in
           contrast to housewives/-men and decreases the chance by 0.177 for deferred
           retirement
           Chance for deferring retirement is higher for housewives/-men as for employed
           individuals (0.221)
           Interruption of employment has no influence on deferred retirement
           Short interruptions of employment increases the probability for early retirement




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     Results III

        Socio-economic factors
           Household income, total amount of assets and savings have no significant influence
           on the retirement decision
           Own pension below 850€ increases the chance for deferred retirement by 4.5 in
           comparison to a pension of more than 1250€
           Partner’s pension below 1250€ decreases the chance for deferred retirement by 0.3
           in comparison to a pension of more than 1250€




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     Conclusion

       Exogenous factors dominating; East-/West differences

       Pension level of partner crucial for deferring retirement

       Hypothesis I confirmed
       Socio-demographic and employment characteristics influence early retirement

       Socio-economic factors influence deferred retirement

       Hypothesis II not confirmed



       Impact of rising retirement eligibility age?

       Labor policy useful to stem early retirement

       Deferred retirement is seldom; mostly financial secured, motivated individuals



17                                                                 Chair of Public Finance and Public Management

				
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