Beware of the employer: Financial incentives for employees may fail to prolong old-age employment

Abstract

This paper shows that increasing the normal retirement age and introducing pension deductions for retirement before normal retirement age in Germany did not prolong employment of older men. The reason for this surprising result is that employers encouraged their employees to use the bridge options unemployment or partial retirement instead of the early retirement option for the long-term insured. Bridge options allowed employers to terminate employment considerably earlier than the pension for long-term insured. Employers however had to compensate their employees for the substantially higher costs of the bridge options. Therefore mainly employers with high employment adaption costs induced employees to use a bridge option during the implementation phase of the pension reform.

Evolutionary Game Analysis between Local Government and Enterprises on Bridge Employment from the Perspective of Dynamic Incentive and Punishment

“…The existing literature has studied bridge employment from different perspectives such as sociology [18], gerontology [19], management [20], economics [21], and psychology [22], mainly involving the following topics: (a) Types of bridge employment. Most literature generally divides bridge employment into two categories: career bridge employment and non-career bridge employment (bridge employment in different fields) [17].…”

Money also is sunny in a retiree’s world: financial incentives and work after retirement

“…In both bridge options, employees usually have to accept financial disadvantages in comparison to their other (early) retirement options, but they can exit employment already before their ERA (Lorenz et al 2020). Indeed, labor market exit age on average is between one to two years earlier for those using partial retirement or retirement after unemployment than for those choosing the early retirement options without employment gaps before retirement that also would have been available for those who used bridge options (Geyer et al 2021).…”

“…We know that partial retirement is mainly accepted by better educated employees who work for large (industrial) employers(Engstler and Romeu-Gordo 2017) and bridge options are mainly offered by employers with higher employee adaptation costs, i.e. large but shrinking employers in regions with high unemployment(Lorenz et al 2020). It is therefore important to control for the mentioned individual and employer characteristics in order to avoid biased results.…”