Retirement Decisions in Recessionary Times: Evidence from Spain

Abstract

The recession that started in the United States in December 2007 has had a significant impact on the Spanish economy through a large increase of the unemployment rate and the bursting of the housing and financial bubbles. We explore how the crisis and changes in the labor, housing, and financial markets might have impacted retirement patterns of Spanish men and women nearing retirement age. We find that the recession primarily reduced women’s retirement likelihood by 27%. The effect, which was associated with the labor market deterioration, as captured by higher unemployment rates, was circumscribed to women already at work, who chose to stay at work longer. In contrast, for the most part, men’s retirement likelihood did not change with the labor, housing, and financial market fluctuations. Overall, the findings suggest that working women might have prolonged their working lives to make up for lost household income.

Prepare developed democracies for long-run economic slowdowns

“…All else being equal, slowing economic growth decreases the rate of job creation, and can increase pressure on both government revenues and social safety nets, which can cause governments to cut spending in opportunity-generating areas such as education 76 . If slowing growth causes retirement savings to grow more slowly than expected, that can incentivize older workers to delay retirement 77,78 . Each of these forces has the potential to result in increased unemployment, especially for youth 79 , and as a result also increase the competitiveness of education systems, as the ratio of elite positions to prospective candidates declines-what Turchin 80 calls 'elite overproduction' .…”