Working pensioners: Need or desire?
Working after retirement is increasingly common, but do pensioners work because they need the extra income or because they find work rewarding in other ways?
The meaning of ‘working age’ is changing. It has usually been defined as 15 to 64 years, but more than 5 million people over 65 in the EU were in employment in 2015, a remarkable increase from 3.3 million in 2004. In the same period, the employment rate of people aged 65–69 increased from 8.5% to 11.6%.
A key question is whether pensioners have to work because of financial need or want to work for other reasons. A study by Eurofound in 2012 on working after retirement estimated that roughly one-fifth of people aged 65 and over who work do so purely because of financial need. The remaining four-fifths may value the additional income, but they also have non-financial reasons, such as maintaining social contacts, continuing to learn, remaining active and healthy, contributing to society in an area where they have experience, and continuing with work that has become part of their identity.
Since that study, data from the EU Labour Force Survey (EU-LFS) ad-hoc module on transition from work into retirement have become available, which include data on whether working pensioners in the EU work for financial or non-financial reasons. Eurofound analysed these data in a recent blog for the European Commission, and the numbers do not seem to tally with Eurofound's earlier estimate: only 37% of working pensioners aged 50–69 say they continue working mainly for non-financial reasons.
However, a closer look at the data reveals that Eurofound’s earlier estimate may not be totally out of step with the EU-LFS.
- The older workers are, the more likely it is that they continue because of reasons other than financial need. Indeed, a conservative estimate shows that almost half (48%) of workers aged 65–69 works mainly for non-financial reasons. Those who work purely for financial need are likely to have exited the labour force by 65 if they are eligible for early retirement or a disability pension. This is certainly true for many of the 50–64-year-olds included in the EU-LFS estimate.
- Eurofound estimated that one-fifth works purely for financial reasons. For the other four-fifths, the additional income may certainly be a reason, but other reasons play a role as well.
For well-educated only?
It is sometimes assumed that work after retirement for non-financial reasons is an elite activity, for rich and highly educated people. This is not true, according to the EU-LFS data. People aged 65–69 with higher education more often work for non-financial reasons (55%), but sizeable proportions of older workers with low (36%) and medium (45%) educational levels do so as well.
Overall, the estimates do not seem to contradict each other. However, more importantly, EU-LFS data confirm Eurofound’s findings on the heterogeneity of working pensioners: some work for reasons other than income, others really only work to make ends meet, and both groups are substantial in size. Policymakers should bear this heterogeneity in mind.
Eurofound also demonstrated that over half (53%) of retirees aged 50 and over who are not in paid work would actually prefer to work, often part time. Do many say so just because they need the money? The proportion is indeed higher for people with difficulties making ends meet (58%), but those who say they can make ends meet easily also often show interest (50%). Is it realistic that these retirees could be employed? Maybe. Interest is largest among the relatively young, better educated, and those with work experience. Policymakers worried about the decline in the proportion of people of working age may be interested in further exploring the potential of facilitating work for this group.
Extending working lives
Many older workers would like to reduce their working hours. Research by Eurofound into the work preferences of workers aged 50 and over showed that 45% wanted to reduce their working hours, taking into account the need to earn a living. Facilitating working time reductions by compensating partly for the decrease in wages would increase this proportion further. Such ‘partial retirement schemes’ can enable and motivate people to continue working.
Later in 2016, Eurofound will publish a report that maps partial retirement schemes in the EU and Norway. It investigates how they have, and have not, contributed to extended working lives. It draws important lessons for policymakers examining such flexible retirement schemes.