Partial retirement and pension policy in industrialized countries

• Author: John TURNER,Denis LATULIPPE
• Published date: 01 June 2000
• DOI: http://doi.org/10.1111/j.1564-913X.2000.tb00409.x
• Date: 01 June 2000

Partial retirement and pension policy 179

Copyright © International Labour Organization 2000

International Labour Review, Vol. 1 39 (200 0), No. 2

Partial retirement and pension policy in

industrialized countries

Denis LATULIPPE* and John TURNER **

Most “regular employ ees” in industrialized count ries work full time until

retirement, when they cease working completely. This mode of exit from

the labour force results in an abrupt change in workers’ time allocation and life-

style when they move from full-time work to full-time leisure.

Patterns of employ ment among older workers are gradually changing,

however, as a significant minority of people now work part-time before retire-

ment — and even after they receive full pensions. A minority of regular em-

ployees move to self-employment, where hours are fl exible, or take other jobs

after leaving their career job. Some move from full-time to part-time jobs with

their career employer, but few employees have this optio n. Taking a transition

job usually requires finding a new employer.1 These transition jobs, commonly

called “bri dge jobs”, often permit workers to reduce their hours by working

part-time for a period before taking full retirement. In the United States, about

half of these br idge jobs are part-t ime jobs (Quinn , 1997).

The term “partial retirement” refers to a transition period of part-time

work between an employee’s career job and retirement which includes payment

of either a partial or a full pension. Partial retirement is distinct fr om the re-

lated concept of flexible retirement age, where workers are giv en a range o f

ages over which they can retire but where the transition from work to retire-

ment remains abrupt . Another transition patter n is intermittent full-time work

at older ages. In this case, an older worker may leave a career job, be out of the

labour force for a period, and then return for a period to a full-ti me job. Al-

though this pattern does not involve part- time work, some government p ro-

grammes, such as Germany’s and Sweden’s, consider it to be partial retirement.

A further possibility is a period of part-time work preceding retirement with-

out receipt of a pension, though most workers need at least a partial pension to

be able to afford a period of part-t ime work. In any case, thi s opt ion i s not

considered here because the focus o f this article is on part ial retirement as an

aspect of pension policy.

* Chief actuary, Quebec Pension Boar d; form erly ILO, Geneva. ** Formerl y S ocial

Security Department, ILO, Geneva.

1According to a study on the United States, three-quarters of these new jobs involve a

change in occupation or industry; almost half of them involve both (Doeringer, 1990).

International Labour Review

180

Following a brief survey of trends and patterns of employment among

older workers, the article examines the advantages, disadvantages and costs of

partial retir ement. T he discussion t hen turns to p olicies that affect part ial re-

tirement, particularl y through its interaction with social security and training.

The salient features of partial retirement policies in selected industrialized coun-

tries are also reviewed. Finally, a concluding section outlines some policy con-

siderations and suggesti ons that emerge fr om the analysis and may inform

national policy-making aimed at encouraging or facilitating partial retirement.

Work for older workers

The rate of employment of older workers has decreased significantly over

the past few decades. In the advanced industrialized countries, appr oximately

50 per cent of the male population aged 60 to 64 was economically active in

1990, compared with 82 per cent in 1950. As shown in table 1, the average age

of effective retirement — based on the complete cessation of economic activity

— declined from over 66 in 1950 to under 62 in 1990 (Latu lippe, 1996).

This reduction in the rate of economic activity of older workers has been

coupled with the widespread institution of pension plans and an increase in the

incidence of part-time work among older workers, both men and women, in

most industrialized countries (OECD, 1995 b). This partly reflects the increase

in the ratio of part-time to t otal employment at all ages. But in most countries,

while the proportion of part-time workers among employed men aged 55-59 is

no higher than it is among younger male workers (und er 10 per cent), the

proportion of 60-64 y ear-old male workers in part- time employment is higher

than the average proportion for all male workers. This also holds true for women,

though in most countries part-time work is much more common among women

than it is amo ng men. At older ages, this pattern may also reflect the fact that

women take part-time work to accommodate their care-giving responsibilities

for elderly parents or other family members.

Part-time work at older (as well as younger) ages encompasses a wide

range of hours of work. According to one study on the United States, over one-

third of the older workers work ing part time worked between 1,200 and 1,60 0

hours a year (equivalent to t hree to four days a week), and only 36 per cent of

them worked less than half-tim e ( Quinn, 1997). In other coun tries, such as

Denmark, Germany, the Netherlands and the United Kingdom, a substantial

proportion of older part-time wo rkers worked relatively few hours (OECD,

1995b). Surveys of p art-time workers i ndicate that some of them do not work

part time by choice but because they cannot find full-time employment. None-

theless, it appears that the majority of older workers who work part-time choose

to do so (OECD, 1995b).

Overall, people who work while receiving a pension account for a signifi-

cant share of employment at older ages. A study of seven countries using Lux-

embourg Income S tudy (LIS) data found t hat among older wor kers, the com-

bination of w ork with receipt of a pension was most common in Sweden and

the United S tates, accounting respectively for 63 and 33 per cent of total em-