How Does Raising Women’s Retirement Age Affect Labor Supply, Income, and Mortality? Evidence from Switzerland Rafael Lalive University of Lausanne and CEPR Stefan Staubli University of Calgary and RAND Retirement Research Consortium Annual Conference Washington DC, August 2014 NBER (SSA) funding gratefully acknowledged (NB14-09) Lalive and StaubliRaising Women’s Retirement Age1 / 20

Research Question How does raising women's full retirement age (FRA) affect labor supply, income, and mortality? Demographic aging puts financial pressure on social security programs Raising the retirement age is the key policy reform to deal with financial pressure People claim for shorter duration People stay in labor force longer Potential concerns: negative effect on health and spillover effects onto other government programs (e.g. disability insurance) Little empirical evidence on impact of large changes to FRA Raising Women’s Retirement AgeLalive and Staubli2 / 20

What We Do Swiss FRA before 2001: 62 for women and 65 for men We study the effects of raising women’s FRA 1997 Law announced increase in women’s FRA via penalty of 3.4% per year: FRA is 63 if born after Dec. 31, 1938 (i.e. cohorts retiring in 2001) FRA is 64 if born after Dec. 31, 1941 (i.e. cohorts retiring in 2005) Institutional comparison to U.S. Labor force participation rates of women are very similar No earnings test in Switzerland: labor supply effects might be smaller in U.S. context Raising Women’s Retirement AgeLalive and Staubli3 / 20

Generosity of Old-Age Pensions Indexed benefits (100=age 62, born <1938) Age Born 1941 Lalive and StaubliRaising Women’s Retirement Age4 / 20

Data and Outcome Variables Data Sources: Administrative data on pension contributions and claims Labor market histories from % random sample of individuals and their spouse Sample: women with labor force attachment affected by reforms (born 1939/1942) and not affected by reforms (born in 1938/1941) Key variables Exit age: last age an individual has positive earnings Claiming age: age individual starts claiming disability/old-age pension Mortality: Indicator(died by end of 2012) Income: amount of benefits and social security wealth (net-present value of benefits) Raising Women’s Retirement AgeLalive and Staubli5 / 20

Birth Date Regression Discontinuity Design (RDD) Estimate effects by exploiting discontinuity in FRA by birth date Treatment groups: women born in 1939/1942 Control groups: women born in 1938/1941 Perform analysis by month of birth Raising Women’s Retirement AgeLalive and Staubli6 / 20

2001 Change FRA 62 ⇒ 63 Penalty 3.4% Informed 4 years in advance Raising Women’s Retirement AgeLalive and Staubli7 / 20

FRA 62⇒63: Women’s Exit Ages Age −12−9−6− Birth date − cutoff Lalive and StaubliRaising Women’s Retirement Age8 / 20

FRA 62⇒63: Women’s Exit Ages Age −12−9−6− Birth date − cutoff Lalive and StaubliRaising Women’s Retirement Age8 / 20

FRA 62⇒63: Women’s Claiming Ages Age −12−9−6− Birth date − cutoff Lalive and StaubliRaising Women’s Retirement Age9 / 20

FRA 62⇒63: Women’s Claiming Ages Age −12−9−6− Birth date − cutoff Lalive and StaubliRaising Women’s Retirement Age9 / 20

FRA 62⇒63: Effects on Women’s Labor Supply Profile Percent Age Lalive and StaubliRaising Women’s Retirement Age10 / 20

FRA 62⇒63: RDD Effects on Unemployment Inflow −4 − Age Lalive and StaubliRaising Women’s Retirement Age11 / 20

FRA 62⇒63: RDD Effects on Disability Inflow − Age Lalive and StaubliRaising Women’s Retirement Age12 / 20

FRA 62⇒63: Spillover Effect on Exit Age of Spouse? Age −12−9−6− Birth date − cutoff, wife Lalive and StaubliRaising Women’s Retirement Age13 / 20

FRA 62⇒63: Impact on Mortality? 0.05 Pr(die by 2012) −12−9−6− Birth date − cutoff Lalive and StaubliRaising Women’s Retirement Age14 / 20

FRA 62⇒63: Change in Benefits Swiss francs −12−9−6− Birth date − cutoff Lalive and StaubliRaising Women’s Retirement Age15 / 20

FRA 62⇒63: Change in Social Security Wealth Swiss francs −12−9−6− Birth date − cutoff Lalive and StaubliRaising Women’s Retirement Age16 / 20

2005 Change FRA 63 ⇒ 64 Penalty 3.4% Informed 8 years in advance Raising Women’s Retirement AgeLalive and Staubli17 / 20

FRA 63⇒64: Effects on Women’s Labor Supply Profile Percent Age Lalive and StaubliRaising Women’s Retirement Age18 / 20

Summary of RDD Estimates FRA 62 to 63 yearsFRA 63 to 64 years A. Labor supply and claiming effects Exit age (years) 0.66*** (0.19) 0.53*** (0.08) 0.58*** (0.17) 0.55*** (0.09) Claiming age (years) B. Health and income effects Mortality, indicator(died by end of 2012) (0.011) -329 (219) -14,489*** (4,939) 0.016* (0.008) -278 (204) -13,296*** (4,439) Social security benefits Social security wealth # Observation 11,32913,912 Lalive and StaubliRaising Women’s Retirement Age19 / 20

Summary Exploit reform in Switzerland that increased FRA for women ⇒ Creates sharp discontinuities in financial incentives to claim benefits Main findings: 1. Significant delay in benefit claiming and labor market exit 2. No impact on benefits but reduction in social security wealth 3. Some increase in mortality but not very precisely estimated ⇒ Data update for full population and more recent years Raising Women’s Retirement Age20 / 20Lalive and Staubli