Preparing the Labor Market for an Aging Population Designing public policy to increase labor force participation Gary Burtless The Brookings Institution Washington, DC June 2007

Labor supply at older ages Southeast Europe: –Levels (2005) –Trends ( ) Comparison countries –Austria –Switzerland Downward trend of overall participation in southeast Europe

Long-term trends in participation at older ages: OECD countries Men have experienced substantial declines Women have seen increases … except at oldest ages But for both sexes, the rate of exit from labor force in old age has –Begun at a younger age –Grown larger over time

Chart 6a. Trend in Economic Activity Rates at Older Ages in 21 OECD Countries,

Chart 6b. Trend in Economic Activity Rates at Older Ages in 21 OECD Countries,

Substantial differences across countries The long-term trend toward early labor force exit has differed –Much bigger in some countries (e.g., Austria) –Much smaller in others (e.g., Switzerland, Japan) These trends have been influenced by incentives in public pension system Higher benefits / Stronger work disincentives have led to lower activity rates in old age