1. Unemployment benefits and older workers Jan C. van Ours Tilburg University & University of Melbourne

2. Setting the stage International comparison of (un)employment rates by age and gender Developments over time for the Netherlands UI benefits for older workers Changes in entitlement & eligibility Unemployment effects: inflow and outflow

3. Employment rates 2009 25 to 54 years55 to 64 years MenWomenMenWomen Netherlands90.779.661.743.6 UK85.474.466.149.3 Germany86.175.463.848.6 France87.876.841.436.7 United States81.570.265.256.4 OECD84.765.364.445.1

4. Unemployment rates 2009 25 to 54 years55 to 64 years MenWomenMenWomen Netherlands3.03.34.03.6 UK6.85.26.02.8 Germany7.66.98.0 France7.28.26.56.0 United States9.27.67.26.0 OECD7.66.96.25.4

5. Employment rates 55-64 years 199420062009 Men40.755.461.7 Women17.535.643.6

6. Older workers in the Netherlands Unemployment rates workers aged 55-64 comparable to prime age workers Employment rates older workers substantially lower but increasing over the past decade

7. Should we worry? Unemployment rates older workers low But: – Low job separation rates – Low job finding rates – Long-term unemployment UI benefits as retirement pathway Unemployment could be lower Role of unemployment benefits – Eligibility criteria – Entitlement

8. Labor market older workers Improvement of employment rates: – Change in pension system from early retirement pay as you go to early retirement actuarially fair – Incentives for unemployed workers Focus of this presentation Quantitatively maybe not so important Showing older workers are influenced by incentives

9. Unemployment benefits Two major changes in UI benefits in the Netherlands: 1.Change in entitlement: reduction of Potential Benefit Duration – not age specific 2.Change in eligibility: introducing search obligations – age specific

10. Entitlement rules - old Several types of benefits: – Short term: 6 months – Wage dependent: up to 3.5 years – Extended: 2 – 3.5 years Unemployed after 57.5 years – Receive UI benefits for 7.5 years – up to old age pensions – Spike in the inflow into unemployment beyond age 57.5

11. Entitlement rules - new August 11, 2003 (weekend): extended benefits were abolished Incentive to become unemployed shortly after age 57.5 disappeared Spike after age 57.5 disappears

12. Eligibility criteria - old Worked 26 out of 39 weeks prior to unemployment Received wage at least 52 days in the 4 calendar years during the 5 years prior to unemployment Register at the employment office Have to accept a suitable job Actively search for work – but only up to the age of 57.5 Drop in job finding rate after age 57.5

13. Eligibility criteria – new Search requirement after age 57.5 was reinstalled Drop in job finding rate at age 575. disappears

14. Natural experiment Before – after comparison Below – above age 57.5 1.Before – below 57.5: cycle before 2.Before – above 57.5: cycle before + age 3.After – below 57.5: cycle after 4.After – above 57.5: cycle after + policy + age (2-1) = age effect (4-3) = age effect + policy effect (4-3) – (2-1) = policy effect

15. Graphical analysis Age at inflow has important effects on entitlement and eligibility rules Policy change affect the incentives After age 57.5: – Inflow does not go up – Outflow goes up

16. Inflow by age 2005

17. Inflow by age 2001-02

18. Annual inflow 2001-022005Diff. 56.6-57.515712257+686 57.6-58.521892488+299 Diff.618231+387 Diff. (%)+40+10-30

19. 3 months prob to find job - 2004

20. 3 months prob to find job - 2002

21. 3 months prob to find job 2001-022005Diff. 55.6-57.58.18.3+0.2 57.6-59.54.86.5+1.7 Diff.-3.3-1.8+1.5 Diff. (%)-40-20+20

22. Graphical analysis - again Age at inflow has important effects on entitlement and eligibility rules Policy change affect the incentives After age 57.5: – Inflow does not go up – Outflow goes up

23. Conclusions Labor market position of older employed workers is not bad Probability to loose their job is small Once unemployed probability to find a job is small too. Low unemployment rates: small inflow rate * long durations

24. Even for older workers incentives seem to work It is possible to reduce inflow into unemployment and increase outflow from unemployment