1. ETLA/Piekkola&Harmoinen 1 AGIR -project workshop 14-15 February 2003 CPB, Hague Option Value for Retirement under Changing Health and Active Leisure: Multinational Retirement and Time Use Study

2. ETLA/Piekkola&Harmoinen 2 OUTLINE OF PRESENTATION Introduction Time use and labour market research Welfare regimes Data Methods Health status Net replacement rate Option value Results Time use Option values Conclusion

3. ETLA/Piekkola&Harmoinen 3 TIME USE DATA, AGEING POPULATION, AND LABOR MARKET RESEARCH Previous work at ETLA: Ruuskanen, Olli-Pekka: Replacement Rates and Reservation Wages Considering the Value of Household Work and Lost Leisure (Etla Discussion Paper 588, 1997) Huovinen, Pasi and Hannu Piekkola: The Time is Right? Early Retirements and Use of Time by Older Finns (ETLA B 189 2002) Applications of time-use data: Economic and social accounting (macro-level) Descriptive analyses, household production, labour market behaviour (micro-level)

4. ETLA/Piekkola&Harmoinen 4 ALLOCATION OF TIME: total work Assume people consider total work time (paid work+domestic work) when allocating time between work and leisure to maximize utility Value domestic work with net wage for this kind of work Account for increase in domestic work in non-employment Goods constraint Time constraint Production functions Production function for household goods

5. ETLA/Piekkola&Harmoinen 5 RETIREMENT AGE MenWomen Austria Belgium*59.058.9 Denmark62.461.5 Finland59.860.0 France59.358.4 Germany **60.559.8 Italy59.358.4 Netherlands **61.660.1 Norway64.264.7 Portugal65.366.5 Spain61.1 Sweden63.361.8 United Kingdom62.061.2 United States65.164.2 * 1971-1976 ** 1993-1998 Table 1. Average ages of withdrawal from labour force 1994-99 Scherer, P. (2002) Age of Withdrawal from the Labour Force in OECD Countries. Labour Market nad Social Policy Occasional Papers. No. 49. OECD

6. ETLA/Piekkola&Harmoinen 6 DATA MTUS data 24 countries, 50 time-use surveys Harmonized data Original Data Austria, (Belgium), Denmark, Finland, Germany, The Netherlands, UK, (Portugal) Finland 1999/2000 follows new Eurostat standards one weekend & one weekday demographic and income variables linked Table 2. countries and survey years of original data

7. ETLA/Piekkola&Harmoinen 7 METHODS Document time use in household work Wage rates, social security payments, tax treatment Estimating health status Replacement rates Option values

8. ETLA/Piekkola&Harmoinen 8 Domestic work increases in non-employment (men 10 hours, women 12.9 hours for healthy) The unhealthy work less, the relative increase in domestic work after withdrawal from work smaller Prediction more accurate for men Table 5. Paid work and domestic work, 45-64 year olds (hours per week) HEALTH STATUS

9. ETLA/Piekkola&Harmoinen 9 Table 6. Total work by gender, employment status, and health (hours per week) Low burden: Denmark, High burden: Portugal, UK Women adjust total work 10 hours less than men after withdrawal from work The unhealthy: Unhealthy men work less, health has no effect among the non- employed Unhealthy women work less, employed and non-employed TOTAL WORK = work + domestic work

10. ETLA/Piekkola&Harmoinen 10 FEMALE SHARE OF TOTAL WORK Table 7. Female share of paid and total work by employment status and health among the employed Women do half of total work in all countries Women do less paid work, especially in Germany, Netherlands, Austria

11. ETLA/Piekkola&Harmoinen 11 DOMESTIC WORK Table 8. Domestic work by gender, employment status and health (hours per week) Women supply 11 hours more domestic work than men! Domestic work increases in non-employment Healthy: 10.1 hours for men and 10.3 for women Unhealthy: 8.1 hours for men and 2.4 hours for women

12. ETLA/Piekkola&Harmoinen 12 DOMESTIC WORK & WELFARE REGIMES Table 14 Domestic work by welfare regime, gender, and employment status, original data 45-64 –year-olds (hours per week) Domestic work increases in non-employment Nordic regime: smallest increase, Southern Continental/Liberal: biggest increase Nordic: share most equally, Southern Continental: share most unequally

13. ETLA/Piekkola&Harmoinen 13 Table 9. Female share of unpaid work time by employment status and health Women do 2/3 of domestic work Unhealthy and the non-employed share domestic work more equally FEMALE SHARE OF DOMESTIC WORK

14. ETLA/Piekkola&Harmoinen 14 FEMALE SHARE OF DOMESTIC WORK & WELFARE REGIMES Table 15. Female share of domestic work by welfare regime, original data 45-64 –year-olds. Women do 2/3 of domestic work Southern Continental: higher female share The Non-employed share domestic work more equally

15. ETLA/Piekkola&Harmoinen 15 ESTIMATING HEALTH STATUS Finnish data: self-assessment of health unhealth=”notable health problems”, 5%-15% of 45-59-years old. ECHP uses ”very poor -very good” five categories Other countries: Demographic factors and time use used to predict health status

16. ETLA/Piekkola&Harmoinen 16 PROBIT MODEL FOR HEALTH STATUS AGE 44-64

17. ETLA/Piekkola&Harmoinen 17 Women (10 hours) and the unhealthy ( 2-5) adjust total work supply by less after withdrawal from work Less work than men and the healthy before, more work after withdrawal from work Domestic work increases 10 hours in non-employment for both sexes 5.2 €/h=2704 €/a Female shares 1/2 of total work 2/3 of domestic work Non-employed and the unhealthy share al work more equally MAIN TIME USE RESULTS

18. ETLA/Piekkola&Harmoinen 18 Nordic regime: smallest increase, Southern Continental/Liberal: biggest increase in domestic work after withdrawal from work Southern Continental: higher female share in domestic work, valued less MAIN TIME USE RESULTS & WELFARE REGIMES

19. ETLA/Piekkola&Harmoinen 19 Net replacement rate (NRR) = net pension + value of domestic work / net earnings + value of domestic work NET REPLACEMENT RATE

20. ETLA/Piekkola&Harmoinen 20 Option value = lifetime utility, retire at particular (optimal) age – lifetime utility, retire today OPTION VALUE

21. ETLA/Piekkola&Harmoinen 21 DOMESTIC WORK AND OPTION VALUE Relative earnings lower: foregone domestic work Replacement rate and pension wealth higher Overall effect: the option value of postponed retirement lower

22. ETLA/Piekkola&Harmoinen 22 OPTION VALUES at age 55 (1000 Euro)

23. ETLA/Piekkola&Harmoinen 23 OPTION VALUES at age 55 (1000 Euro)

24. ETLA/Piekkola&Harmoinen 24 CONCLUSIONS Pensionable age crucial, after that option value decreases except with low replacement rate (UK, Denmark) Domestic Work: Decreases option values Slope steeper with domestic work after retirement age Gender differences: larger effect for men The unhealthy: smaller increase in domestic work after retirement, shorter life expectancy, less effect on option value?

25. ETLA/Piekkola&Harmoinen 25 COUNTRY TABLES

26. ETLA/Piekkola&Harmoinen 26 COUNTRY TABLES

27. ETLA/Piekkola&Harmoinen 27 TOTAL WORK & WELFARE REGIMES Table 11. Total work by gender, employment status, and welfare regime, 45-64 –year- olds (hours per week)

28. ETLA/Piekkola&Harmoinen 28 EMPLOYMENT & WELFARE REGIMES Table 12. Employment rates by country and welfare regime, 45-64 – year-olds (reported time-use in paid work).

29. ETLA/Piekkola&Harmoinen 29 For more information or a copy of the paper, please contact hannu.piekkola@etla.fi or liisa.harmoinen@etla.fi

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34. ETLA/Piekkola&Harmoinen 34 WELFARE REGIMES Table 3. Welfare regimes according to Esping-Andersen and Kosonen Esping-Andersen, Gøsta (1990). The Three Worlds of Welfare Capitalism. Polity Press, Cambridge Kosonen, Pekka (1994). European Integration: A Welfare State Perspective. University of Helsinki Sociology of Law Series No. 8. Yliopistopaino, Helsinki

35. ETLA/Piekkola&Harmoinen 35 WELFARE REGIMES: time use approach Table 4. Three alternative service economies according to Gershuny: time-use perspective Gershuny, Jonathan (2000). Changing Times. Oxford University Press, Oxford.

36. ETLA/Piekkola&Harmoinen 36 OECD

37. ETLA/Piekkola&Harmoinen 37 H i s t o r y o f t i m e u s e r e s e a r c h First time use studies done in USSR in the 1920’s First Multinational time use study by Szalai (not before) mid-1960’s Szalai study motivates many other countries carry out national diary surveys Multinational Time Use Study, so-called Essex data 1980 Raising level of interest among Economists (especially in U.S.) 1980-1990

38. ETLA/Piekkola&Harmoinen 38 I n t r o d u c t i o n Time use research History and background Methodology Applications Economics and time use Literature International co-operation Szalai’s multinational survey MTUS HETUS AGIR

39. ETLA/Piekkola&Harmoinen 39 M e t h o d o l o g y Main characteristic: Difficult and costly Use of diaries seen as the only way to obtain reliable data on time use Sample aimed to provide diaries of all types of days and seasons of the year Weights have to be built to meet this demand Respondents fill a 24 hour diary. Diary entries coded (!) to a standard list of activities Normally two diary days by each respondent (but this varies. ie. Netherlands: 7 days) Normally wide range of background information collected in interviews Main activity - secondary activity With whom -questions Yesterday and tomorrow diaries

40. ETLA/Piekkola&Harmoinen 40 - a n d + Capability of providing information on non-pecuniary activities More reliable data on market activities than traditional surveys (ie. labour supply) Costly and difficult Panel sets of time use data do not exist A lot of zero reported hours on activities Harmonisation process results in a lot of lost detail and scope of information Effect on social sciences has not been very significant (why?)

41. ETLA/Piekkola&Harmoinen 41 A p p l i c a t i o n s Macro level: augmented economic and social accounting systems Inputs for production outside the market Inputs of leisure time Micro level: modelling and describing household behaviour Descriptive studies: division of responsibility, use of time in childcare and elderly care (and leisure) Models: labour supply (!), household production ETLA: Net replacement rates and reservation wages with lost time, time use of elderly, leisure time allocation’s effect in early retirement decision

42. ETLA/Piekkola&Harmoinen 42 Economics and time use research Household production models Mincer (1962) Becker (1965) Gronau (1970) Time and money intensity of commodities Intertemporal Time Use Ghez & Becker (1975) Blinder & Weiss (1976) Ryder, Stafford & Stephan (1976) Time use strongly related to age. Time is allocated over time between training, market work, non-market work and leisure to reach optimal level of consumption

43. ETLA/Piekkola&Harmoinen 43 I n t e r n a t i o n a l c o - o p e r a t i o n First Multinational time use study by Szalai, mid-1960’s, founded by UNESCO 12 countries ( Soviet Union, United States, Federal Republic of Germany, German Democratic Republic, Bulgaria, Czechoslovakia, Hungary, Poland, Yugoslavia, Belgium, France, and Peru ) http://www.radcliffe.edu/murray/data/ds/ds0652.htm International Association for Time Use Research, St. Mary’s University Halifax promotes development of time use research methods, theory etc. encourages international and diachronic comparability of time-use studies arranges yearly meetings for researchers working with time use Multinational Time Use Study, Institute for Social and Economic Research, Essex

44. ETLA/Piekkola&Harmoinen 44 M T U S Started 1980s by Professor Jonathan Gershuny Harmonised time diary data from 50 studies conducted in 24 countries Multiple surveys from 12 countries Aggregated file of 40 activity categories Limited demographic details Age limit still 20 and 60 (to be removed within weeks) 150 792 observations Main problems in international comparability occur among the activity classification

45. ETLA/Piekkola&Harmoinen 45..M T U S Main problems in international comparability occur among the activity classification Different background data collection Different years of data collection (And different periods: more than a year -> two weeks) 2 to 7 diary days Different response rates Some have age ranges

46. ETLA/Piekkola&Harmoinen 46 Australia 1997, 1992, 1987, 1974 Austria 1992 Belgium 1965 Bulgaria 1988 Canada 1992, 1986, 1981, 1971 Czechoslovakia 1965 Denmark 1987, 1964 East Germany 1965 France 1974, 1965 Finland 1987, 1979 Germany 1992 Hungary 1986/87, 1977, 1965 Israel 1990 Italy 1989, 1980 The Netherlands 1995, 1990, 1985, 1980, 1975 Norway 1991, 1981, 1971 Peru 1965 Poland 1965 Sweden 1991 UK 1999, 1995, 1983/84 & 1987 (combined as 1985), 1975, 1961 USA 1992-94, 1985, 1975, 1965 West Germany 1965 Yugoslavia 1965 Countries and Survey Years Covered

47. ETLA/Piekkola&Harmoinen 47 U p d a t e s File including people who fall outside the age range of the World 5.5 main file (both younger and older) Expected January 2002 File documenting the calculation of the education variable Expected Winter 2001 The following new variables will be included in the World 5.5 file: Number of children (NCHILD) Age of youngest child (AGEKID) Household size (HHSIZE) Employment status of spouse (EMPSP) Number of parents (2-parent or 1-parent households) (NPAR)

48. ETLA/Piekkola&Harmoinen 48 F u t u r e of I n t e r n a t i o n a l c o - o p e r a t i o n: HETUS Organised by EUROSTAT to allow cross-national comparison of time use data in Europe Aim to harmonise data collection and produce a harmonised data file Samples of 3000+ diaries All household members aged 10+ (whole household keeps diaries on the same days; weekday + weekend day) Primary and secondary activities, with whom questions, and where

49. ETLA/Piekkola&Harmoinen 49 4 categories: Paid and unpaid work, leisure & basic needs (sleep, drink etc.) Behavioral vs. Stuctural change employment, sex and family status main variables associated with variation in time use. country and period have smaller role effects normally much smaller for men than women 3 x Converging time use Country, Gender, Social group Trends in Time use in the second half of the twentieth century

50. ETLA/Piekkola&Harmoinen 50 The virtuous triangle I: work and leisure in the second half of the twentieth century. (Gershuny 2000)

51. ETLA/Piekkola&Harmoinen 51 Men’s paid work time (Gershuny 2000)

52. ETLA/Piekkola&Harmoinen 52 Women’s paid work time unweightedUK base year

53. ETLA/Piekkola&Harmoinen 53 Domestic work Men Women, UK base year

54. ETLA/Piekkola&Harmoinen 54 Leisure time (Gershuny)

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56. ETLA/Piekkola&Harmoinen 56 Ageing population, time use data and the AGIR project Recent work carried out in ETLA Unemployment - and value of leisure time (Ruuskanen) Time use of elderly (Huovinen) Leisure time allocation and early retirements (Huovinen and Piekkola) Results Importance of leisure and domestic work time Methodological challenges

57. ETLA/Piekkola&Harmoinen 57 R e p l a c e m e n t r a t e s Data on wages and pension systems Global substitution system: using a house helper wage for domestic time Employer perspective: social security costs + other employers cost Employee perpective: net wage Basic assumptions: APW worker, working from n years, wage profile, taxation (gross and net replacement)

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60. ETLA/Piekkola&Harmoinen 60 Questions How serious is the causality / endogeneity problem? What would be the possible ways to go around it? What kind of time use model would be valuable for the project Voluntary work, neighbourhood help, active leisure, time stress etc. How the time use data could be benefit for other work packages Time use in different life cycles (by time and demographic group) (+) Informal care (-) Other data sets / approaches for WP 3