How Does Raising Women’s Retirement Age Affect Labor Supply, Income, and Mortality?

Evidence from Switzerland

Rafael LaliveUniversity of

Lausanneand CEPR

Stefan StaubliUniversity of Calgary

and RAND

Retirement Research Consortium Annual Conference

Washington DC, August 2014

NBER (SSA) funding gratefully acknowledged (NB14-09)Lalive and Staubli

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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

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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

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Generosity of Old-Age Pensions90

100

110

120

130

Inde

xed

bene

fits

(100

=age

62,

bor

n <1

938)

62 63 64 65 66 67 68 6970

AgeBorn <1939 Born 1939−1941Born >1941

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Data and Outcome Variables

• Data Sources:• Administrative data on pension contributions and claims• Labor market histories from 1982-2012• 25% 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)

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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

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2001 Change

• FRA 62 ⇒ 63

• Penalty 3.4%

• Informed 4 years in advance

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FRA 62⇒63: Women’s Exit Ages59

.560

60.5

6162

62.5

Age

61.5

63

−12 −9 −6 −3 0 3 6 9 12Birth date − cutoff

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FRA 62⇒63: Women’s Exit Ages59

.560

60.5

61A

ge61

.562

62.5

63

−12 −9 −6 −3 0 3 6 9 12Birth date − cutoff

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FRA 62⇒63: Women’s Claiming Ages60

.561

61.5

62A

ge62

.563

63.5

64

−12 −9 −6 −3 0 3 6 9 12Birth date − cutoff

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FRA 62⇒63: Women’s Claiming Ages60

.561

61.5

62A

ge62

.563

63.5

64

−12 −9 −6 −3 0 3 6 9 12Birth date − cutoff

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FRA 62⇒63: Effects on Women’s Labor Supply Profile

0.2

.4.6

.81

Per

cent

50 55 60 65 70 75Age

1938

1939Lalive and Staubli

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FRA 62⇒63: RDD Effects on Unemployment Inflow

−4−2

02

4

53 54 55 56 57 58 59 60Age

61 62 63 64 65

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FRA 62⇒63: RDD Effects on Disability Inflow−2

02

4

53 54 55 56 57 58 59 60Age

61 62 63 64 65

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FRA 62⇒63: Spillover Effect on Exit Age of Spouse?

6262

.563

Age

63

.564

64.5

6565

.5

−12 −9 −6 −3 0 3 6 9 12Birth date − cutoff, wife

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FRA 62⇒63: Impact on Mortality?0

.05

Pr(

die

by 2

012)

.1.1

5.2

−12 −9 −6 −3 0 3 6 9 12Birth date − cutoff

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FRA 62⇒63: Change in BenefitsS

wis

s fra

ncs

1600

0

1700

0

1800

0

1900

0

2000

0

2100

0

2200

0

−12 −9 −6 −3 0 3 6 9 12Birth date − cutoff

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FRA 62⇒63: Change in Social Security WealthS

wis

s fra

ncs

4000

00

420

000

44

0000

4

6000

0

4800

00

500

000

−12 −9 −6 −3 0 3 6 9 12Birth date − cutoff

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2005 Change

• FRA 63 ⇒ 64

• Penalty 3.4%

• Informed 8 years in advance

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FRA 63⇒64: Effects on Women’s Labor Supply Profile

0.2

.4.6

.81

Per

cent

50 55 60 65 70 75Age

1941

1942Lalive and Staubli

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Summary of RDD Estimates

FRA 62 to 63 years

FRA 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)

0.004(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 11,329 13,912

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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 exit2. No impact on benefits but reduction in social security

wealth3. Some increase in mortality but not very precisely estimated⇒Data update for full population and more recent yearsRaising Women’s Retirement

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