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Health and Work and Pension Reform

Health and Work and Pension Reform. Maarten Lindeboom SZW Congres Leiderschap & Dialoog: fundamenten voor duurzame inzetbaarheid. Motivation. Most countries are encouraging later retirement in order to mitigate adverse effects from ageing

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Health and Work and Pension Reform

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  1. Health and Work and Pension Reform Maarten Lindeboom SZW Congres Leiderschap & Dialoog: fundamenten voor duurzame inzetbaarheid

  2. Motivation • Most countries are encouraging later retirement in order to mitigate adverse effects from ageing • Major reforms have been implemented in past decades -Reduced retirement incentives (changes in pension wealth accrual rates) - Changes in mandatory retirement age

  3. ….Policies have been effective in lot of OECD countries and especially in the Netherlands……. Participation rates 1994 2008 Males 55-64 42% 63% Females 55-64 19% 43%

  4. Relevant question: What can we expect from participation rates of future cohorts of older workers? Health and Work Patterns of the Middle aged (participation rates drop already at ‘young’ ages)

  5. Health & Work Patterns of Middle Aged • Poor Health arguably most important for withdrawals from labor force, prior to retirement ages - Direct outflow, but middle age health also shapes budget constraint (retirement opportunities) at later ages - Impact of poor health depends on institutions, in particular Disability Insurance (DI)

  6. This suggests that policies should also focus on reducing disability prevalence among young and increase labor market prospects of those with a disability  • Of relevance are trends in health and what to expect

  7. Trends:Mortality decreases  better population health? (Note Poor Health  Disability) US evidence • Crimmins et al, 1999 - Among 60+, chronic conditions fell for retired, but not for those at work - Disability prevalence fell

  8. Bhattacharya et al, 2008 (more recent cohorts): - Among 60 year old chronic conditions increased, but disability prevalence fell - Among the 30-45 year old, prevalence of chronic conditions and disability increased -Obesity seems to be most associated with this Outside the US?

  9. Health trends in the Netherlands

  10. Essence of the previous graphs: • High prevalence rates • Mortality and health/disability is improving, particularly among older cohorts in our sample • No sign for worsening health (or disability) among younger cohorts What about employment status by level of health (and Disability)?

  11. Health and Work in the Netherlands

  12. Essence of the previous graph: • Among men without health problems employment rates are close to one well into their fifties • Much more potential for increases in participation from those in poor health / with disabilities - Decrease prevalence of conditions - Increase participation of those with a condition • Important to consider incentive structure for individuals in ill health ……. ….Institutions important…..Disability Insurance (DI)

  13. Disability Insurance • DI most important exit route from employment for people with a disability in the US, Germany (?), …….. ………… but certainly in the Netherlands • Netherlands moved from one of the most lenient systems in the world (1980’s 1990’s) to average OECD in early 2000’s

  14. Some important changes in DI -1993: Stricter eligibility criteria + re-examinations -1996: Employers responsible for sickness benefits in 12 months waiting period -1998: Experience rating of employer premiums -2002: Introduction of ‘gatekeepers’ protocol -2003: More incentives for employers to hire disabled -2004: Waiting period extended to 24 months -2006: Restructuring of DI……(WAO=> WIA) Note : Important changes put Sickness and DI risk at firm (where they can best be influenced)

  15. Inflow: Disability benefit awards (in 1,000)

  16. DI reforms have affected DI rates

  17. The effect of the business cycle

  18. Essence of the previous graphs • Decreases in DI trends for each younger male cohorts • Underlying health presumably not the main driver, but rather institutions • Different effects of recessions: older cohorts on DI, younger cohorts on UI (DI permanent out of labor force, UI less so)

  19. Zooming in on WIA - Emphasizing residual capacity to work - Two parts: 1 IVA : full (80% +) and permanent disabled Replacement rate 75% 2 WGA: Partial (35%-80%) or temporary disabled (emphasis on work) Short term wage related benefits + follow up benefit  More work  higher follow up benefit

  20. Drastic reduction in inflow -2000-2002 about 100,000 per yr 2006-2008 about 35,000 per yr Of WIA applications  55% awarded  20% IVA  80% WGA  45% denials (< 35%)

  21. However (early numbers): - Unexpectedly high fraction of WGA is temporary 100% disabled (likely to become permanent, IVA?) - Of partial WGA only 60% at work - About 60% of denials applied for UI Morover, in current discussion two groups deserve attention: - Vangnetters: Without employer at time of DI application -WAJONG: Young disabled (not discussed today)

  22. Vangnetters (Safety-Netters) • Safety-netters are entitled to sick pay but have no employer to pay for it (NSII pays) • Major groups are: • UI-beneficiaries • Temps (their employment contract ends when become sick) • Fixed-term workers who are sick when their contract ends • DI-risk of safety-netters is four times as high as that of regular employees (20% of population accounts for 50% of DI awards)

  23. Everhardt & De Jong: • Assesseffectiveness of return to workinterventionson re employmentrates of long term sick • They do thisbylooking at determinants of re-employmentrate of regularworkrs and safety-netters • Good to recall: • Thatemployerspayexperiencerated premiums forworkerswho enter WGA (up until 10 yrs) • Thisgivesfirmsanincentive to provide effectiverehabilitation (rtw) programs • The NSII (UWV) lacks these incentives (cannotpunishitself!)

  24. Main findings • Return to Work interventions for regular employees are substantially more effective than for flex workers and UI beneficiaries • More effective because of an early start with gradual work resumption and other interventions (Of the regular workers 62% has already partially resumed work after 10 months (1st wave), against 12% for flex workers and 3% for unemployed ) Olderworkers face currentlyreducedemploymentprospects and that puts them in vulnerableposition

  25. Summing up • Increases in life expectancy do not necessarily translate into better population health • Poor Health  Disability • Employment rate of healthy prime-aged male workers  95% of those with disabilities  65%  Reduction of worker outflow due to health important (workplace and/or DI policies) (Cross-national studies point at large diffs b/w countries: employment structure, workplace, institutions)

  26. Past decades of DI reforms in Netherlands had strong impact on DI (inflow) rates • Important, because experiences in the US and own graphs show that during recessions UI inflow is substituted by DI, especially for low wage (older) workers ( Temporary withdrawals are transformed into permanent ones) • Vulnerable groups remain and this holds i particular for position older worker

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