Économie et Statistique n° 441-442 : Pension systems and their reforms; assessments and projections

Economie et Statistique
Paru le : 20/10/2011
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Projecting the Impact of Pension Reforms on the Activity Rate of Persons Aged 55+: A Comparison of Three Models

Marion Bachelet, Magali Beffy et Didier Blanchet

The projection of labour-force participation rates at older ages is a major step in the preparation of financial scenarios for pension systems. It is therefore the focus of special attention during the construction of INSEE's periodic labour-force projections. To project the participation rate, one must take account of the diversity of individual statuses, as the impact of pension reforms on personal behaviour is inherently likely to vary considerably from one status to another. For example, the raising of the minimum pensionable age to 62 enacted in the 2010 reform will be neutral for persons who, even absent a reform, would already have retired at that age or later. The new measure will be constraining for others, but the impact on the participation rate will depend on a person's pre-retirement status: raising the pensionable age for persons who have already left the labour market has no effect on participation, at least so long as there is no change in behaviour at pre-retirement ages. Simulating these individual trajectories, however, raises major problems, to which the models provide only imperfect and uncertain solutions. This is an argument for scenario-based projections comparing different behavioural assumptions. We report the results obtained using three options offered by INSEE's DESTINIE 2 microsimulation model. Depending on the assumption, the cumulative effects of the reforms enacted between 1993 and 2010 on the participation rate at ages 60-64 vary between 10 and 40 percentage points in the long run, but relative to “non-reform” changes that also vary from one scenario to another. Overall, absent any further reform, the participation rate of the 60-64s in 2050 is expected to range between 40% and 50%. It would imply an average retirement age of 64-65, and an average exit age from the labour force ranging between 61 and 63, depending on the pension reform's retroactive effect on end-of-career trajectories.

Economie et Statistique
No 441-442
Paru le : 20/10/2011