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The Right to Work Versus the Right to Retire

Allianz Research

Ageism is still pushing older workers out of the labor market, hampering pension reforms: Job seekers aged 50 and older take twice as long to find new employment compared to young workers.

Against the background of aging societies and increasing life expectancy, retaining older workers and providing incentives to postpone retirement are key to improving the long-term sustainability of pension systems, and cushioning the demographic impact on the labor market. In fact, many countries have already introduced measures such as granting credits for long work histories or postponing retirement and tightened the conditions for early retirement. But further increases of the retirement age are often still ruled out by politicians.

Recent protests against the increase of the retirement age in France and Uruguay as well as the strong reactions to the proposal of the opposition to abolish the possibility of retirement at the age of 63 for those insured for at least 45 years in Germany, illustrate the politically charged nature of the issue. Protests and resentment are fueled by the fear of being unable to find an adequate job at an older age and being pushed into prolonged unemployment before reaching the retirement age. And these fears are rather valid, considering that job seekers aged 50 and older take twice as long to find new employment compared to young workers. Moreover, in most countries, the share of long-term unemployment is still markedly higher in the age group 55 to 64 than in the average workforce population. In the OECD, the share has been 8.7pps higher on average than in the age group 25 to 54 since the turn of the century. In 2022, the gap reached 10.7pps after a dip to 4.5pps during the Covid-19 pandemic. 38.6% of older workers were unemployed for longer than one year compared to 28.0% of the workers in the age group 25 to 54