ETLA Piekkola & Harmoinen AGIR & DEMWEL Seminar 12-14 June, 2003 ETLA, Helsinki Options for...
Preview:
Citation preview
- Slide 1
- ETLA Piekkola & Harmoinen AGIR & DEMWEL Seminar 12-14
June, 2003 ETLA, Helsinki Options for Retirement: Health and Time
Use in a Cross-Section of Countries
- Slide 2
- ETLA Piekkola & Harmoinen OUTLINE OF PRESENTATION
Introduction Allocation of time: considering total working time
Withdrawal from labour force Welfare regimes Data Methods Net
replacement rate Option value Health status Results Time use Net
replacement rates Option values Conclusions
- Slide 3
- ETLA Piekkola & Harmoinen TIME USE DATA, AGEING POPULATION,
AND LABOUR 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)
- Slide 4
- ETLA Piekkola & Harmoinen WITHDRAWAL FROM THE LABOUR FORCE
Scherer, P. (2002) Age of Withdrawal from the Labour Force in OECD
Countries. Labour Market nad Social Policy Occasional Papers. No.
49. OECD Table 1. Average ages of withdrawal from the labour
force
- Slide 5
- ETLA Piekkola & Harmoinen TIME-GEOGRAPHICAL AUTHORITY
CONSTRAINT AND ALLOCATION OF TIME BETWEEN WORKPLACE AND HOME
MASTERS THESIS MAY 6, 2003 Liisa Harmoinen
- Slide 6
- ETLA Piekkola & Harmoinen OBJECTIVES AND RESEARCH QUESTIONS
Ageing, Health, and Retirement in Europe project, ETLA Labour
market behaviour and time use of the ageing Are there differences
in time use btw. groups and countries? Effect of the value of
household work on labour market behaviour?
- Slide 7
- ETLA Piekkola & Harmoinen THEORETICAL FRAMEWORK Time
Geography Constraints to activity Economic Theory Allocation of
time Welfare Regimes Social security Allocation of time between
workplace and home
- Slide 8
- ETLA Piekkola & Harmoinen TIME GEOGRAPHY AND CONSTRAINTS TO
ACTIVITY Capability constraint Physiological and physical
characteristics and needs Coupling constraint Places, resources,
other people Authority constraint Legislation, authorities, rules,
norms
- Slide 9
- ETLA Piekkola & Harmoinen ACTIVITY TRAJECTORY: daily vs.
lifetime Space Time shop home work
- Slide 10
- ETLA Piekkola & Harmoinen AUTHORITY CONSTRAINT: Welfare
Regimes Nordic Regime: Finland, Denmark Continental Regime:
Belgium, Germany, Netherlands British Regime: United Kingdom
Southern Continental: Portugal
- Slide 11
- ETLA Piekkola & Harmoinen WELFARE REGIMES
- Slide 12
- ETLA Piekkola & Harmoinen WELFARE REGIMES: Time Use
Approach
- Slide 13
- ETLA Piekkola & Harmoinen STRUCTURALISTIC VIEW OF THE
SOCIETY
- Slide 14
- ETLA Piekkola & Harmoinen 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 Production function for
household goods
- Slide 15
- ETLA Piekkola & Harmoinen ALLOCATION OF TIME: Total Work M
s The effect of social security payments by the employer M m The
effect of wage tax rate M k The effect of consumption tax rate
Utility function Production functions Time constraint Goods
constraint
- Slide 16
- ETLA Piekkola & Harmoinen DATA MTUS data 24 countries, 50
time-use surveys Harmonized data Original Data (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 covered
- Slide 17
- ETLA Piekkola & Harmoinen METHODS Document time use in
household work Wage rates, social security payments, tax treatment
Estimating health status Replacement rates Option values
- Slide 18
- ETLA Piekkola & Harmoinen NET REPLACEMENT RATE Net
replacement rate = net pension + value of household work net
earnings + value of household work
- Slide 19
- ETLA Piekkola & Harmoinen Option Value = lifetime utility,
retire at future (optimal) age - lifetime utility, retire now
OPTION VALUE
- Slide 20
- ETLA Piekkola & Harmoinen ESTIMATING HEALTH STATUS Finnish
data includes self-assessed health variables unhealth = notable
health problems 5%-15% of 45 to 59-year- olds ECHP: very poor -very
good five categories
- Slide 21
- ETLA Piekkola & Harmoinen LOGISTIC ESTIMATION OF HEALTH
STATUS Logistic model to explain health problems in Finland,
predict health status in other countries Socio-economic variables,
time use income education family working hours
- Slide 22
- ETLA Piekkola & Harmoinen LOGISTIC ESTIMATION OF HEALTH
STATUS: Finland
- Slide 23
- ETLA Piekkola & Harmoinen LOGISTIC ESTIMATION OF HEALTH
STATUS: Finland
- Slide 24
- ETLA Piekkola & Harmoinen LOGISTIC ESTIMATION OF HEALTH
STATUS: Other Countries
- Slide 25
- ETLA Piekkola & Harmoinen 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 all work more equally MAIN TIME USE RESULTS
- Slide 26
- ETLA Piekkola & Harmoinen Table 4. 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 with respect to employment status 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
- Slide 27
- ETLA Piekkola & Harmoinen DOMESTIC WORK Table 5. 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
- Slide 28
- ETLA Piekkola & Harmoinen Table 6. 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
- Slide 29
- ETLA Piekkola & Harmoinen PAID WORK Men supply 10 hours
more paid work than women Continental countries: equal allocation
Perhaps household work services bought more than elsewhere Table 7.
Weekly hours of paid work by gender and female share of paid
work
- Slide 30
- ETLA Piekkola & Harmoinen CONCLUSIONS: Time Use Men and
women contribute equally to total work in most countries,
allocation of total work between paid work and domestic work based
on the specialisation of work Dual burden most relevant for young
workers with children, not for older workes Allocation of
additional time towards domestic work greater form men after
withdrawal from work Huovinen and Piekkola (2002) also find that
allocation of time is a much more important determinant for
retirement for men than for women. This is also shown in the
positive effect of active time use on the probability to
retire.
- Slide 31
- ETLA Piekkola & Harmoinen REPLACEMENT RATE Value of
domestic work while at work on average 1/3 of net earnings for men
and 2/3 of net earnings for women After retirement relative value
of domestic work exceeds annual pension income for both genders
Changes in domestic work greater for men Value of domestic work
almost doubles after retirement
- Slide 32
- ETLA Piekkola & Harmoinen REPLACEMENT RATE Replacement
rates on average close to 100 percent when domestic work is
accounted for The effect of domestic work greater for women 40
percent for men and 45 percent for women The average replacement
rates (age at last year of work 55-70 years) Women: 101 % with
domestic work and 69 % without Men 93 % and 67 % With the exclusion
of domestic work slightly lower for men than for women; replacement
rate decreases with increasing income level
- Slide 33
- ETLA Piekkola & Harmoinen REPLACEMENT RATE: Men Table 8.
Net replacement rates accros countries for men
- Slide 34
- ETLA Piekkola & Harmoinen REPLACEMENT RATE: Women Table 9.
Net replacement rates accros countries for women
- Slide 35
- ETLA Piekkola & Harmoinen OPTION VALUES FOR RETIREMENT
Domestic work has two effects on option value: Replacement rate and
pension wealth are higher Relative value of continuing to work and
the accumulation of total income are lower because of foregone
domestic work
- Slide 36
- ETLA Piekkola & Harmoinen OPTION VALUES: Belgium Additional
domestic work after withdrawal from work worth 1500 a year for men
and 3200 a year for women. Replacement rates are 95% for men and
125% for women Incentives to accumulate pension wealth are low
- Slide 37
- ETLA Piekkola & Harmoinen OPTION VALUES: Finland New system
in 2005: Accrual 1.5 before age 53, 1.9 ages 53-62 and 4.5 ages
63-68 Pension wealth at 62 13,000 higher for men, 14,800 higher for
women in the new system, as replacement rates are 5 percentage
points higher Increase in domestic work 10 hours for men and 13
hours for women Men start at low level of domestic work, marginal
value one of the highest with hourly net wage 7.8 Difference btw
net earned income and pension income 5,000 after retirement,
compensated by an equal increase in the value of domestic work.
Individuals are rather indifferent whether to retire at age 62 or
at age 68, women especially
- Slide 38
- ETLA Piekkola & Harmoinen Germany Additional domestic work
after withdrawal from work worth 900 Replacement rate 10 percentage
points higher when domestic work included, 77%-79% at age 62 the
German system can encourage postponement of retirement until 65
years of age or beyond for wome Encourage to work until 63 if
individuals cannot draw any pensions earlier: deduction of pension
at 3.6% per year if retirement occurs before 65 and an addition to
pension at 6% per year if retirement is postponed
- Slide 39
- ETLA Piekkola & Harmoinen Netherlands Value for additional
domestic work after retirement is relatively low 4000 for men and
2900 for women, but from low initial level Public pension system
with flat pension implies low replacement rate around 87 percent
(46 percent for men and 40 percent for women when domestic work is
excluded) Incentives to retire are relatively low for low-income
earners in the public system Optimal retirement age close to the
pensionable age
- Slide 40
- ETLA Piekkola & Harmoinen United Kingdom Additional
domestic work after withdrawal from work worth 4400 a year for men
and 3100 a year for women Low replacement rates, 71% for men and
81% for women Strong incentives to postpone retirement
- Slide 41
- ETLA Piekkola & Harmoinen COUNTRY TABLES: Belgium
- Slide 42
- ETLA Piekkola & Harmoinen COUNTRY TABLES: Denmark
- Slide 43
- ETLA Piekkola & Harmoinen COUNTRY TABLES: Finland
- Slide 44
- ETLA Piekkola & Harmoinen COUNTRY TABLES: Germany
- Slide 45
- ETLA Piekkola & Harmoinen COUNTRY TABLES: Netherlands
- Slide 46
- ETLA Piekkola & Harmoinen COUNTRY TABLES: UK
- Slide 47
- ETLA Piekkola & Harmoinen REGIONAL DIFFERENCES Denmark most
similar to Finland Finland similar to Netherlands and UK, partly to
Portugal. UK similar to Portugal Central Europe with relatively
short paid work hours and average domestic work hours: Germany
Small countries and UK with long paid work hours and long domestic
work hours for men and women Exceptions: Denmark with relatively
little domestic work, but greatest similarity to Nordic regime.
Table 10. Measures of dissimilarity (D) between pairs of countries
in weekly hours of paid and household work by employed men and
women.
- Slide 48
- ETLA Piekkola & Harmoinen REGIONAL DIFFERENCES IN
RETIREMENT INCENTIVES Three groups: High replacement rate and flat
option value curve after the pensionable age: Central Europe
(Germany), Finland and Portugal High replacement rate and downward
sloping option value curve since pensionable age: Belgium, the
Netherlands. Low replacement rate and rising option value curve
after the pensionable age: Denmark, UK
- Slide 49
- ETLA Piekkola & Harmoinen REGIONAL DIFFERENCES IN
RETIREMENT INCENTIVES Expected lifetime at age 65 12 years for men
and 17 years for women (when considered at age 55) Pension accruals
since pensionable age must be relatively high for the option value
to be flat With high pension wealth (replacement rate) additional
income from work is of low importance Finland: accrual at age 63-67
at 4.5 percent annually With low replacement rates the option value
after pensionable age can be upward sloping UK and Denmark
- Slide 50
- ETLA Piekkola & Harmoinen CONCLUSIONS: Retirement
Accounting for the value of household work yields on average 40
percent higher net replacement rates and lower option values
Continental Europe (Germany): high replacement rates and flat
option value curves after the pensionable age Small countries are
categorized to those with High replacement rate and flat option
value curve after pensionable age (Finland and Portugal) High
replacement rate and downward sloping option value curve after
pensionable age (Belgium and Netherlands) Low replacement rate and
rising option value curve after pensionable age (Denmark, UK)
- Slide 51
- ETLA Piekkola & Harmoinen CONCLUSIONS: Retirement Observed
and optimal ages of withdrawal from work The optimal path for
retirement quite close to the actual average retirement in
countries with low option values such as Belgium and Netherlands
(men). In some countries with high option values for continuing to
work (Germany, Finland), pension wealth can, however, be high
- Slide 52
- ETLA Piekkola & Harmoinen CONCLUSIONS: Time use Differences
in time use with respect to employment status, gender, and country
Non-employed spend more time at home and supply more household work
than the employed In most countries changes in domestic work after
retirement are greater for men than for women Individual
characteristics, such as the health status and own perception of
life expectancy, arguably have a strong effect The unhealthy:
smaller increase in domestic work after retirement, shorter life
expectancy, less effect on option value?
- Slide 53
- ETLA Piekkola & Harmoinen OPTION VALUES: at age 55 (1000
)
- Slide 54
- ETLA Piekkola & Harmoinen OPTION VALUES: at age 55 (1000
)
- Slide 55
- ETLA Piekkola & Harmoinen For more information or a copy of
the paper, please contact hannu.piekkola@etla.fi or
liisa.harmoinen@etla.fi
- Slide 56
- ETLA Piekkola & Harmoinen WELFARE REGIMES Table 3. Welfare
regimes according to Esping-Andersen and Kosonen Esping-Andersen,
Gsta (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
- Slide 57
- ETLA Piekkola & Harmoinen 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.
- Slide 58
- ETLA Piekkola & Harmoinen TOTAL WORK & WELFARE REGIMES
Table 11. Total work by gender, employment status, and welfare
regime, 45-64 year- olds (hours per week)
- Slide 59
- ETLA Piekkola & Harmoinen TOTAL WORK: Welfare Regimes Table
x. Total work and female share of total work by welfare regime
- Slide 60
- ETLA Piekkola & Harmoinen DOMESTIC WORK: Welfare Regimes
Table x. Domestic work and female share of domestic work by welfare
regime
- Slide 61
- ETLA Piekkola & Harmoinen PAID WORK: Welfare Regimes Table
x. Paid work and female share of paid work by welfare regime
- Slide 62
- ETLA Piekkola & Harmoinen EMPLOYMENT & WELFARE REGIMES
Table 12. Employment rates by country and welfare regime, 45-64
year-olds (reported time-use in paid work).
- Slide 63
- ETLA Piekkola & Harmoinen TIME-GEOGRAPHICAL AUTHORITY
CONSTRAINT AND ALLOCATION OF TIME BETWEEN WORKPLACE AND HOME
MASTERS THESIS MAY 6, 2003 Liisa Harmoinen
- Slide 64
- ETLA Piekkola & Harmoinen OBJECTIVES AND RESEARCH QUESTIONS
Ageing, Health, and Retirement in Europe project, ETLA Labour
market behaviour and time use of the ageing Are there differences
in time use btw. groups and countries? Effect of the value of
household work on labour market behaviour?
- Slide 65
- ETLA Piekkola & Harmoinen THEORETICAL FRAMEWORK Time
Geography Constraints to activity Economic Theory Allocation of
time Welfare Regimes Social security Allocation of time between
workplace and home
- Slide 66
- ETLA Piekkola & Harmoinen TIME GEPGRAPHY AND CONSTRAINTS TO
ACTIVITY Capability constraint Physiological and physical
characteristics and needs Coupling constraint Places, resources,
other people Authority constraint Legislation, authorities, rules,
norms
- Slide 67
- ETLA Piekkola & Harmoinen AUTHORITY CONSTRAINT: Welfare
Regimes Nordic Regime: Finland, Denmark Continental Regime:
Belgium, Germany, Netherlands British Regime: United Kingdom
Peripheric Regime: Portugal
- Slide 68
- ETLA Piekkola & Harmoinen WELFARE REGIMES
- Slide 69
- ETLA Piekkola & Harmoinen WELFARE REGIMES: Time Use
Approach
- Slide 70
- ETLA Piekkola & Harmoinen STRUCTURALISTIC VIEW OF THE
SOCIETY
- Slide 71
- ETLA Piekkola & Harmoinen MAIN RESULTS Non-employed and
women supply more household work than employed and men Value of
household work affects incentive to retire: Higher net replacement
rate Lower option value Differences between countries in
functioning of authority constraint, some core periphery
consistency
- Slide 72
- ETLA Piekkola & Harmoinen HOUSEHOLD WORK
- Slide 73
- ETLA Piekkola & Harmoinen PAID WORK
- Slide 74
- ETLA Piekkola & Harmoinen NET REPLACEMENT RATES
- Slide 75
- ETLA Piekkola & Harmoinen OPTION VALUES: Belgium
- Slide 76
- ETLA Piekkola & Harmoinen OPTION VALUES: Denmark
- Slide 77
- ETLA Piekkola & Harmoinen OPTION VALUES: Finland
- Slide 78
- ETLA Piekkola & Harmoinen TIME USE AND WELFARE REGIMES