Estimating an implicit cost of bad working conditions: the case of older workers

We try to quantify the effect of working conditions on retirement behaviour by estimating an implicit cost of keeping on working in a bad job. The cost is measured by the amount of the increase in retirement pension that the employee would claim to accept to postpone the date on which he intends to retire. We use data of a specific survey on employees aged 54 to 59 years and working in the private sector. They were required to state their preferences while reacting to various scenarios of retirement. We construct an indicator of bad working conditions from the answers provided by the employee to questions on job satisfaction and health status. We find that to compensate for the disutility of keeping on working one year more in a bad job it would be necessary to increase the retirement pension by roughly 10 %. In other words a worker facing bad working conditions will accept postponing retirement with an increase of his pension 10 points higher than the one requested by an employee in a good job.