Simulating the impact of pension reforms on labour force participation for the 55+: a comparison of three models

A specific attention is devoted to the 55+ age group when building global labour force projections regularly updated by Insee. This requires taking into account individual heterogeneity, because the impact of pension reforms on behavior is potentially very different across individuals. For instance, increasing to 62 the minimum age of eligibility, as decided in 2010, will be neutral for people who already planned to retire after this age. It will be constraining for other people, but the impact on global labour force will depend upon employment status before retirement: postponing pension claiming for individuals who have already left the labour market does not affect this labour force, at least as long as it does not change labour market behavior before retirement age. Simulating individual transitions to retirement raises however considerable problems, to which models only bring imperfect and uncertain answers. This argues in favor of scenarized projections based on alternative assumptions. We present here results based on three options offered by the Destinie 2 microsimulation model. Depending upon these assumptions, cumulated impacts of past reforms on labour force participation rates for the 60-64 age group range, in the long run, between 10 and 40%, but starting from no-reform trends that are themselves very different from one scenario to the next. On the whole, after reforms, the long run labour force participation rate for the 60-64 group would lie within the 40%-50% bracket. This corresponds to mean ages at pension claiming lying between 64 and 65 years, and to mean ages at exit from the labour force fluctuating between 61 and 63 years, depending upon possible retroactions on career paths before full retirement.