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Old-Age Pension Beneficiaries: Labor Supply and Policy Tasks
Old-Age Pension Beneficiaries: Labor Supply and Policy Tasks
  • Table of Contents

    Chapter 1. Introduction

    Chapter 2. Elderly Workers’ Labor Market and Pension Benefits

    Chapter 3. Elderly Workers’ Labor Supply and Household Income

    Chapter 4. Elderly Workers’ Labor Supply and Pension Benefits

    Chapter 5. Conclusion: Elderly Workers’ Labor Supply and Policy Implications  

  • SUMMARY

    This study reviews recent changes in elderly workers’ labor market and tries to identify the factors that determine their labor supply and retirement through statistical sources. Data sources include the Korea Labor and Income Panel Study (KLIPS), Korean Longitudinal Study of Ageing (KLoSA) and Korea Retirement and Income Study (KReIS).

     

    The National Pension Service, launched on Jan. 1, 1988, has grown to 21.66 million members as of June 2017, with 3.544 million confirmed cases of old-age pension payout. The Government Employee Pension currently has 777,000 eligible civil servants and 453,000 beneficiaries of retirement pension as of 2016. The Private School Teachers’ Pension has 313,000 members and 57,000 beneficiaries of retirement pension as of the end of 2016. Military Personnel Pension has 87,000 beneficiaries of retirement pension as of 2015.

     

    Literature shows that today’s elderly workers have a stronger incentive to stay in the labor market than previous generations, which is attested to by their high employment rate. It can also be observed in Statistics Korea’s Economically Active Population Survey as well as the KLIPS data comparing babyboomers and pre-babyboomers for the ratio of non-employed and the ratio of part-timers working less than 25 hours per week. Last, it is also seen in the KLoSA analysis. In addition, prior studies also highlight that many of the elderly are in insecure jobs such as non-regular jobs or part-time jobs, which results in elderly poverty rate higher than that in other countries. KLoSA data reveals the important fact that that employment rate changes drastically around the age of 60.

     

    To understand the factors that affect elderly workers’ labor supply, this study analyzes weekly working hours based on the Tobit model using KLIPS data. The results show that first, age as an individual characteristic has a negative effect on working hours, with the hours decreasing with age. Social insurance payment has negative effect on retirement. KLoSA also shows that the higher the pension benefit the lower the labor supply. Second, another individual characteristic, negative perception of health, was found to be associated with shorter weekly working hours. Similar result was found in the analysis of KLoSA among the elderly with no chronic illnesses. Third, between married couple, the weekly working hours shows positive correlation. Fourth, the household characteristic of having children in school (college or below) or high non-labor income (financial or real estate income) was associated with shorter weekly working hours. In households with net debts (having more debts than assets), the weekly working hours were relatively long. Fifth, KLoSA shows men having average working hours of over 40, with no observable partial retirement.

    Analysis of employment status also showed similar result. In particular, analysis using the KReIS data shows the special occupation retirement pension beneficiaries having a lower likelihood of employment than old-age national pension beneficiaries.

     

    Let us now consider the policy implications that can be gained from the analysis so far, although it should be noted that few of the explanatory variables included in the analysis would be affected by policy intervention. One such implication is that a great number of factors affect elderly labor supply. In other words, factors like old-age life, family relations, individual and couple’s leisure activities must be considered altogether when looking at their labor supply. In particular, the seemingly paradoxical fact that the explanatory variable of pension benefits have a negative effect on their labor supply while pensioners have a relatively high rate of employment leads to the speculation that there are reasons other than pension benefits that stop elderly workers from completely exiting the labor market. These other reasons must also be fully considered in connection with elderly labor supply and National Pension Service reform.

     

    The analysis result indicating that non-labor income and debt affect labor supply reaffirms the fact that household finance is a decisive factor for the elderly group without sufficient old-age security. In particular, the statistical fact that non-pensioners have lower household equivalised income than pensioners makes it clear that old-age security remains an urgent issue in Korea. And given that some are non-pensioners because they are left outside the social safety net (although it could also be because they have yet to fulfill the required contribution period), there should be ongoing policy interest on broadening pension coverage. There should also be policy support to provide jobs that help elderly workers’ gradual retirement even if they come with job insecurity. This is so because Korea’s elderly workers do not show signs of gradual retirement when observed through working hours. It goes without saying that there should be utmost caution involved with such policy planning as it is also linked with the elderly workers’ retirement income.  

Seung-Yeol Yee's other publications : 22
{Research Series} posts
No Title Author Date Attach
22 Freelance, the Job of the Future (I): Content Creators Seung-Yeol Yee, Yong-Kwan Lee, Sangkyu Lee December 28, 2018 Freelance, the Job of the Future (I): Content Creators
21 A Study on Middle and Old-aged Self-employed Workers Seung-Yeol Yee, Yeong Jeong Son December 28, 2018 A Study on Middle and Old-aged Self-employed Workers
20 Old-Age Pension Beneficiaries: Labor Supply and Policy Tasks Seung-Yeol Yee December 29, 2017 Old-Age Pension Beneficiaries: Labor Supply and Policy Tasks
19 Comprehensive Evaluation of the Youth Labor Market Policy: Literature Review Seung-Yeol Yee, Se-Um Kim, Jin-Young Kim, Jae Min Seong, Sun Jung Oh, Min-Ki Hong December 29, 2017 Comprehensive Evaluation of the Youth Labor Market Policy: Literature Review
18 Status and Policy Challenges of Injured Workers: Return-to-Work After a Workplace Injury Seung-Yeol Yee, Seungwook Lee December 30, 2016 Status and Policy Challenges of Injured Workers: Return-to-Work After a Workplace Injury
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