Although more than half of the Dutch working population in their mid-fifties work until their retirement age, there are many early trajectories out of the labour market. Low-educated workers in particular continue to run a risk of unemployment and inactivity.
According to a fresh dissertation, retirement is a long-term process rather than a single event. A comparison between the Netherlands and Finland by Senior Researcher Aart-Jan Riekhoff (Finnish Centre for Pensions) shows that retirement includes multiple transitions that take place over several years.
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Lehtikuva/Petra Piitulainen (Photo: Business Wire)
“Many people get some other type of pension or benefit before they retire on an old-age pension. In the Netherlands and Finland unemployment or sickness often result in an early, permanent exit from the labour market. The risks tend to add up over the life course for people with a low education level, insecure jobs and low earnings,” Riekhoff explains.
Education reduces the risk of early exit
Riekhoff has followed the employment lives of workers in the Netherlands and Finland from their mid-fifties until retirement. Welfare and pension systems are similar in many regards in both countries. It is possible to retire early or late. Many people also retire after longer spells of sickness, disability and unemployment.
“Looking at the factors that contribute to each of the trajectories, it is clear that a higher education reduces the risk of involuntary early exit in both the Netherlands and Finland, Riekhoff says.
More transitions between work and benefits
Following the benefit and pension reforms, elderly workers in the two countries tend to stay in employment longer. Whereas late careers have remained relatively stable in Finland, there has been a slight increase in transitions between work and benefits in the years before the retirement age of 65 in the Netherlands.
“This might be due to the stricter criteria that applied after the introduction of the new disability benefit legislation (WIA) in 2006 as well as to the abolishing of extended unemployment benefits in 2003 and the tightening of job search requirements for older workers in 2004. These reforms did not prevent older workers from becoming unemployed or disabled but pushed them back into the labour market after a shorter period on benefits.”