How Does Raising Women’s Retirement Age Affect Labor Supply, Income, and Mortality?

1. How Does Raising Women’s Retirement Age Affect Labor Supply, Income, and Mortality? Evidence from Switzerland Rafael Lalive University of Lausanne and CEPR Stefan Staubli University of Calgary and RAND Retirement Research Consortium Annual Conference Washington DC, August 2014 NBER (SSA) funding gratefully acknowledged (NB14-09) Lalive and Staubli Raising Women’s Retirement Age 1 / 20

2. Research Question • How does raising women's full retirement age (FRA) affect labor supply, income, and mortality? • Demographic aging puts financial pressure on social security programs • Raising the retirement age is the key policy reform to deal with financial pressure • People claim for shorter duration • People stay in labor force longer • Potential concerns: negative effect on health and spillover effects onto other government programs (e.g. disability insurance) • Little empirical evidence on impact of large changes to FRA Lalive and Staubli Raising Women’s Retirement Age 2 / 20

3. What We Do • Swiss FRA before 2001: 62 for women and 65 for men • We study the effects of raising women’s FRA • 1997 Law announced increase in women’s FRA via penalty of 3.4% per year: • FRA is 63 if born after Dec. 31, 1938 (i.e. cohorts retiring in 2001) • FRA is 64 if born after Dec. 31, 1941 (i.e. cohorts retiring in 2005) • Institutional comparison to U.S. • Labor force participation rates of women are very similar • No earnings test in Switzerland: labor supply effects might be smaller in U.S. context Lalive and Staubli Raising Women’s Retirement Age 3 / 20

4. Generosity of Old-Age Pensions 130 Indexedbenefits(100=age62,born<1938) 120 110 100 90 62 63 64 65 66 67 68 69 70 Age Born<1939Born1939−1941Born>1941 Lalive and Staubli Raising Women’s Retirement Age 4 / 20

5. Data and Outcome Variables • Data Sources: • Administrative data on pension contributions and claims • Labor market histories from 1982-2012 • 25% random sample of individuals and their spouse • Sample: women with labor force attachment affected by reforms (born 1939/1942) and not affected by reforms (born in 1938/1941) • Key variables • Exit age: last age an individual has positive earnings • Claiming age: age individual starts claiming disability/old-age pension • Mortality: Indicator(died by end of 2012) • Income: amount of benefits and social security wealth (net-present value of benefits) Lalive and Staubli Raising Women’s Retirement Age 5 / 20

6. Birth Date Regression Discontinuity Design (RDD) • Estimate effects by exploiting discontinuity in FRA by birth date • Treatment groups: women born in 1939/1942 • Control groups: women born in 1938/1941 • Perform analysis by month of birth Lalive and Staubli Raising Women’s Retirement Age 6 / 20

7. 2001 Change • FRA 62 ⇒ 63 • Penalty 3.4% • Informed 4 years in advance Lalive and Staubli Raising Women’s Retirement Age 7 / 20

8. FRA 62⇒63: Women’s Exit Ages 63 62.5 62 Age 61.5 61 60.5 60 59.5 −12 −9 −6 −3 0 3 6 9 12 Birth date − cutoff Lalive and Staubli Raising Women’s Retirement Age 8 / 20

9. FRA 62⇒63: Women’s Exit Ages 63 62.5 62 Age 61.5 61 60.5 60 59.5 −12 −9 −6 −3 0 3 6 9 12 Birth date − cutoff Lalive and Staubli Raising Women’s Retirement Age 8 / 20

10. FRA 62⇒63: Women’s Claiming Ages 64 63.5 63 Age 62.5 62 61.5 61 60.5 −12 −9 −6 −3 0 3 6 9 12 Birth date − cutoff Lalive and Staubli Raising Women’s Retirement Age 9 / 20

11. FRA 62⇒63: Women’s Claiming Ages 64 63.5 63 Age 62.5 62 61.5 61 60.5 −12 −9 −6 −3 0 3 6 9 12 Birth date − cutoff Lalive and Staubli Raising Women’s Retirement Age 9 / 20

12. FRA 62⇒63: Effects on Women’s Labor Supply Profile 1 .8 .6 Percent .4 .2 0 50 55 60 65 70 75 Age 1938 1939 Lalive and Staubli Raising Women’s Retirement Age 10 / 20

13. FRA 62⇒63: RDD Effects on Unemployment Inflow 4 2 0 −2 −4 53 54 55 56 57 58 59 60 Age 61 62 63 64 65 Lalive and Staubli Raising Women’s Retirement Age 11 / 20

14. FRA 62⇒63: RDD Effects on Disability Inflow 4 2 0 −2 53 54 55 56 57 58 59 60 Age 61 62 63 64 65 Lalive and Staubli Raising Women’s Retirement Age 12 / 20

15. FRA 62⇒63: Spillover Effect on Exit Age of Spouse? 65.5 65 64.5 64 Age 63.5 63 62.5 62 −12 −9 −6 0 3 6 9 12 Birth date− cutoff, wife Lalive and Staubli Raising Women’s Retirement Age 13 / 20

16. FRA 62⇒63: Impact on Mortality? .2 .15 Pr(dieby2012) .1 .05 0 −12 −9 −6 0 3 6 9 12 Birth date− cutoff Lalive and Staubli Raising Women’s Retirement Age 14 / 20

17. FRA 62⇒63: Change in Benefits Swissfrancs 16000 17000 18000 19000 20000 21000 22000 −12 −9 −6 0 3 6 9 12 Birth date− cutoff Lalive and Staubli Raising Women’s Retirement Age 15 / 20

18. FRA 62⇒63: Change in Social Security Wealth Swissfrancs 400000 420000 440000 460000 480000 500000 −12 −9 −6 0 3 6 9 12 Birth date− cutoff Lalive and Staubli Raising Women’s Retirement Age 16 / 20

19. 2005 Change • FRA 63 ⇒ 64 • Penalty 3.4% • Informed 8 years in advance Lalive and Staubli Raising Women’s Retirement Age 17 / 20

20. FRA 63⇒64: Effects on Women’s Labor Supply Profile 1 .8 .6 Percent .4 .2 0 50 55 60 65 70 75 Age 1941 1942 Lalive and Staubli Raising Women’s Retirement Age 18 / 20

21. Summary of RDD Estimates FRA 62 to 63 years FRA 63 to 64 years A. Labor supply and claiming effects Exit age (years) 0.66*** (0.19) 0.53*** (0.08) 0.58*** (0.17) 0.55*** (0.09) Claiming age (years) B. Health and income effects Mortality, indicator(died by end of 2012) 0.004 (0.011) -329 (219) -14,489*** (4,939) 0.016* (0.008) -278 (204) -13,296*** (4,439) Social security benefits Social security wealth # Observation 11,329 13,912 Lalive and Staubli Raising Women’s Retirement Age 19 / 20

22. Summary • Exploit reform in Switzerland that increased FRA for women • Creates sharp discontinuities in financial incentives to claim benefits • Main findings: • Significant delay in benefit claiming and labor market exit • No impact on benefits but reduction in social security wealth • Some increase in mortality but not very precisely estimated • Data update for full population and more recent years Lalive and Staubli Raising Women’s Retirement Age 20 / 20