THE LABOUR FORCE PARTICIPATION OF OLDER WORKERS The effects of pension and early retirement schemes

Policy distortions are provoking unnecessarily early retirement Average effective retirement ages have declined in many OECD countries over the past three decades, and cross-country differences have become wide (Figure 1). Reversing this past decline would raise the labour force participation and employment of older workers. This in turn would ease the adjustment to ageing populations, curb age-related public spending and generate higher tax revenues to finance it. OECD research summarised in this note demonstrates that public pension systems and other social transfer programmes (such as unemployment, disability or special early retirement benefits) embody significant early retirement incentives.