FIGURE 5-11 Tax force to retire and proportion of men aged 55–65 out of the labor force, 11 countries, circa 1995. SOURCE: Gruber, Milligan, and Wise (2009).
This suggests that social security incentives to retire are an important cause of the low labor force participation of older workers. An equally important result from this early project work is that when thinking about incentives to retire, it is critical to include disability insurance and special unemployment insurance programs as well as social security programs per se, because disability and special unemployment programs often serve as early retirement programs before the social security early retirement age.
The “Fixed Number of Jobs” View of the Labor Market
The original impetus for plan provisions that encouraged older persons to leave the labor force is unclear. It is now frequently claimed that such provisions were designed to generate more jobs for younger people, the assumption being that having fewer older persons in the labor force would translate into more opportunities for the young. This reasoning is also used against efforts to reduce or eliminate incentives for older workers to leave the labor force, by arguing that an increase in labor force participation