institut für gerontologie an der tu dortmund prof. dr. gerhard naegele institute of gerontology at...

Institut für Gerontologie an der TU Dortmund

Prof. Dr. Gerhard Naegele

Institute of Gerontology at the TU Dortmund University, Germany

Work after (in spite of) retirement -The role and interests of companies and governments – Evidence from Germany


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Introduction

EU wide data show that the traditionally more or less rigid borderline between the period of gainful employment and the period of “retirement” without gainful employment is slowly dissolving.

For Germany for those already retired currently only a small rate of gainful employment can be assumed. Official figures show an employment rate of about 5 % among those 65+.

However, taking into account not officially registered paid work resp. paid work in clandestine illicit employment higher figures can be assumed, possibly amounting to distinctively more than 10 %. Recent figures indicate a further increase in “silver work” due to different reasons.

Two typical patterns of gainful employment can be distinguished: new entry (in a field of employment not previously engaged in) and continuation of employment.


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Who are Germany`s “silver workers” ? More younger than older retirees (between 65 and 70) More retirees with a comparative good health of state Many former self-employed (share of over 40 %) Many working in family run businesses (share of 30 %) (many of them

unpaid family workers) More male than female retirees Restricted lines of business (merchandising, service and transport sector) More typical so called-simple service jobs (watchmen, deliverers of

newspapers) than highly qualified jobs (e.g. consultants, senior experts, twin-partners), however the latter with growing importance

Precarious employment relationships the predominant form of employment in the “silver work” sector (e.g. no standard contracts, in most cases earnings restricted to 400 EUR/months; e.g. This true for all early retirees)

For the majority of working retirees (share of more than 85 %) both part-time work as well as flexible working time schedules are typical and – besides others - one prime requisite for paid work after retirement.


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The legal background for “silver work” in Germany - How are additional earnings during retirement treated by social and tax legislation ? (2012)

(1) Before 65 (legal retirement age) (true for early retirees) additional earnings up to 400 Euros, no reduction of pension and no social

insurance contributions in case of additional earnings in excess of 400 Euros severe reduction of

pensions before 65 have to be accepted (in consequence de facto no use) (2) After 65 (true for all “normal” retirees) no restrictions on additional earnings however, social insurance contributions payable on additional earnings in

excess of 400 Euros (health and long term care insurance, statutory pension insurance and unemployment insurance)

In consequence individual pension entitlements to be increased through work after 65

(3) For both case groups income tax for additional earnings in excess of 8,004 EUR p.a.


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Motives and drivers for “silver work” in Germany I

A mixture of different types of motives and drivers can be distinguished which in reality very often overlap.

Financial necessities which so far are only true for the minority of cases, are of rising significance. Among them retirees with low pension entitlements and many former self employed are overrepresented.

In a rising number of cases reductions in pensions due to early retirement (actuarial cuts) serve as a further financial incentive for paid work after retirement. This is particularly true for those cases of early retirement due to health reasons/reduced functional working capacity (“Erwerbsminderung”). These early retirees in average have the smallest level of pension.

In future a rise in significance of financial incentives is expected by all experts.

In this connection both the former and future official pension and retirement policies in Germany as well as the increasing trend towards “denormalization/precariation of work” (“working poor”) can be regarded as strong drivers.


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Motives and drivers for “silver work” in Germany II

Empirical evidence also indicate individual “stroke of fates” with financial implications (e.g.to pay for a sudden family-case of long term care).

In some cases familiar reasons play an additional role (e.g. children still to be financially supported).

Currently, individual (intrinsic) motivations still dominate (like fulfilling an individual “mission”, the wish to stay active, work as a personal and individual challenge, as a tool for activity and self realization, to maintain social contacts and to prevent social disintegration).

In terms of motivations differences between low and high skilled pensioners can be found: Intrinsic motivations are more found among the high skilled, more financial necessities among the low skilled pensioners. Among the latter group there is empirical evidence for pure existential need.


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Favourable prerequisites for “silver work” – employer`s interests I

No legal right for employee`s continuing former jobs after having passed legal retirement age (65) (if not by contract individually negotiated) - however this has been justified as de-facto age-discrimination by German courts just recently according to the new discrimination legislation (in political dispute)

In consequence employees have to negotiate for a “silver work job”, what must be wanted and supported by employers.


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Favourable prerequisites for “silver work” – employer`s interests II

Employer`s interests more or less circulate around business reasons like regional, seasonal labour shortage, need for knowledge transfer, general lack of qualifications, company’s demand for special vocational expertise, very often oriented towards competencies of special (mainly highly qualified) staff member

From a corporate point of view, silver work often serves as a further instrument of flexibility besides other forms of employment (such as temporary employment, labour leasing, etc.) to adapt staff according to market changes and needs with the additional benefit of low personnel costs through employer`s exemptions from social insurance contributions

Economic interests of employers in practice often stands in line with a general positive attitude towards the special extrafunctional qualifications (“soft skills”) of older workers


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Favourable prerequisites for “silver work” – employer`s interests III

In consequence paid work after retirement very often is organized both either as both precarious 400 EURO-jobs or as contract management as well as freelancing

Problem is, precarious employment relationships in the area of work after retirement very often suits pensioners’ interest in flexible working time, etc.

Trade unions fear, “silver work” can develop to a new “business concept” which might become increasingly important against the background of demographic change on the labor markets as well as for qualified labor shortage and misused against the “true” interest and needs of older workers

Case studies confirm that in certain lines of business employment of highly motivated retirees helps filling the gaps in manpower derived from own mistakes in personnel planning in the past


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Insights from case study-findings - promoters and barriers of “silver work” in practice

Legal and regulative incentives or disincentives (tax legislation, limits on regular earnings in retirement)

Organizational incentives/business reasons play a key role on the supply side

Overall labor market situation as a further important prerequisite Normative support by employers of high importance Adequate adapted working conditions Reducing of working hours, less physical job constraints and less work

responsibility, high degree of flexibility, reduced physical constraints play a key role

Majority of „silver workers“ in a comparatively good health status Further individual incentives refer to the family status, family situation,

qualifications, skills and particular vocational experiences


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Current policy background for promoting “silver work” in Germany I

Recent Federal pension policy initiatives aim at promoting “silver work” by both raising the upper limits on additional earning and by freeing them from social insurance contributions. The most important arguments are:

To fight age-discrimination according to Germany`s new legislation on age discrimination (2008)) through reducing practical barriers (due to corporate contracts as well as to social and tax legislation)

“Silver work” is seen as one (of many others) answer to meet the expected (qualified) labour market shortage

“Silver work” is seen as tool to improve the individual income situation in old age and to reduce the risk of poverty of future cohorts older people (against the background of expected rising income risks of future age-cohorts (e.g. due to involuntary early retirement, not fulfilling “pension with 67” (in power since 2012), actuarial cuts for early retirement)

“Silver work” is seen as “good practice” for the normative concept of active ageing (2012 EU-year of active ageing)


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Current policy background for promoting “silver work” in Germany II

However there is political dispute: Trade unions argue more silver work to be an attempt to create the ground for (compensating) further pension

reductions might contribute to keep the first labour market closed for those being

unemployed and looking for jobs Socio political scientist fear a further loss of reputation for the statutory pension Insurance (for not

being able to secure a sufficient level of old age income making many people dependent on “work in spite of retirement”)

Gerontologists fear A” silent” termination of the institution retirement age as the “well-earned”

and satisfactorily secured end of the normal working-career new forms of social inequalities in the process of retirement


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Thank you for your attention!

Prof. Dr. Gerhard Naegele Institute of Gerontology at the TU Dortmund University Evinger Platz 13 44339 Dortmund Phone: +49 (0)231 728 488 0Fax: +49 (0)231 728 488 55 E-mail: [email protected] URL: http://www.ffg.uni-dortmund.de

Prof. Dr. Gerhard Naegele | Dublin 02./03.11.2011

mailto:[email protected]

http://www.ffg.uni-dortmund.de/

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