The rise of working pensioners: the Swedish case

Lennart Flood; Nizamul Islam

Acceso abierto

The rise of working pensioners: the Swedish case

Lennart Flood

Nizamul Islam

| 31 may 2016

Nordic Tax Journal

Volumen 2016 (2016): Edición 1 (May 2016)

Acerca de este artículo

Artículo anterior

Artículo siguiente

Cite

Article Category: Article

Publicado en línea: 31 may 2016

Páginas: 41 - 66

Recibido: 02 mar 2016

Aceptado: 23 abr 2016

DOI: https://doi.org/10.1515/ntaxj-2016-0003

Palabras clave
Old age pension, labor supply, tax reforms, microsimulation

© L. Flood and N. Islam, published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Old-age dependency ratio expressed as a percentage (number of individuals age 65 or older relative to number of individuals of working age), 2015 and 2060. Sorted according to the ratio in 2060.Source: Eurostat - Population Projections EUROPOP2013.http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tsdde511

Change in employment rates for people age 65–74, 2006–2014, percent.Sources: Skattebetalarna (Swedish Taxpayers Association (2015)) and Eurostat

Percentage of working pension beneficiaries age 50–69 in 2012.Source: Eurostat, LFS AHM 2012.http://ec.europa.eu/eurostat/statistics-explained/index.php/Labour_force_survey_statistics_-_transition_from_work_to_retirement

Changes in exit age over time. Source: Swedish Pensions Agency (2015)Source: Swedish Pensions Agency (2015)

Labor force participation as a percentage of the population, age 55–64.Source: Swedish Pensions Agency (2015)

Labor force participation as a percentage of the population, age 65–74.Source: Swedish Pensions Agency (2015)

Percentage with labor income, age 61–74, 2006 and 2011. Source: Own calculations, LINDA data 2006 and 2011Source: Own calculations, LINDA data 2006 and 2011

Percentage with business income, individuals age 61–74 in 2006 and 2011.Source: Own calculations, LINDA data 2006 and 2011

Percentage increase from 2006 to 2011 of individuals with both pension and labor income, distributed by age and sex.Source: Own calculations, LINDA data 2006 and 2011

Standard deduction and JSA for individuals older than 65 in 2014.Source: Own calculationsNote: The calculations are based on an average municipal tax of 31.86%

Average and marginal tax in 2014, expressed in percent, for people older than 65 with and without the JSA.Source: Own calculationsNote: The calculations are based on an average municipal tax of 31.86%

Primary general government net lending as a percentage of GDP and the percentage of older people in the population.Source: Flood and Ruist (2015)

Primary general government net lending in SEK billions for those older than 60 and the period of 2015–2034.

Estimated parameters.

	Annual income above one income base amount	Business income above 0.25 denotes significance at 10% of one income base amount
Constant	0.4371 significance at 1%.	0.0301 significance at 1%.
p (before reform = 0, otherwise 1)	0.0765 significance at 1%.	0.0122 significance at 1%.
t (Age 66 = 1, otherwise 0)	-0.3283 significance at 1%.	-0.0143 significance at 1%.
Reform (p × t)	0.0313 significance at 1%.	0.0106 significance at 1%.
Highest education secondary school	0.0412 significance at 1%.	-0.0034
Highest education university	0.1615 significance at 1%.	0.0098 significance at 1%.
Married	-0.0316 significance at 1%.	0.0067 significance at 1%.
Male	-0.0140 denotes significance at 10%	0.0301 significance at 1%.
Married and male	0.1103 significance at 1%.	0.0175 significance at 1%.
Foreign-born	-0.1168 significance at 1%.	-0.0249 significance at 1%.
Self-employed	0.2883 significance at 1%.	——
Self-employed and foreign-born	0.0874 significance at 1%.	——
Medium-sized city	-0.320 significance at 1%.	-0.0048 significance at 5%
Rural	-0.0364 significance at 1%.	0.0049 denotes significance at 10%
Mean for percentage with income in the entire sample	0.387	0.057
Mean for percentage with income in the treatment group before the reform	0.166	0.044
The estimated reform efect without control variables	0.0382 significance at 1%.	0.0117 significance at 1%.

Probability of collecting old-age pension.

Variables	Men	Women
Intercept	771.6555^***	1244.0820^***
Initial value	12.5024^***	10.4820^***
2010	3.2093^***	2.4360^***
2011	4.0886^***	3.3542^***
Age	-25.9246^***	-40.5899^***
Age²/100	21.4813^***	32.9001^***
Compulsory school	1.0436^***	0.7356^***
Secondary school	0.9632^***	0.5444^***
Large city	-0.3362^***	-0.3831^***
Native-born	0.8478^***	0.7693^***
Replacement rate	1.4188^***	1.4211^***
Income above cap	0.4773^***	0.1591

Summary of evaluations of effects on the employment rate of targeted tax reductions for older workers.

	Reform effect Estimated parameter	Percentage effect in relation to mean, entire sample	Percentage effect in relation to mean, treatment group before the reform
Pirttilä and Selin (2011)	0.020	3	19
Data: LFS, 2001–2010
Control: 55–64, Treatment: 65–74
Mean
Entire sample, 60% Rough estimate based on Figure A5
Treatment group before reform, 10.3%
Ministry of Finance (2012)	0.07	18	47
Data: HF, 2004–2009
Control: 64, Treatment: 66
Probit model
Mean
Entire sample, 38.8% Calculated based on Table 7.1
Treatment group before reform 15% Estimate based on Chart 7.1
Laun (2012)	0.015	5	8
Data: Total population, 2001–2009
Control: Aged 65 Jan–Feb
Treatment: Aged 65 Nov–Dec
Only individuals with income 1996–2000
Mean
Entire sample 30.6%
Treatment group before reform 19,3% Calculated based on LINDA data
Flood (2016)	0.031	8	19
Data: LINDA, 2004–2011
Control: 64, Treatment: 66
Mean
Entire sample 38.7%
Treatment group before reform 16.6%
Flood (2016)	0.022	7	13
Data: LINDA, 2004–2011	(Signifcant at 10%)
Control: Aged 65, Jan–Mar
Treatment: Aged 65, Oct–Dec
Mean
Entire sample 31.4%
Treatment group before reform 16.2%
Flood (2016)	0.011	19	24
Data: LINDA 2004–2011
Self-employed
Control: 64, Treatment: 66
Mean
Entire sample 5.7%
Treatment group before reform 4.4%

Net present value of general government net lending in SEK billions and percentage change compared with the reference alternative. The calculations refer to the period of 2015–2035 and individuals older than 60.

	SEK billions		Percentage change compared with reference alternative
	No discount	Discount rate 3%	No discount	Discount rate 3%
Reference alternative	–7,532	–5,537
Increased JSA at 66	–7,023	–5,199	–6.7	–6.1
Increased JSA at 61	–7,085	–5,243	–5.9	–5.3

Working hours/week, 2014.

	Women	Men
55–64	36.1	40.0
65–69	24.3	28.1
70–74	13.8	21.3

Statistics for individuals aged 64 and 66 (2004–2011).

	64	66
Percentage with annual income above one income base amount	0.53	0.22
Percentage with business income above 25% of one income base amount	0.06	0.05
Percentage highest education compulsory school	0.31	0.34
Percentage highest education secondary school	0.52	0.51
Percentage highest education university	0.16	0.15
Percentage married	0.76	0.75
Percentage male	0.53	0.55
Percentage foreign-born	0.12	0.12
Percentage self-employed	0.08	0.08
Percentage residing in a large city	0.31	0.31
Percentage residing in a medium- sized city	0.40	0.40
Percentage residing in rural area	0.29	0.30
Number of individuals in the sample	47,342	41,381

Size of old-age pension assuming collection.

Variables	Men	Women
Constant	11.560^***	11.198^***
61	-1.028^***	-1.146^***
62	-0.731^***	-0.829^***
63	-0.605^***	-0.720^***
64	-0.519^***	-0.568^***
65	-0.383^***	-0.354^***
Compulsory school	-0.534^***	-0.339^***
Secondary school	-0.344^***	-0.212^***
Large city	0.103^***	0.109^***
Native-born	0.385^***	0.250^***
Replacement rate	1.010^***	1.292^***
Replacement rate²	-0.173^***	-0.246^***

Attempt to replicate some results for evaluations of the effects on the employment rate of the targeted tax reductions for older workers.

	Reform effect Estimated parameter	Percentage effect in relation to mean, entire sample	Percentage effect in relation to mean, treatment group before the reform
Comparison, Ministry of Finance	0,06	16	36
Data: LINDA, 2004–2009	0,05	13	30
Control: 64, Treatment: 66	0,026	7	16
Probit model evaluated at mean
Probit model, mean of individual values
OLS
Mean:
Entire sample 37.6%**
Treatment group before reform 16.6%***
Comparison 1, Laun	0,021	5	11
Data: LINDA, 2001–2009
Control: 64, Treatment: 66
Only individuals with income 1996–2000
Mean:
Entire sample 39.9%
Treatment group before reform 18,0%
Comparison 2, Laun	0,024	8	12
Data: LINDA, 2001–2009	(Significant at 10%)
Control: age 65 Jan–Mar
Treatment: age 65 Oct–Dec
Only individuals with income 1996–2000
Mean:
Entire sample 28.6%
Treatment group before reform 19,3%

Evaluation of the increased JSA based on the 2014 rule system.

	Increased JSA for people age 66 and older		Increased JSA for people age 61 and older
	Without behavioral modification, percent (1)	With behavioral modification, percent (2)	Without behavioral modification, percent (3)	With behavioral modification, percent (4)
Employment rate	0	13.3	0	3.8
Working hours	0	9.0	0	5.9
Pension income	0	-0.2	0	-0.3
Labor income	0	6.9	0	2.9
Income tax	-1.0	-0.3	-1.8	-1.3
Transfers	00	0	-0.4
Disposable income	0.4	1.1	0.7	1.3
VAT	0.4	1.1	0.7	1.3
Payroll taxes	0	3.7	0	2.0
Total budget efect, SEK millions	-432	275	-1,514	-66

eISSN:: 2246-1809
Idioma:: Inglés

Calendario de la edición:: Volume Open
Temas de la revista:: Business and Economics, Business Management, Business Law, Political Economics, Public Finance and Fiscal Theory, Law, History, Philosophy and Sociology of Law, Public Law, Tax and Accounting Law

RSS Feed de revista

The rise of working pensioners: the Swedish case

Article Category: Article

Publicado en línea: 31 may 2016

Páginas: 41 - 66

Recibido: 02 mar 2016

Aceptado: 23 abr 2016

DOI: https://doi.org/10.1515/ntaxj-2016-0003

Palabras clave
Old age pension, labor supply, tax reforms, microsimulation

© L. Flood and N. Islam, published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Figure 1

Figure 2

Figure 3

Figure 4

Figure 5

Figure 6

Figure 7

Figure 8

Figure 9

Figure 10

Figure 11

Figure 12

Figure 13

Estimated parameters.

Probability of collecting old-age pension.

Summary of evaluations of effects on the employment rate of targeted tax reductions for older workers.

Net present value of general government net lending in SEK billions and percentage change compared with the reference alternative. The calculations refer to the period of 2015–2035 and individuals older than 60.

Working hours/week, 2014.

Statistics for individuals aged 64 and 66 (2004–2011).

Size of old-age pension assuming collection.

Attempt to replicate some results for evaluations of the effects on the employment rate of the targeted tax reductions for older workers.

Evaluation of the increased JSA based on the 2014 rule system.

The rise of working pensioners: the Swedish case

Article Category: Article

Publicado en línea: 31 may 2016

Páginas: 41 - 66

Recibido: 02 mar 2016

Aceptado: 23 abr 2016

DOI: https://doi.org/10.1515/ntaxj-2016-0003

Palabras claveOld age pension, labor supply, tax reforms, microsimulation

© L. Flood and N. Islam, published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Figure 1

Figure 2

Figure 3

Figure 4

Figure 5

Figure 6

Figure 7

Figure 8

Figure 9

Figure 10

Figure 11

Figure 12

Figure 13

Estimated parameters.

Probability of collecting old-age pension.

Summary of evaluations of effects on the employment rate of targeted tax reductions for older workers.

Net present value of general government net lending in SEK billions and percentage change compared with the reference alternative. The calculations refer to the period of 2015–2035 and individuals older than 60.

Working hours/week, 2014.

Statistics for individuals aged 64 and 66 (2004–2011).

Size of old-age pension assuming collection.

Attempt to replicate some results for evaluations of the effects on the employment rate of the targeted tax reductions for older workers.

Evaluation of the increased JSA based on the 2014 rule system.

Palabras clave
Old age pension, labor supply, tax reforms, microsimulation