How have Israel's couples reacted to retirement age reforms?

A decade after the retirement age was raised, the impact of the move is beginning to be understood by researchers.

Elderly people sit on a bench to take in the sun along the Promenade Des Anglais in Nice (photo credit: ERIC GAILLARD/REUTERS)
Elderly people sit on a bench to take in the sun along the Promenade Des Anglais in Nice
The increase in “official” retirement ages for men and women in the last decade caused, as is natural, an increase in the actual ages in which employees have chosen to retire. A Bank of Israel report detailed the spillover effects, which differ significantly by gender.
Pension reforms were implemented gradually between 2004 and 2009, deferring the retirement age for men from 65 to 67 and for women from 60 to 62. In many cases, the researchers said, raising the retirement age of men contributed to increased employment of their spouses. Yet raising the official retirement age of women did not effect the employment of their spouses.
Employment rates prior to the pension reform – during the 2003-2004 year – among men aged 65 to 67 were 33% and among women aged 60 to 62 stood at 29%.
Men’s employment rate grew by seven to eight percentage points as a result of the increase in their official retirement age, said Bank of Israel researcher Dr. Edith Sand and Ben-Gurion University economist Dr. Shirlee Lichtman-Sadot. The employment rate of men, however, was not impacted by the increase in retirement age of their spouses.
In contrast, the employment rate of women increased by six percentage points due to the increase in their own official retirement age.
Research was based on comparing married couples of similar ages that were born up to two years before the threshold year for which the retirement age was deferred. Couples were born up to two years following the threshold year, and were in the range for the official retirement age being raised.
Sand and Lichtman-Sadot said, “To the best of our knowledge, we are the first to explore possible interactions between both spouses’ retirement age deferrals... The challenge of balancing sustainability of social security systems and providing an adequate income in retirement is expected to grow and become more pronounced in many countries in the coming years. Since most couples nearing retirement age are dual-earners, it is important to understand the implication of pension reforms at a household level, rather than the individual level.”
The results, the researchers added, may be explained by models of joint leisure and income considerations among couples. The leisure consideration predicts that raising a spouse’s retirement age would decrease his or her leisure time, which in turn would increase the willingness of the other spouse to continue working if their leisure time is complementary.
The income consideration model predicts the opposite effect, forecasting that raising a spouse’s retirement age would increase their probability of working, and increase household income, thereby reducing the need for the other spouse to also continue working.
Accordingly, the researchers’ findings suggest that the leisure consideration may be stronger for women, creating a positive correlation between retirement decisions reached by spouses.