From Early Retirement to Staying in the Job: Trend Reversal in the Danish Labor Market

Until the 1970s, the social security retirement age was 67. An early retirement program without medical criteria was introduced in 1979 and resulted in a sharp decrease in labor force participation among those aged 60 to 66. Considering future population aging, the question became how to adapt the overall pension system to a demography with more older people. Several reforms were enacted between 1999 and 2012, to be phased in over a long period. Simultaneously, a turnaround began in the labor force participation among older workers, in Denmark and other OECD countries. We examine the factors behind this turnaround in Denmark. Policy reforms introduced at the same time explain part of the change. Factors affecting labor force participation among older workers were changing, including better health and more education. Further, the reduction of physically demanding jobs allowed older people to continue working. Finally, sectoral changes in the economy and other factors on the demand side could have favored older workers. We examine whether labor force participation among older workers stabilizing on a higher level is a specific occurrence, or a process that continues as longevity increases.