The Influence of Social Security on Labor Force Participation for Selected OECD Countries: A Comparative Study
Abdulhalim ÇelikSocial security, which functions as a compensator for the negative effects of economic growth, is criticized for decreasing labor force participation. It is argued by everyone, including oppositionists, that restructuring and radical changes in social security are necessary in a period when economic and social conditions are worsening compared to the age of welfare. In developed countries, where early retirement is facilitated, the labor force participation rate of middle-aged and elderly people has decreased. For this reason, radical changes and regulations have been made in pension programs in developed countries for the last two decades. In social insurance programs, regulations such as increasing the retirement age, making the conditions for benefiting from social security benefits more difficult and extending the minimum protection are at the forefront. The purpose of this study is to come to a conclusion as to whether social security reduces labor force participation. For this, the data of 12 OECD member countries were selected and an evaluation was made for the period between 2000-2018. As a result of the study, it was concluded that there is a strong link between benefiting from social security benefits and labor force participation and that social security may have a negative effect on the rate of participation in the labor force.
Sosyal Güvenliğin İşgücüne Katılma Oranına Etkisi
Abdulhalim ÇelikEkonomik büyümenin olumsuz etkilerini telafi edici bir işlev gören sosyal güvenlik, işgücüne katılımı azalttığı yönünde eleştirilmektedir. Ekonomik ve sosyal koşulların refah çağına göre ağırlaştığı bir dönemde sosyal güvenlikte yeniden yapılanma ve köklü değişikliklerin gerekli olduğu karşıt görüşlüler dahil herkes tarafından savunulmaktadır. Gelişmiş ülkelerde erken emekliliğin kolaylaştırıldığı dönemlerde orta yaşlı ve yaşlı nüfusun işgücüne katılma oranları düşmüştür. Bu nedenle gelişmiş ülkelerde son yirmi yıldır emeklilik programlarında köklü değişiklikler ve düzenlemeler yapılmaktadır. Sosyal sigorta programlarında emeklilik yaşının yükseltilmesi, sosyal sigorta ödeneklerinden yararlanma koşullarının ağırlaştırılması, asgari korumanın yaygınlaştırılması gibi düzenlemeler ön plandadır. Bu çalışmanın amacı sosyal güvenliğin işgücüne katılımı azaltıp azaltmadığı yönünde bir sonuca varmaktır. Bunun için OECD üyesi 12 ülke verileri seçilerek 2000-2018 yılları arasındaki dönem için bir değerlendirme yapılmaya çalışılmıştır. Çalışma sonucunda sosyal sigorta ödeneklerinden yararlanma ile işgücüne katılma arasında kuvvetli bir bağ bulunduğu ve sosyal güvenliğin işgücüne katılma oranı üzerinde olumsuz bir etkisinin olabileceği kanaatine ulaşılmıştır.
The understanding that social security is a state duty in the 20th century has been established. The state has acted generously providing social security benefits with the opportunities provided by economic growth. Following the extraordinary economic growth after the Second World War, a golden age of social security has been experienced. Financial difficulties have been added to demographic developments affecting social security with the stagnation in economic growth since the 1970s. After that, the state has sought out ways for a sustainable social security understanding and an era of restructuring in social security has begun.
In a world where uncertainty has emerged in pension systems with globalization, many states have made various regulations and reforms to solve the financial problems of the pension system and to ensure the sustainability of the system. Reform studies in social security have been carried out globally for the last fifty years and are still underway. In social security benefits, noticeable regulations, such as increasing the retirement age, making the conditions more difficult and extending the minimum protection are made. There is a limit to what the state can now do. Therefore, these reforms seem necessary.
Social security reforms have been at the top of the policy agenda of most OECD economies, with the constant aging of societies and the changing nature of work putting pressure on both the financial sustainability and pension income adequacy of pension systems. Faced with similar problems, modern welfare states have opted for various reforms. For this, governments primarily aimed to increase the funds by accumulating financial assets and reduce the financial burden of social security. In addition, they envisioned expanding the tax base by stimulating the labor supply and increasing economic output. This situation has ruled out the early retirement plans of the older population who want to enjoy all the benefits of the pension system before the normal retirement age.
People leave their workforce at an early age when their social security benefits begin to become permanent at a later age (above 50). In the years when the retirement age is low, they stop looking for a job and retire early. In many studies on the effects of reforms in social security programs on the labor force participation rate, striking results have been obtained on the negative effects of unemployment insurance, unemployment benefits, early retirement and social assistance on the social security labor force participation rate. In the years when these benefits were provided, the labor force participation rate started to decrease, and when they were decreased, the labor force participation rate increased. It is possible to see improvements in the rate of participation of the elderly in the workforce. It is a fact that in most countries it is difficult to manage the aging population. Some countries have begun to limit early retirement, raise the retirement age, support women’s participation in the labor force, and have been selective in migration.
One of the reasons that negatively affects social security coverage and adequacy is the fall in formal employment and the increase in unemployment rates. As the proportion of the elderly population increases, the proportion of active workers decreases. Informal work poses a major problem in accumulating funds for retirement in some countries. It is observed that the informality seen in the young population and generally among women decreases especially with the increase in education level.
For the future of social security, benefiting from the solutions of history and taking lessons from today can be a solution to new searches. A major concern for both industrialized and developing countries is the phenomenon of early retirement. Early retirement keeps people away from active life, both by reducing the savings of social security systems and by causing the workforce to withdraw from work areas at an early stage. Therefore, keeping people in the labor market with a reasonable retirement age and making regulations that encourage working should be the policies to be followed.
In this study, the development of the labor force participation rate of the elderly population reaching retirement age was evaluated using the data of selected OECD countries between 2000 and 2018. While labor force participation rates remained low before pension reforms, it was observed that these rates increased after reforms in recent years. In short, the idea that early retirement reduces labor force participation rates seems to be justified.
