Unemployed Over-53s Have an Unfairly Negative Reputation

Older unemployed workers are often accused of taking excessive advantage of unemployment benefit. This sweeping accusation, however, is unjustified.

It is true that the increase in the maximum period for which unemployment benefit might be claimed by over-53s, a reform implemented in the 1980s, led to an increase in the average duration of unemployment for this age group. Between 1981 and 1993, the average length of a period of unemployment for a 53-year-old increased by 50 per cent. In the same period, the average duration of unemployment of younger unemployed workers, who were not affected by the reform, fell by 25 per cent. Having said this, the duration of unemployment for over-53s who ultimately find re-employment did not increase following reforms. In fact, the duration of unemployment of older individuals who re-enter the job market is actually shorter than that of younger unemployed workers. The increase in the average duration of unemployment for unemployed over-53s is therefore largely due to those who never re-enter employment. This is largely a consequence of the early-retirement programme.

This is the finding of a study carried out by the Centre for European Economics Research (ZEW) in Mannheim. The study elaborated on preliminary results from a long-term DFG research project. The study is based on comprehensive individual data held by the Federal Employment Agency and concerns some 600,000 individuals. The current study has therefore taken approximately 100 times more data into account than previous studies have done.

In the period from 1985 to 1987, the maximum period during which unemployment benefit may be claimed by those aged over 53 was increased from 12 to 32 months. In addition to the general increase in the duration of unemployment, the reform also resulted in a larger proportion of older unemployed workers remaining unemployed for exactly 32 months before fully leaving the job market. This suggests that businesses have been making use of the longer period for which unemployment benefit may be claimed, in order to integrate early retirement into their social planning. Workers might receive a lump sum payment towards the end of their working life and register as unemployed for 32 months prior to retirement. Such solutions, which businesses aim to implement with the agreement of workers, result in a "rejuvenated" staff body. This is, however, achieved at the cost of the general public.

Contact

Dr Ralf Wilke, Phone: +49(0)621/1235-131, E-mail: wilke@zew.de