Reference
Kirn, T., Barslund, M., Dekkers, G., van den Bosch, K., Kump, N., Liegeois, P., Moreira, A., Stropnik, N., & Vergnat, V. (2021). The impact of taking up care tasks on pensions: a comparative analysis for 5 european countries. Presented at the ESPAnet 2021, KU Leuven, online.
Publication type
Presentation at Scholarly Conference
Abstract
We study how, having to provide care to a child or an older adult, might impact on women’s future pension claims. As the impact of care related labour market decisions depends on the design of the pension system, we carry out a cross-country comparison, in which we analyse the impact in countries with a high (Luxembourg), middle (Switzerland, Belgium, Portugal) and low (Slovenia) Gender Pension Gaps. Making use of standard simulation models, we examine to what degree the impact of care-related events – which are assumed to last 6 years - is mediated by a) pension rules, and b) women’s caring decisions - move to full-time care, combine care with part-time work, or combine care with full-time work. Four main findings stand out. First, the impact of having to provide care to a dependent adult on pension entitlements largely exceeds the impact of having to provide care to children. This is particularly so in Portugal. Second, we identify large cross-country differences in the impact of reducing work hours to provide care for children or dependent adults. In Luxembourg, reducing work hours by 50% (for 6 years) to provide care to a child is projected to reduce the value of the old age pension by up to 7%. In Belgium and Portugal, a similar decision will have a negligible effect on pension entitlements. Third, the impact on earnings from absence from the labour market can have an as big or larger effect on the final pension when it comes to childcare compared to the period of caring itself. Finally, we find evidence that pension rules - namely the availability of pension credits, and the degree to which these replace lost wages/earnings - introduce significant nonlinearities in the impact of care episodes on pension entitlements. In this regard, Belgium’s system of pension care credits emerges as the most effective at protecting the pension entitlements of women that are required to reduce their work hours to provide care.
Persons
Organizational Units
- Center for Economics