Working life after the Norwegian pension reform

The Norwegian pension reform strongly increased the return to work for private sector employees covered by the early retirement scheme (AFP). Results based on those aged 63 or 64 by 2014 show clearly that many more continue to work approximately as they did at age 60, and that this is closely related to the return to work compared to retirement. In addition, may take up the pension. The increased pension cost from the repeal of the earnings test are more than offset by the increased tax revenue from higher earnings. The test of the public pension against earnings for the age group 67-69 was gradually lifted over the period 2008-2010. This resulted in an immediate increase in earnings for those who would otherwise have chosen to earn just below the test threshold. In 2007, the maturation of the pension system meant that some had full pension accrual (40 years) at age 67 and therefore less to gain from continued work than preceding cohorts. However, this potential pension reduction was stretched out over the remaining life time and the rules were not particularly transparent. In contrast to the impact of the lifting of the earnings test, the loss of potential accrual had no effect on earnings. The change in the total economic benefit of the two events was of the same size.

The direct and immediate effects of the pension reform is to increase the economic return from work among large groups of the elderly in the private sector and to increase liquidity by giving access to actuarially adjusted pension take up. Indirectly, the reform may also induce changes in the occupational pensions and in wage growth. Also, the reform of the private sector AFP increases income for employees in AFP firms, which may reduce work activity. The total effect on work, earnings and income distribu tion is dependent also on the reform of the disability pension and the tax system. This will be investigated in a series of analyses, starting with a thorough mapping of economic work incentives under the new system. We then analyse labour supply effects in differences-in-differences approach, using both event history and regression analyses. We will also analyse changes in the structure and scope of occupational pensions, and interactions between these and wage growth. The reform may increase work acti vity among younger persons who wish to compensate for the longevity adjustment, and analyses of such effects may provide valuable insight into forward looking behaviour. The results of the partial analyses will be drawn together to provide a more comple te overview of the effects, including changes in the earnings distribution. We will explore whether data are sufficient to explore health outcomes. The results will also provide a basis for simulations with an economy wide perspective, like micro simulat ion models and macroeconomic models