The effect of the Incentivized Gradual Retirement Plans on municipalities’ employment rate
Abstract: We investigate the effect of incentivized gradual retirement plans (GRPs) on the retirement behavior of older civil servants and the employment levels of younger civil servants at municipalities. The GRP wants to establish that older civil servants remain employed up to the pension eligibility age, by offering them a reduction in working hours with only a limited decrease in net earnings and little to no reduction in pension accrual. Municipalities use this freed-up capacity by hiring younger employees. Using variation in the availability of GRPs between Dutch municipalities, we use a difference-in-differences design to test whether GRPs succeeded in achieving its goals. We find that this is not the case. More precisely, we find that the adoption of a GRP has a minor significant effect (close to zero) on the exit age of older civil servants. We as well find that GRPs do not increase the hiring rate of young civil servants in the age group 18-30.