This manuscript is an incomplete draft for just discussion, so please do not cite.

Classifying Welfare States
Based on Elderly Labor Force Participationⅰ
PARK Hyebin (Doshisha University Ph.D student)

Introduction
According to Seike (2006), the low birth rate and aging population areconsequences of economic development and the improvement of the living
standards and medical care. However, it is also predicted that the increaseof elderly population would lead into the rising of socio-economic cost,calling for a measure to reduce it. Particularly, the main problems would
be how to design the life of elders in the graying societies and find a way
to support them.
Among the problems, the instability as to the old-age income is morethan a problem of individuals but rather a matter of the entire society andits governing states. Responding to this problem, I recommend labor force
participation of old-age people as one of the solutions. Utilizing elderly
population as labor force is thought of as a solution for future socioeconomic crisis; the participation in economic activities and the resulting
income are found to enliven the life at older ages (Kanou 2007, Seike 2006,
OECD 2006).
As a matter of fact, the shift in policies towards encouraging elderly
generation to participate in labor market along with the reduction ofpension benefits is shown in many countries nowadays. There are manystudies demanding the protection and invigoration of elder people‟s labor
force participation. Specifically, studies on finding factors pertaining to
the retirement and labor market participation of the elders are of utmost
frequency. Among the factors considered in precedent studies are: pension,1

This manuscript is an incomplete draft for just discussion, so please do not cite.

retirement age, vocational status prior to the retirement, health condition,and the technological progress in workplace. Moreover, numerous
researches are conducted on the needs of elder people in job search withrespect to active aging and productive aging (Park 2011). Such researches
can serve as essential references in understanding the circumstances
involving elder people‟s labor force participation and formulating
proposals thereto.

An International Comparative Study
More efficient policies based on scrutinizing and reflecting upon current
policies will be required to boost labor force participation of elder people.
An international comparative study could be one option for studying thematter. It has the benefit of finding unique features of a specific state byexamining cases in other countries and making comparisons, whichcannot be easily achieved if the research is solely focused on the internal
or domestic cases without comparison. Furthermore, with international
comparative study, one can grasp the global tendency on the policies,
broadening the available options for future policies (Uzuhashi 1998, Park2005).

Studies on Classifying Welfare States
Recently, thanks to quantity expansion of social welfare policy andservices, many studies upon welfare regimes and welfare states are being
conducted, resulting into diverse accomplishments. Studies on classifying
welfare states have advantages on understanding the flows of welfare
policy and service of the targeted country at large. Also, they enable one tofind tendency in a series of policies.
Currently, studies on classifying welfare states are being carried out,using various indexes. De-commodification and stratification, as EspingAndersen suggested in “The three worlds of welfare capitalism”, are themost representative indexes. And, lately, many studies on classifying
welfare states based on new indexes are being conducted. For example,2This manuscript is an incomplete draft for just discussion, so please do not cite.

Kim (2008) did a research based on social investment strategy. In hisresearch, 20 countries are categorized into the Social Investment States(Sweden, Denmark), the Active Labor Market Policies Centered States(Germany, Netherlands), the Family Service centered States (UK,Luxembourg, Australia), and the Liberal Welfare states (USA, Japan,Korea) according to their employment rate, female employment rate,
unemployment rate, and gini coefficient. KRÖGER (2011), proposing an
original concept, called dedomestication, which differs from defamilisation,suggested a new index to international comparisons of child care andservice provision.
On the other hand, a great number of studies are using indexes related
to pension, medical care, and long-term care while significantly less tolabor force participation of elder people, when it comes to the international
comparative studies using indexes related to elder people. Miura (2003) istrying to classify welfare states using the employment rate and social
expenditure of males of age from 55 to 64, focusing on the relationshipbetween employment and welfare; the purpose of it is to clarify therelationship between welfare and employment, not the labor market
participation of elder people.
As it is the case, in international comparative studies or researches onclassifying welfare states, only a limited number of researches primarily
concentrating on labor market participation of elder people have been
carried out. However, due to the rise of life expectancy, low birth rate andpopulation aging, the need for labor force participation of elder people andthe job opportunity for them are expected to grow, correspondingly. Hence,
more studies focused on labor force participation of elder people are to beconducted.
In this paper, as mentioned above, it will be explained that it is required
to enhance and secure labor market participation of elder people, and interms of studying methods, classification of welfare states throughinternational

comparativestudies

will

beadopted

realizing

theinsufficient number of researches on international comparative studies.
3This manuscript is an incomplete draft for just discussion, so please do not cite.

Also, a new index for studies on welfare states is to be suggested, based on
the reality of labor force participation of elder people and indicators
pertaining to it. The suggestion is believed to become a new axis ofinternational comparative studies on labor force participation of elder
people, and to broaden the scope of such areas.

Methods
Ebbinghaus (2006) and OECD (2006) analyzed the cause for whether asenior citizen decides to retire or to participate in labor market in twoperspectives. Namely, Pull factor toward retirement and Push factor
toward retirement (Fig. 1).
Pull factor is characterized by weakening the will of an elder person,
centered on income security by means of economic incentives, toparticipate in the labor market. Along with one‟s desire to do more leisureactivities or switch to other non-occupational jobs, different social policy
programs provide alternatives that facilitate retirement: Pensions,
unemployment benefits. Push factor is rather compulsory, which has lessto do with one`s will. Push factor is more concerned with labor market
than pull factor: unemployment rate, the technological progress inworkplace, health condition, mandatory retirement system, a preference
for job to youth.
In this paper, the index is to be suggested, referring to the two factors.

Public expenditure on pension is adopted as pull factor in that thedecision to retire of an elder person is closely related to retirement pension
income. Unemployment rate is adopted as push factors in that the job
opportunity of the elder is closely related to the level of entire
unemployment rate. Additionally, in order to verify how each factor affects
labor force participation, average labor participation rate of both sexes at
the age from 55 to 64, specifically in this paper, OECD‟s survey of 28
countries conducted in 2005, is used.
The reason for this paper, to use labor force participation rate instead ofemployment rate, is that employment is a limited form of labor, i.e.
4This manuscript is an incomplete draft for just discussion, so please do not cite.

contract-based labor. In Korea, it is to be considered that the retirement
age is mid-50s and a significant number of workers are engaged inprimary industries such as agriculture and fishery (OECD 2004), which do
not fall into the category of employment, e.g.
In this paper, unemployment rate is thought of as having a negative
impact on elderly labor force participation among OECD states, whereas
unemployment rate does not play much role on labor force participation in
the research of OECD and Ebbinghaus.
Additionally, I tried to use other indicators as push factor such as
economic growth rate (percentage change of real GDP from previous year),the unemployment rate of age 55 to 64. Yet, those indicators are found tohave no correlation with the labor force participation rate of age 55 to 64.
Seniority wage structure has correlation with labor force participation
rate aged 55-64 only for 13 countries (Australia, Belgium, Canada, Czech
Rep., France, Germany, Ireland, Japan, Korea, Netherlands, Norway, UK,USA). However, the data wasn‟t useful for the classification because theamount of the data is very limited and it shows very irregular distribution.

Fig.1

Pull factor and Push factor

Pull factor (pension, unemployment benefit, desire to do
more leisure activities or switch to othernon-occupational jobs)
Push factor (unemployment rate, the technological progress
in workplace, health condition, mandatory retirement
system, a conciliatory attitude for job to youth )labor force
participate

retirement

Source: Ebbinghaus(2006) ,OECD(2006)
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In this paper, I will use these three indexes for classification purposes.
－Pull factor：Public expenditure on pension as a percentage ofGDP/ratio of population ages 65ⅱ－Push factor：entire unemployment rate
－ Independent variable：labor force participation rate aged 55－64

Fact Findings
The analysis, confirmed that pension expenditure and unemployment
rate are negatively related to labor force participation rate of elder people.
In other words, in countries the unemployment rate and pension
expenditure of which are low, labor force participation rate of elder people
is high, and the opposite is the case in the countries where unemployment
rate and pension expenditure are low.
First of all, 4 groups classified according to their level of pension
expenditure and labor force participation rate in Fig. 2 are as follows.
Group A involves the countries such as Sweden, Norway, Japan andUnited States where the labor force participation rate is high and the levelof pension expenditure is lower than OECD average. The countries inGroup B (Korea, Canada, Ireland and United Kingdom) are located moreclosely than those in Group A to the linear trend line, have the lower levelof pension expenditure and labor force participation rate close to OECDaverage. Group C (Finland, France, Spain and Germany) features thenearest positions to the linear trend line and high level of pension
expenditure, while Group D (Italy, Belgium, Hungary and Luxembourg)
has high level of pension expenditure and the lowest labor force
participation rate.

6This manuscript is an incomplete draft for just discussion, so please do not cite.

Fig. 2Public expenditure on pension and labor force participation rate

aged 55-64

90.00
ISL

80.00

A
SWE
NZL
NOR CHE

Labor Force Participation age 55-64

70.00

JPN
DNK

B

USA

KOR

60.00

CAN

GBR
AUS
IRL

FIN
OECD

50.00

C

DEU

MEX
NDL

CZE
ESP
GRC
FRA

40.00

D
LUX

SVKBELy = -0.5653x + 76.131
R² = 0.3966
HUNITA

AUT

POL

30.00
02040

60

80

100

Public Expenditure on Pension /Ratio of population aged 65

Source: OECD (2010)

Also, Fig. 3 shows a trend similar to that of Fig. 2, allowing analogousassortment. Although Groups A and B have similar unemployment rates,
Group A‟s labor force participation is 60~70% while Group B is 50~60%.
While Groups C and D have similar public expenditures on pension level,
the unemployment rates of Group D were lower than Group C.
Nevertheless, Group D‟s labor force participation rates were lower.
7This manuscript is an incomplete draft for just discussion, so please do not cite.

Fig. 3

Unemployment rate and labor force participation age 55-64

90.00

Labor force Participation aged 55-64

ISL
80.00

A
NZL
NOR
CHE
JPN

70.00

USA

DNK
KOR

60.00

B
50.00

CAN

GBR

IRL

MEX

SWE

FIN C

AUS
OECD

DEU
CZE ESP

NDL

FRA

40.00

GRC

y = -2.3065x + 68.22
R² = 0.3139

D

30.00
2.0

LUX

AUT

4.0

6.0

HUN
ITA

SVK

BEL

8.0

10.0

12.0

Unemployment rate

Source: OECD (2010)

814.0

16.0POL

18.0

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Conclusion
Owing to the fact that it is hard to discuss all characteristics andbackground of the whole States whereupon this research is made, thegeneral trend and characteristic of 5countries (Sweden, Germany, USA,Japan, Korea) should be mainly discussed.
Firstly, the classification made in this paper seen in Fig. 2 and Fig. 3 isanalogous to the Esping-Andersen‟s three welfare regime-type. A trend atlarge, Social-democratic regime-type → Liberal regime-type → Corporatistregime-type in order of A-B-C-D, is shown. Even so, the trend does notalways fit the data. USA in Group A is a typical example of liberal regime
state, and Finland has long been understood as Social-democratic regime.
Such difference can be explained as follows.
This research on welfare states has a purpose to see a general trend
among the target countries, and thus not every idiosyncrasy of each stateis to be taken in to account; it is assumed that there exist differences inculture, economic situation and the perspective on the elder`s labor force
participation.
The highest labor force participation rate is shown in Sweden except forIceland. Sweden has the highest labor force participation rates of elderly,
despite the higher unemployment rate and pension expenditure rate thanthose rates of other countries in the group A. It seems to be affected by its
high degree of entire employment rate and expenditure of active labormarket policies.
USA belongs to group A, although it is a liberal regime-type state. USA
prohibit the age discrimination in employment by ADEA(Agediscrimination in Employment Act) ,and high entire employment rate in
USA would be a reason for this fact.
Since the 1970s, a political scheme to spur early retirement has been
settled in the European states including Germany. However, Germany
have higher labor market participation rate of the elderly than Italy,
France, which are the same Corporatist regime-type countries. From1990s, German political scheme begun to change. Pension reform and9

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create new Act for elderly part-time jobs to be combined with partialpensions(ATG).
Korea and Japan are classified in different groups, while in many otherstudies, Korea and Japan fall in the same category. There would be manyreasons for the labor force participation rate of Japan to be higher than
Korea despite the fact that Japan has higher pension expenditure rate,
which is found out to be a pull factor, having negative impact on labor
force participation.
A view about sources of income in the elder‟s life is one of the reaseons.
In terms of living expenses of seniors, Japan has higher sense of selfreliance than Korea. In Korea, there are higher expectations for social
security and stronger opinions calling for the financial support fromfamily.

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Fig. 4. View about what should be the source of and older person‟s2005

2000

1995

1990

1980

retirement income
Korea

40.3

Japan

55

Korea

43.2

38.2

Japan

4416

Korea

41.9

28.2

Japan

46.6

12.8

Korea

46.3

19.5

Japan

42.6

Korea

36.5

Japan

47.6
0

49.4

8.2 1.1
18.8

7.9

11.5

2040

21.8

2.5

17.6
37.5

0.6
2.3

29.2

037.72.3

32.7

0.6

46.3

2.6

51.3

0.7

6.9 43.6

1.4

60

80

100

Source: Cabinet Office (2007)
Note: ■ People should save money while working and should not have torely on the government, their family members, or public support, ■ Family
members should care for their elderly, ■ Society should care for the elderly
through public support such as Social Security, ■ Others

In this paper, OECD countries are categorized into groups according totheir Push factors and Pull factors of labor participation of the aged.
General trend is examined as to the result of the classification, and thefeatures of Korea and Japan are analyzed.
The further assignment would be to analyze the background of othercountries and the characteristic of each group with the labor market
theory.

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References
Atsusi SEIKEI (2006), Living in Age-free Society, NTT Publishing.
Bernhard Ebbinghaus (2006), Reforming Early Retirement in Europe,

Japan , and the USA, Oxford University Press.
Byunghyun PARK (2005), Comparing the Welfare states, Community.
Delsen and Reday － Mulvey (1996), Gradual Retirement in theNetherlands, Lei Delsen and Gneviève Reday－Mulvey.(eds.), Gradualretirement on the OECD countries: macro and micro issues and policies,
Ashgate Publishing, pp. 111－132.

Gøsta Esping－Andersen (1990), The Three World of Welfare Capitalism,Policy.
Gøsta Esping － Andersen (2008), Trois leçons sur l'ètat － providence
Bruno , Palier.
Hisakazu KATOU(2007), Demographic Economics, Nihon Keizai Shimbun
Publishing.
Hyebin PARK (2011), A Review of Elderly Work, Doshisha University

Graduate Course Collection of essays , Vol.25, pp. 56－64.
Japanese Cabinet Office (2007), The 6th International survey on Livingand Consciousness of Senior Citizens.
Jonathan Gruber and David A. Wise. Eds. (2010), Social Security

Programs and Retirement Around the World: The Relationship to Youth
Employment, The University of Chicago Press.
12This manuscript is an incomplete draft for just discussion, so please do not cite.

Kyoseong KIM (2008), Classifying Welfare States Based on the social
Investment Strategies, Social Welfare Policy, Vol. 35, pp. 29-59.
Mary MIURA (2003), „labor market regulation and Welfare States －International

ComparativeandJapan‟sposition‟,

inTakahumi

UZUHASHI (Ed.), Welfare states in Comparing. Minerva syobou, pp.
109－133.
OECD (2006), Live Longer, Work Longer, OECD.
OECD (2010), OECD Factbook 2010: Economic ， Environmental andSocial Statics, OECD.
Teppo KRÖGER (2011), Defmilisation, Dedomestication, and care policy:
Comparing Childcare Service Provisions of Welfare States, International

Journal of Sociology and Social Policy, Vol. 31.
Takahumi UZUHASHI (1997), A Comparative Study of Welfare States –features and prospects of Japanese Model, Nihon hyoronsya．

NOTE
ⅰI wrote a master thesis [A Comparative Study of Elderly Labor Forceand Retirement – an Essay at Classifying]. In that thesis, 5 Countries(USA, Sweden, Germany, Japan, and Korea) are mainly analyzed as towhat factors affect the elder whether they decide to retire or to participate
in labor market. Also, I tried to classify OECD States according to theinternational common factors, carefully picked with reference to theanalysis, that affect the elder‟s alternative of retirement or labor market
participation. This paper is a revised and contracted version of the masterthesis.

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ⅱ Aging rate (ratio of population ages 65) varies among states, and there
is a tendency that the higher the aging rate, the higher the public pension
expenditure rate as well. Aging rate could directly affect the relationshipbetween public pension expenditure rate and labor force participation, yet,in this paper, I designed the set-up in a way that the classification ofstates is independent of the variance of aging rate among states.

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