The result, says Alan Walker of Sheffield University, who wrote a report on Combating Age Barriers in Employment for the European Foundation for the Improvement of Living and Working Conditions, has been to create a culture of early retirement, where companies often think their older workers don t want to stay on. Even in countries which have stopped deliberately promoting early retirement, governments and companies often unintentionally encourage early retirement, by imposing a heavy implicit tax on working for too many years. Thus in some countries, it is illegal to work while drawing a pension. In others, workers can draw a pension only if they first leave their current job. Given the difficulty older workers have in finding work, that in effect condemns them to unemployment.
Many countries withdraw some pension entitlement from working pensioners.
As for workers who stay on the job, they rarely gain much in extra entitlements. That further boosts the implicit tax on work. Company pension schemes have similar effects. One study of pension plans and employment records at several Fortune 500 companies found that the ages of retirement in those firms correlated almost exactly with the financial incentives in their pension plans, which generally encouraged retirement before 65. Indeed, the impact of changes in such pension plans, for the workers covered by them, seemed even stronger than the impact of reforming Social Security.