# 5. Productive longevity: What could work in L/MICs?

This section presents evidence for interventions directed at individuals and families (supply side), at firms (demand side), and at employment services in charge of labor market intermediation. Across these dimensions, we identify policies that could raise incentives and remove barriers to accessing work, and those that could foster productivity by raising human capital and especially skills (there is limited evidence on health). Policies aimed at increasing labor force participation are largely focused on formal sector workers, for whom regulatory reform is relevant. Formal sector workers are more likely to have resources (and thus incentives) to retire, but at the same time are more able to continue working and with higher productivity, than workers in informal, low-productivity jobs. Human capital policies, by contrast, are also relevant for the informal sector.

In identifying relevant literature, we have given priority to studies that present results for LICs or MICs and to rigorous evaluations, to the extent possible. However, the policy agenda focusing on productive longevity is relatively recent and the evidence on policy effectiveness limited, especially for L/MICs. Where evidence for mature workers in L/MICS is scarce, we focus on the impact of similar interventions for other groups, or for HICs, and discuss potential differences that would need to be considered when drawing lessons from these experiences.

Supply-side interventions: Improve incentives and remove barriers to work while investing in skills development This section discusses evidence on regulatory reforms to improve work incentives and make work pay for mature workers, along with improvements in services and skills development aimed at increasing the ability and capacity of mature workers to work longer and more productively.

Reforming social insurance and labor taxation

**Reforms to social insurance focused on increasing retirement age and reducing work disincentives in the design of pension schemes can play a role in extending working lives for formal sector workers** . Across OECD countries, comprehensive social security reforms of contributions, benefits, and retirement ages are planned or have already been implemented.<sup>113</sup> Raising retirement ages has resulted in postponed retirement and higher employment rates among mature workers. Raising retirement ages in Austria and Germany, for example, resulted in increases in employment by nearly 10 percentage points for the affected groups.<sup>114</sup> Many middle-income countries in East Asia and the Pacific, Europe and Central Asia, Latin America and the Caribbean, and the Middle East and North Africa have also reformed their pension systems. The objective has primarily been to increase financial sustainability, and labor market impacts have not been systematically studied, however.

**Pension reforms require careful attention to the entire social insurance system** . As discussed above, increasing retirement age may also result in a more intensive use of alternative pathways into inactivity, such as unemployment, disability support, or partial retirement – especially for low-wage and less healthy workers, and especially during recessions. In the studies of Germany and Austria cited above, for example, some mature workers transitioned into other forms of social insurance support. Countries have consequently embarked on a parallel set of reforms to close loopholes, including

113 Boissonneault et al. 2020. 114 Riphahn and Schrader 2021 and Staubli and Zweimuller 2013.

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