Across the middle-income countries of the developing world, policy makers are keenly aware that increased longevity and aging populations will place significant and growing burdens on working age adults in the near future. Informal sector workers face a particularly daunting challenge: they frequently lack the ability to “retire” and must work into old age, and then rely on family support when no longer able to work. The challenge is exacerbated by increases in migration of younger family members to urban areas—raising concerns over whether private support for current and future elderly will be sufficient to protect against poverty in old age.
With concern over the well-being of the current and future elderly, extension of social pensions or government-subsidized pensions figures prominently on social protection policy agendas. Although most newly envisioned pensions for the informal sector are relatively modest, perceptions of fairness dictate that eligibility ages match those of more generous pensions received by retirees from the civil service or formal sector. These retirement ages tend to be low. Little is known as to whether receipt of modest social pensions will disincentivize work, or the extent to which they may crowd out traditional sources of support from family members.
In this talk, John will first briefly review microeconomic evidence on factors influencing employment at older ages, with attention to evidence from the ECA and EAP regions. In addition to age of pension eligibility, other factors, including health status, provision of traditional family support, and spousal preferences for joint-retirement suggest other levers that policymakers may use to create incentives for delayed retirement. Next John will examine the sources of financial support for the elderly, with a focus on the determinants of private financial transfers received by elderly households. Finally, he will present results from new research examining the effects of China’s New Rural Pension Program on labor supply, poverty reduction, and private transfers (among other outcomes).