## sipea2025078

## Source details

**Canonical URL:** [sipea2025078](https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025078.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025078.pdf.md)
- [Structured JSON version](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025078.pdf.json)

---

### Data and methodology
- Two data sources: the Encuesta de Población Activa (EPA) and the Encuesta de Condiciones de Vida (ECV).
  - EPA: quarterly survey, longitudinal structure following workers over six quarters.
  - ECV: annual household survey, panel structure following workers for at most four consecutive years; used for the M-Logit model.
- Definitions:
  - “Older workers”: individuals aged 55-69.
  - “Prime-age” workers: individuals aged 25-54.
- M-Logit model:
  - Probability formulation for transitions across K states as specified in the text.
  - Average marginal effects computed by integrating individual-level marginal effects.
- Sample: panel version of the ECV over 2010-2023, for a total of approximately 26,973 worker-year observations.

### Participation trends and alternative pathways — key empirical findings
- Participation and employment trends:
  - The effective average age of exit from the labor force in Spain was estimated at 62 by the OECD (2023) and at 64 by the European Commission (2024) Aging Report.
  - The statutory retirement age “lied between 65 years and 66 and 4 months, depending on contribution history.”
  - Employment rate of workers aged 55-69 rose from 32 percent in 2014 to above 46 percent in 2024.
  - This rise contributed to an increase in the overall employment rate of approximately 4 percentage points since 2014.
- Early exits and non-retirement inactivity:
  - Employment rate starts declining in the mid-50’s, approximately 10 years before full pension benefits are accrued for most workers.
  - Using data from 2022-2024, the rise in non-retirement inactivity after age 50 reduces the employment rate of male workers aged 51-64 by approximately 6 percentage points relative to 50-year-old ones, and by 11 percentage points for females.
  - Less than 50 percent of new retirees were employed a year prior to retirement.
  - Inactivity due to sickness and disability accounts for 25 percent of new retirees among men and 15 percent among women.
  - Among women, approximately one third of newly retired were previously inactive to care for a family member or for other family and/or personal reasons.
  - Jobless older workers very infrequently return to employment; the yearly probability of moving back into work is very low and lower than the likelihood of moving into retirement.

### M-Logit analysis — transitions from employment (selected marginal effects)
- Model covariates grouped into demographic factors and job/worker-specific contextual factors; controls include year fixed effects.
- Demographic effects:
  - Aging reduces the probability of remaining employed and increases the probability of transitioning into retirement.
  - Female workers have a 3-percentage points higher probability of remaining employed compared to males, accompanied by a lower chance of retirement.
  - Education: having secondary or tertiary education increases the likelihood of remaining employed by 3 and 4 percentage points, respectively (baseline: primary schooling).
- Health and job-quality effects:
  - Self-reported bad or very bad health: workers in this category have a 9-percentage point lower probability of remaining employed.
  - Full-time status and having any dependents in the household are positive predictors of employment at t+1.
  - Working full time is associated with a lower chance of becoming unemployed; part-time work is associated with higher job insecurity.
- Income effects:
  - Controlling for full-time status, higher monthly earnings are associated with a small rise in the probability of retirement.
  - For log wages, a one log-unit increase (corresponding to a 2.7-times rise in earnings) is used to report probability changes.
  - In Spain, a 2.7-times rise in monthly earnings is approximately equal to the ratio of the 75th to 25th percentile of monthly labor earnings; keeping other variables constant, a worker in the 75th percentile has a 1-percentage point higher yearly retirement rate compared to one at the 25th percentile.

### Channels and compositional dynamics of joblessness (descriptive)
- Composition of non-employment among 55-65 year-olds:
  - Inactivity related to health and disability accounts for a large part of the rise in joblessness prior to retirement for both men and women.
  - As total unemployment falls with age, the remaining unemployed pool shifts toward long-term unemployed (those who have not worked for more than one year).
  - Among women, a significant increase in inactivity in the 50’s and early 60’s is due to caring for a family member or for personal reasons; after age 65 this is sharply replaced by an “other inactive” state, often reflecting women permanently out of the labor force but not receiving a contributory old-age pension.

### M-Logit results — transitions out of non-employment (selected findings)
- Sample and outcomes:
  - Sample: workers who are non-employed and non-retired in the initial period; male and female workers aged 55-69.
  - Pooled non-employment categories (excluding retirement): unemployment, health-related inactivity (including permanent disability), inactivity for “domestic” reasons, and all other types of inactivity.
  - Possible outcomes in year t+1: employment, retirement, and all other non-employment statuses.
- Demographics:
  - Age is positively associated with higher chances of retirement and reduced prospects of returning to work.
  - Non-employed women have a 2 percentage points lower job-finding probability compared to men.
  - Non-employed women have a 5 percentage points lower probability of transitioning to retirement compared to men.
- Type/reason for non-employment:
  - Relative to the unemployed (base group), those who are inactive (health, domestic, other) are more likely to remain jobless in the next period.
  - Health- and domestic-related inactivity each imply approximately a 5-percentage points fall in the probability of re-employment.
  - Health-related inactivity is also associated with an increased likelihood of retirement.
  - Domestic duties and other reasons for inactivity are more persistent states with lower transitions into retirement.
- Socio-economic predictors:
  - Higher gross household income is associated with higher probabilities of both re-employment and retirement (less prone to remain inactive).
  - Self-reported bad health increases the chance of remaining in non-retirement inactivity and strongly hinders re-employment and labor market participation for older workers.
  - Having dependents in the household is associated with lower transitions into retirement, but not with higher job-finding rates (implying greater persistence of non-employment).
  - Receiving any social assistance benefits in the previous year is associated with a higher likelihood of retiring at the expense of re-employment and other inactivity transitions.
- Caveat: potential high correlation between some controls (e.g., health inactivity and bad health; receiving benefits and being unemployed) may lead to imprecise estimates for collinear variables.
- Additional note: reception of benefits is endogenous to limited prospects of re-employment, requiring more in-depth analysis.

### Health, dependents, and labor market impacts
- Health prevalence and trends (ECV, 2016–2023):
  - Close to 50 percent of the Spanish population aged 55-69 in 2023 reported being affected by some long-term health condition.
  - 35 percent reported some degree of health-related physical limitations.
  - Above 2 percent assessed their overall health condition as “very bad”.
  - Share of population receiving permanent disability support has remained stable or even fallen slightly among the older working-age population.
- Work-absence and disability trends:
  - Health-related work absences rose sharply starting in 2020 and have remained persistently high thereafter.
  - Temporary disability beneficiaries increased by 37 percent from 6 million in 2018 to 8.1 million in 2023.
- Dependents and domestic-related inactivity:
  - Among older women, close to 35 percent of respondents fall under “domestic inactivity”; among older men, this figure is 0.16 percent.
  - Domestic-inactive older women report, on average, 15 years of labor market experience versus 30 years for older women in employment, unemployment, or other inactivity types.
  - Domestic-inactive group has the highest share of individuals out of a job for more than 3 years—close to 80 percent.
  - Domestic-inactive individuals have almost a 5 percentage points higher probability of remaining out of a job compared to the unemployed.
  - Close to 80 percent of the domestic-inactive group remain in that labor market status across two years.
  - Exits from employment directly into domestic inactivity are very infrequent.
- Caregiving prevalence beyond household:
  - In 2021, there were 638,000 individuals with some level of caring duties for people aged 70 or above within their household, and 920,000 for elderly outside of their household; men constituted 40 percent of carers.

### Support for prolonged out-of-labor-force workers and re-skilling
- Those who have remained out of the labor force for a prolonged period, once their family caring role is no longer a priority, need access to guidance services and training programs to re-acquire skills they may have lost.
- The recent reform of unemployment benefits (RDL 2/2024) could be helpful if accompanied by enhanced active labor market policies.
- The reformed subsidio por desempleo por cotizaciones insuficientes:
  - extends eligibility to those with just 3 months of social security contributions and dependents,
  - allows access to the job guidance services provided by public employment offices.
- The impact of this reform could be strengthened if activation requirements were strengthened.

### Working hours flexibility — evidence and implications
- Hours and preferences (ages 50–69):
  - Average hours worked and desired hours decline from age 50 until age 64, with a narrowing gap between the two.
  - Decline in weekly hours reflects a shift in preferences toward a shorter work week; desired hours decline more steeply.
  - Convergence of averages accompanied by falling mismatch and a falling share of workers not satisfied with their number of hours.
  - From age 65, average effective and desired hours both rise steeply and the gap closes, suggesting those working into late 60s prefer full-time employment.
  - Standard deviation of desired hours rises by almost 50 percent across ages 50–69, indicating growing heterogeneity in preferences.
  - On average older individuals prefer reducing work weeks by 2 to 3 hours relative to 50-year-olds, but some continue to desire full-time employment while others seek significant reductions.
- Occupation-level evidence:
  - Broad occupation groups with higher shares of voluntary part-time employment among those aged 55+ have higher average retirement ages, especially in lower-paying jobs like “elementary occupations” and “services and sales.”
  - Managers are an exception: high retirement ages and low incidence of part-time work.
  - Acemoglu et al. (2022) composite “old-age friendliness” index (flexible work, reduced job stress, less demanding cognitive/physical activities, shorter commuting, telework) is positively associated with average retirement ages across occupations in Spain.
- Policy implications and recommendations on hours flexibility:
  - Policies should enable better matching between workers and their desired hours and arrangements.
  - Establish a regulatory framework and provide incentives for firms to accommodate diverse preferences.
  - Adjust hours within current roles and enact policies to facilitate transitions to jobs aligned with desired hours and job characteristics.
  - Foster greater labor mobility at older ages through training programs to help older workers acquire skills needed in other occupations, facilitating career transitions and labor market attachment.
- Recent pension-work combination reform:
  - Measures approved in December 2024 (RDL 11/2024) increase flexibility in combining work earnings and pension benefits via “partial” (early) retirement and “active” (delayed) retirement schemes.
  - Further improvements could eliminate the requirement for the worker’s employer to introduce a “replacement” worker (with commitment to convert that contract into a full-time open-ended one), which currently makes workers’ personal decisions subject to firms’ needs.

### Unemployment benefits and social support schemes — design, patterns, and implications
- Overview of UB and UA:
  - Unemployment benefits (UB) in Spain include contributory unemployment insurance (UI, prestación por desempleo) and non-contributory unemployment assistance (UA, subsidio por desempleo).
  - UI benefits can last up to a maximum of 24 months depending on years of contribution. After finding a job, recipients may continue to combine work income with benefits for 6 months.
  - UA is means-tested and accessible after expiration of UI. For those aged 52 and above, UA has unlimited duration and includes social security contributions of 125 percent of the minimum contribution base.
  - For younger workers UA duration is limited (from 4 to 24 months) and does not include contributions.
  - Greater generosity of UA provides extra insurance against poverty at older ages but can reduce job search incentives, especially for those with low potential earnings.
  - Note: ability to combine UI with employment income (complemento al empleo) was until 2024 only available to part-time employment; a reform approved in 2024 loosens those requirements starting in 2025.
  - Note on age threshold: raised from 52 to 55 years in 2012 and lowered to 52 in 2019.
- Empirical patterns:
  - Older unemployed workers are more likely to receive UB and for longer, while facing markedly lower re-employment prospects.
  - Share of prime-age unemployed receiving UI or UA decreases steeply with duration; for the 55+ it has a hump-shaped profile, creating a gap in benefit coverage of approximately 30 percentage points among the long-term unemployed (older vs prime-age).
  - Job finding rate of older unemployed workers is approximately 10 percentage points lower than that of the prime-aged at all unemployment durations.
- Effects of benefits on re-employment:
  - Receiving unemployment benefits is associated with slightly lower job finding rates, particularly at longer durations.
  - Extended M-Logit specification distinguishing UB from other benefits (disability, sickness, social assistance, family assistance) finds:
    - Receiving UB increases the probability of retiring in the next period by more than 5 percentage points.
    - Receiving other benefits increases the probability of retiring by closer to 1 percentage point.
  - Interpretation: older workers may smooth transition to retirement through the benefits system, with UB used as a de facto early retirement scheme.
  - Policy takeaway: room to strengthen job search incentives of UI and UA recipients. The 2024 UA reform allowing combination of benefits with employment earnings for 6 months reduces the participation tax rate (PTR). Strengthening activation requirements and allowing longer combination of benefits with earnings could amplify employment impact.
- Structural drivers beyond benefit design:
  - Closing the job finding rate gap between benefit recipients and non-recipients yields a mechanical employment-rate impact for older workers of only 0.1 percentage points (Barrela et al., 2025).
  - Larger gains require equalizing the job finding rate of older workers to prime-age job seekers or addressing sectoral/occupational mismatch with labor demand.
  - Occupational composition findings:
    - Older unemployed workers are more skewed towards lower-wage occupations relative to the employed labor force and to prime-age job seekers.
    - More than 38 percent of unemployed older workers were previously in elementary occupations, compared to 31 percent of those aged 25-54, while elementary occupations account for only 12 percent of overall employment.
    - Older jobless are less likely than younger jobless to have occupied high-wage jobs that contribute as much as 20 percent to overall employment.
  - Policy recommendations on matching and training:
    - ALMPs should emphasize career shifts, acquiring new skills, or exploring careers with similar skill needs to close the age-based job-finding gap.
    - ALMPs must be closely tailored to training needs of older workers and their realistic potential to acquire new skills, matching jobs compatible with life commitments and preferences.
    - Prevent skill depreciation prior to job loss via enhanced lifelong training initiatives for the employed.

### Policy implications and recommendations (synthesis)
- Complementary policy actions beyond pension reforms are needed to extend working lives:
  - Improve health outcomes and enable participation of workers with health limitations, including facilitating returns after prolonged leave.
  - Increase work flexibility, particularly the ability to choose the number of hours worked.
  - Revise unemployment support schemes to strengthen incentives for older job seekers to return to work.
  - Support families with caring needs via fiscal incentives for caring expenses, increased flexibility in work arrangements, and training programs for those away from the labor force for long.
  - Improve re-skilling programs and other active labor market policies (ALMPs) to address structural barriers to job finding for older workers.
- Additional considerations:
  - The negative association between full-time work and employment exits suggests further study on how the ability to adjust hours facilitates work at older ages.
  - Providing opportunities to accommodate older workers’ needs and preferences may broaden choices and encourage greater participation before and after the standard pensionable age.

*Source: sipea2025078 (excerpt), based on IMF staff calculations using the EPA and the ECV.*

### 3.      Going forward, however, other complementary policy actions may be needed to keep

### 3.      Going forward, however, other complementary policy actions may be needed to keep

### Data and methodology
- Two data sources: the Encuesta de Población Activa (EPA) and the Encuesta de Condiciones de Vida (ECV).
  - EPA: quarterly survey, longitudinal structure following workers over six quarters.
  - ECV: annual household survey, panel structure following workers for at most four consecutive years; used for the M-Logit model.
- Definitions:
  - “Older workers”: individuals aged 55-69.
  - “Prime-age” workers: individuals aged 25-54.
- M-Logit model:
  - Probability formulation for transitions across K states as specified in the text.
  - Average marginal effects computed by integrating individual-level marginal effects.
- Sample: panel version of the ECV over 2010-2023, for a total of approximately 26,973 worker-year observations.

### Key empirical findings: participation trends and alternative pathways
- Participation and employment trends:
  - The effective average age of exit from the labor force in Spain was estimated at 62 by the OECD (2023) and at 64 by the European Commission (2024) Aging Report.
  - The statutory retirement age “lied between 65 years and 66 and 4 months, depending on contribution history.”
  - Employment rate of workers aged 55-69 rose from 32 percent in 2014 to above 46 percent in 2024.
  - This rise contributed to an increase in the overall employment rate of approximately 4 percentage points since 2014.
- Early exits and non-retirement inactivity:
  - Employment rate starts declining in the mid-50’s, approximately 10 years before full pension benefits are accrued for most workers.
  - Using data from 2022-2024, the rise in non-retirement inactivity after age 50 reduces the employment rate of male workers aged 51-64 by approximately 6 percentage points relative to 50-year-old ones, and by 11 percentage points for females.
  - Less than 50 percent of new retirees were employed a year prior to retirement.
  - Inactivity due to sickness and disability accounts for 25 percent of new retirees among men and 15 percent among women.
  - Among women, approximately one third of newly retired were previously inactive to care for a family member or for other family and/or personal reasons.
  - Jobless older workers very infrequently return to employment; the yearly probability of moving back into work is very low and lower than the likelihood of moving into retirement.

### M-Logit analysis — transitions from employment (selected marginal effects)
- Model covariates grouped into demographic factors and job/worker-specific contextual factors; controls include year fixed effects.
- Demographic effects:
  - Aging reduces the probability of remaining employed and increases the probability of transitioning into retirement.
  - Female workers have a 3-percentage points higher probability of remaining employed compared to males, accompanied by a lower chance of retirement.
  - Education: having secondary or tertiary education increases the likelihood of remaining employed by 3 and 4 percentage points, respectively (baseline: primary schooling).
- Health and job-quality effects:
  - Self-reported bad or very bad health: workers in this category have a 9-percentage point lower probability of remaining employed.
  - Full-time status and having any dependents in the household are positive predictors of employment at t+1.
  - Working full time is associated with a lower chance of becoming unemployed; part-time work is associated with higher job insecurity.
- Income effects:
  - Controlling for full-time status, higher monthly earnings are associated with a small rise in the probability of retirement.
  - For log wages, a one log-unit increase (corresponding to a 2.7-times rise in earnings) is used to report probability changes.
  - In Spain, a 2.7-times rise in monthly earnings is approximately equal to the ratio of the 75th to 25th percentile of monthly labor earnings; keeping other variables constant, a worker in the 75th percentile has a 1-percentage point higher yearly retirement rate compared to one at the 25th percentile.

### Channels and compositional dynamics of joblessness (descriptive)
- Composition of non-employment among 55-65 year-olds:
  - Inactivity related to health and disability accounts for a large part of the rise in joblessness prior to retirement for both men and women.
  - As total unemployment falls with age, the remaining unemployed pool shifts toward long-term unemployed (those who have not worked for more than one year).
  - Among women, a significant increase in inactivity in the 50’s and early 60’s is due to caring for a family member or for personal reasons; after age 65 this is sharply replaced by an “other inactive” state, often reflecting women permanently out of the labor force but not receiving a contributory old-age pension.

### Policy implications and recommendations highlighted in the text
- Complementary policy actions beyond pension reforms are needed to extend working lives:
  - Improve health outcomes and enable participation of workers with health limitations, including facilitating returns after prolonged leave.
  - Increase work flexibility, particularly the ability to choose the number of hours worked.
  - Revise unemployment support schemes to strengthen incentives for older job seekers to return to work.
  - Support families with caring needs via fiscal incentives for caring expenses, increased flexibility in work arrangements, and training programs for those away from the labor force for long.
  - Improve re-skilling programs and other active labor market policies (ALMPs) to address structural barriers to job finding for older workers.

*Source: sipea2025078 (excerpt), based on IMF staff calculations using the EPA and the ECV.*

### 16.      Figure 7 shows the results for the M-Logit model of transitions out of non-

### Figure 7 shows the results for the M-Logit model of transitions out of non-employment

### Model specification and sample
- Sample: workers who are non-employed and non-retired in the initial period; male and female workers aged 55-69.
- Pooled non-employment categories (excluding retirement): unemployment, health-related inactivity (including permanent disability), inactivity for “domestic” reasons, and all other types of inactivity.
- Possible outcomes in year t+1: employment, retirement, and all other non-employment statuses.
- Predictors/control variables:
  - Dummy variables for initial non-employment status (health, domestic, other); baseline = unemployment.
  - Demographics: age, gender, marital status, education level.
  - Log of gross household income in the initial period.
  - Self-reported bad health (equals one if respondent reports health as bad or very bad).
  - Dummy for having any dependents in the household (child < 18 or elderly > 65 inactive member).
  - Dummy for receiving any type of benefits or social assistance in the previous year (unemployment, sickness, disability, social assistance, or family support benefits).
  - Year dummy variables (not shown).
- Caveat: potential high correlation between some controls (e.g., health inactivity and bad health; receiving benefits and being unemployed) may lead to imprecise estimates for collinear variables.

### Key empirical findings on transitions out of non-employment
- Demographics:
  - Age is positively associated with higher chances of retirement and reduced prospects of returning to work.
  - Non-employed women have a 2 percentage points lower job-finding probability compared to men.
  - Non-employed women have a 5 percentage points lower probability of transitioning to retirement compared to men.
- Type/reason for non-employment:
  - Relative to the unemployed (base group), those who are inactive (health, domestic, other) are more likely to remain jobless in the next period.
  - Health- and domestic-related inactivity each imply approximately a 5-percentage points fall in the probability of re-employment.
  - Health-related inactivity is also associated with an increased likelihood of retirement.
  - Domestic duties and other reasons for inactivity are more persistent states with lower transitions into retirement.
- Socio-economic predictors:
  - Higher gross household income is associated with higher probabilities of both re-employment and retirement (less prone to remain inactive).
  - Self-reported bad health increases the chance of remaining in non-retirement inactivity and strongly hinders re-employment and labor market participation for older workers.
  - Having dependents in the household is associated with lower transitions into retirement, but not with higher job-finding rates (implying greater persistence of non-employment).
  - Receiving any social assistance benefits in the previous year is associated with a higher likelihood of retiring at the expense of re-employment and other inactivity transitions.
- Additional note: reception of benefits is endogenous to limited prospects of re-employment, requiring more in-depth analysis.

### Health: prevalence, trends, and labor market impact
- Prevalence and trends (ECV, 2016–2023):
  - Close to 50 percent of the Spanish population aged 55-69 in 2023 reported being affected by some long-term health condition.
  - 35 percent reported some degree of health-related physical limitations.
  - Above 2 percent assessed their overall health condition as “very bad”.
  - Share of population receiving permanent disability support has remained stable or even fallen slightly among the older working-age population.
- Work-absence and disability trends:
  - Health-related work absences rose sharply starting in 2020 and have remained persistently high thereafter.
  - Temporary disability beneficiaries increased by 37 percent from 6 million in 2018 to 8.1 million in 2023.
- Implications:
  - Bad health is a major driver of exits from employment and an impediment to re-employment among the non-employed, especially for older workers.
  - Reducing the adverse effect of ill health on labor force participation requires policies to improve general health outcomes and targeted measures to support workers with health limitations.

### Dependents and domestic-related inactivity
- Prevalence and labor market attachment:
  - Among older women, close to 35 percent of respondents fall under “domestic inactivity”; among older men, this figure is 0.16 percent.
  - Domestic-inactive older women report, on average, 15 years of labor market experience versus 30 years for older women in employment, unemployment, or other inactivity types.
- Persistence:
  - Domestic-inactive group has the highest share of individuals out of a job for more than 3 years—close to 80 percent.
  - Domestic-inactive individuals have almost a 5 percentage points higher probability of remaining out of a job compared to the unemployed.
  - Close to 80 percent of the domestic-inactive group remain in that labor market status across two years.
  - Exits from employment directly into domestic inactivity are very infrequent.
- Gendered effects of dependents on employment transitions:
  - Among those employed in the initial period, having dependents affects men and women differently.
  - For males, having a child in the household increases the probability of remaining employed by close to 4 percentage points.
  - The effect of having an older dependent for males is slightly weaker and not statistically different from zero.
  - For females, having dependents (young or old) does not have statistical predictive power on the probability of transitioning out of employment at older ages—consistent with stronger sorting into employment/inactivity at younger ages.
- Caregiving prevalence beyond household:
  - In 2021, there were 638,000 individuals with some level of caring duties for people aged 70 or above within their household, and 920,000 for elderly outside of their household; men constituted 40 percent of carers.

### Policy implications and recommendations
- Health-related policies:
  - Improve general health outcomes across the life cycle to reduce long-term adverse health effects on older workers’ participation.
  - Support workers with health limitations to remain employed or return to work through increased flexibility and accommodations (e.g., work from home, reduced schedules).
  - The Ministry of Inclusion, Social Security, and Migration’s proposal to facilitate voluntary gradual return to work for those receiving temporary disability benefits is highlighted as a positive step.
  - Where flexible arrangements are infeasible, provide job search guidance and active labor market policies targeted to match workers to suitable roles.
- Policies addressing dependents and domestic duties:
  - Provide greater flexibility in work arrangements (telework, compressed schedules, reduced hours) to make employment compatible with caring duties.
  - Lower the costs of caring services through public provision and fiscal incentives to encourage return to work.
  - PIT deductions: deductions for families caring for an elderly or disabled family member who resides with them (introduced in 2006 via RDL 35/2006, Art. 59-61; parameters last updated in 2015) support those who provide assistance and incentivize continued employment.
  - Several autonomous communities provide PIT deductions for expenses related to childcare and elderly care, including hiring home carer professionals.
  - Recent amendment to the Charter of Workers (RDL 5/2023) grants workers the right to request adjustments to their schedules when caring for a dependent.
- Benefits and work incentives:
  - Social benefits received by the jobless can influence decisions to exit the labor force; careful assessment is required because benefit receipt is partly endogenous to weak re-employment prospects.
- Other policy considerations:
  - The negative association between full-time work and employment exits suggests further study on how the ability to adjust hours facilitates work at older ages.

*Source: sipea2025078 — chapter section on M-Logit model results and policy issues (figures and notes as provided in the source content).*

### 32.      Specific support is needed for

### 32.      Specific support is needed for

### Support for prolonged out-of-labor-force workers and re-skilling
- Those who have remained out of the labor force for a prolonged period, once their family caring role is no longer a priority, need access to guidance services and training programs to re-acquire skills they may have lost.  
- The recent reform of unemployment benefits (RDL 2/2024) could be helpful if accompanied by enhanced active labor market policies.  
- The reformed subsidio por desempleo por cotizaciones insuficientes:
  - extends eligibility to those with just 3 months of social security contributions and dependents,
  - allows access to the job guidance services provided by public employment offices.  
- The impact of this reform could be strengthened if activation requirements were strengthened.

### Working Hours Flexibility
- The ability to choose how much to work is likely an important driver of the decision to remain employed at older ages.  
- Aging changes priorities, health, and family needs; some older workers seek shorter work weeks while others may want to increase hours once dependents leave home. If workers cannot adjust hours or arrangements, they may leave the labor force.  
- M-Logit analysis findings:
  - Full-time employment has a positive association with continued employment, reflecting labor market attachment and job quality (greater job stability, lower unemployment risk, higher earnings).
  - Part-time work for older workers can both ease the path to retirement and be linked to earlier labor force exit through:
    - selection (workers preferring fewer hours have higher propensity to leave), and
    - involuntary part-time arrangements leading to discouragement and exit.
  - Caveat: ECV does not differentiate voluntary versus involuntary part-time; EPA contains information on effective and desired weekly hours for further analysis.
- Patterns of effective and desired hours (ages 50–69):
  - Average hours worked and desired hours decline from age 50 until age 64, with a narrowing gap between the two.
  - Decline in weekly hours reflects a shift in preferences toward a shorter work week; desired hours decline more steeply.
  - Convergence of averages accompanied by falling mismatch and a falling share of workers not satisfied with their number of hours.
  - From age 65, average effective and desired hours both rise steeply and the gap closes, suggesting those working into late 60s prefer full-time employment.
  - Standard deviation of desired hours rises by almost 50 percent across ages 50–69, indicating growing heterogeneity in preferences.
  - On average older individuals prefer reducing work weeks by 2 to 3 hours relative to 50-year-olds, but some continue to desire full-time employment while others seek significant reductions.
- Occupation-level evidence:
  - Broad occupation groups with higher shares of voluntary part-time employment among those aged 55+ have higher average retirement ages, especially in lower-paying jobs like “elementary occupations” and “services and sales.”
  - Managers are an exception: high retirement ages and low incidence of part-time work.
  - Acemoglu et al. (2022) composite “old-age friendliness” index (flexible work, reduced job stress, less demanding cognitive/physical activities, shorter commuting, telework) is positively associated with average retirement ages across occupations in Spain.
- Policy implications and recommendations on hours flexibility:
  - Policies should enable better matching between workers and their desired hours and arrangements.
  - Establish a regulatory framework and provide incentives for firms to accommodate diverse preferences.
  - Adjust hours within current roles and enact policies to facilitate transitions to jobs aligned with desired hours and job characteristics.
  - Foster greater labor mobility at older ages through training programs to help older workers acquire skills needed in other occupations, facilitating career transitions and labor market attachment.
- Recent pension-work combination reform:
  - Measures approved in December 2024 (RDL 11/2024) increase flexibility in combining work earnings and pension benefits via “partial” (early) retirement and “active” (delayed) retirement schemes.
  - Further improvements could eliminate the requirement for the worker’s employer to introduce a “replacement” worker (with commitment to convert that contract into a full-time open-ended one), which currently makes workers’ personal decisions subject to firms’ needs.

### Unemployment Benefits and Social Support Schemes
- Overview of UB and UA:
  - Unemployment benefits (UB) in Spain include contributory unemployment insurance (UI, prestación por desempleo) and non-contributory unemployment assistance (UA, subsidio por desempleo).
  - UI benefits can last up to a maximum of 24 months depending on years of contribution. After finding a job, recipients may continue to combine work income with benefits for 6 months.
  - UA is means-tested and accessible after expiration of UI. For those aged 52 and above, UA has unlimited duration and includes social security contributions of 125 percent of the minimum contribution base.
  - For younger workers UA duration is limited (from 4 to 24 months) and does not include contributions.
  - Greater generosity of UA provides extra insurance against poverty at older ages but can reduce job search incentives, especially for those with low potential earnings.
  - Note: ability to combine UI with employment income (complemento al empleo) was until 2024 only available to part-time employment; a reform approved in 2024 loosens those requirements starting in 2025.
  - Note on age threshold: raised from 52 to 55 years in 2012 and lowered to 52 in 2019.
- Empirical patterns:
  - Older unemployed workers are more likely to receive UB and for longer, while facing markedly lower re-employment prospects.
  - Share of prime-age unemployed receiving UI or UA decreases steeply with duration; for the 55+ it has a hump-shaped profile, creating a gap in benefit coverage of approximately 30 percentage points among the long-term unemployed (older vs prime-age).
  - Job finding rate of older unemployed workers is approximately 10 percentage points lower than that of the prime-aged at all unemployment durations.
- Effects of benefits on re-employment:
  - Receiving unemployment benefits is associated with slightly lower job finding rates, particularly at longer durations.
  - Extended M-Logit specification distinguishing UB from other benefits (disability, sickness, social assistance, family assistance) finds:
    - Receiving UB increases the probability of retiring in the next period by more than 5 percentage points.
    - Receiving other benefits increases the probability of retiring by closer to 1 percentage point.
  - Interpretation: older workers may smooth transition to retirement through the benefits system, with UB used as a de facto early retirement scheme.
  - Policy takeaway: room to strengthen job search incentives of UI and UA recipients. The 2024 UA reform allowing combination of benefits with employment earnings for 6 months reduces the participation tax rate (PTR). Strengthening activation requirements and allowing longer combination of benefits with earnings could amplify employment impact.
- Structural drivers beyond benefit design:
  - Closing the job finding rate gap between benefit recipients and non-recipients yields a mechanical employment-rate impact for older workers of only 0.1 percentage points (Barrela et al., 2025).
  - Larger gains require equalizing the job finding rate of older workers to prime-age job seekers or addressing sectoral/occupational mismatch with labor demand.
  - Occupational composition findings:
    - Older unemployed workers are more skewed towards lower-wage occupations relative to the employed labor force and to prime-age job seekers.
    - More than 38 percent of unemployed older workers were previously in elementary occupations, compared to 31 percent of those aged 25-54, while elementary occupations account for only 12 percent of overall employment.
    - Older jobless are less likely than younger jobless to have occupied high-wage jobs that contribute as much as 20 percent to overall employment.
    - These patterns suggest older job seekers may be particularly mismatched vis-à-vis demand.
- Policy recommendations on matching and training:
  - ALMPs should emphasize career shifts, acquiring new skills, or exploring careers with similar skill needs to close the age-based job-finding gap.
  - ALMPs must be closely tailored to training needs of older workers and their realistic potential to acquire new skills, matching jobs compatible with life commitments and preferences.
  - Prevent skill depreciation prior to job loss via enhanced lifelong training initiatives for the employed.

### Conclusions
- Labor supply decisions of older workers are affected by multiple factors: health, capacity to recover from job losses, family caring needs, ability to adjust hours worked, and financial incentives in unemployment insurance and pension systems.
- Inability to adjust working arrangements and opportunities to needs and skills often induces earlier exits and alternative retirement pathways—sometimes voluntary, sometimes unplanned.
- Providing opportunities to accommodate older workers’ needs and preferences may broaden choices and encourage greater participation before and after the standard pensionable age.

*Italic: Source — Extract from sipea2025078 PDF chapter/section.*

### 47.      Encouraging greater labor force participation of older workers requires acting on

### 47.      Encouraging greater labor force participation of older workers requires acting on multiple fronts.

### Key findings
- Over the past decades, the progressive increase in the standard pensionable age and enhanced financial incentives for delayed retirement have been successful in extending the average length of careers.
- Continued recourse to raising pensionable ages and financial incentives may only go so far if other constraints on labor supply at older ages are not addressed.
- Important complementary constraints include health outcomes, reduced health and physical capacities, limited flexibility in hours and work arrangements, gaps in on-the-job training, and insufficient active labor market policies (ALMPs) for older unemployed workers, including recipients of unemployment insurance and assistance benefits.

### Policy levers and recommendations
- Improve health outcomes for older workers to support longer and more productive working lives.
- Adjust labor modalities to accommodate reduced health and physical capacities (age-friendly job designs).
- Allow greater flexibility in adjusting hours worked and promote flexible arrangements such as telework.
- Expand and improve on-the-job training targeted at older workers to maintain skills and employability.
- Enhance ALMPs for older unemployed workers, including tailored support for recipients of unemployment insurance and assistance benefits.

*Source: IMF chapter text.*

---


_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025078.pdf_