This policy brief summarizes the findings in a paper where individual exit trajectories of Russians from the labor market to economic inactivity are examined using survival analysis methods based on the Russian Longitudinal Monitoring Survey for 1995-2015. Among other results, the analysis shows that the statutory retirement age has a significant impact on the time of exit from the labor market for both men and women, but the effect is very high for women. This is an interesting and unexpected result, given no penalty for working beyond the pension age of those already retired, the five-year difference in statutory retirement age between males and females, and the low pension age in Russia on an international scale. This questions the painlessness of rising the retirement age for women, should the decision finally be taken.
An ageing population, combined with a slowdown in economic growth, challenges the Russian public finances with an increased deficit of the Pension fund. In addition, the persistently negative natural population growth against the backdrop of ageing has predetermined a decline in the working-age population in the foreseeable future. Older cohorts are therefore becoming a potentially attractive source to increase the size of the labor force. All this has actualized the discussion about the need to increase the Russian retirement age (see, for instance, Maleva and Sinyavskaya, 2010). However, little is known about the labor market situation of older age groups and, in particular, about the process of their exit from the labor market
The Russian pension system, unlike the pension systems of many developed countries, hardly penalizes continuation of work after reaching retirement age and documenting a pension (working pensioners lose only pension indexation). The changes in pension law that have entered into effect since 2015 encourage continued work without recourse to retirement, but there have been few responses to the innovation so far. Coupled with the low pension replacement rate (i.e., the proportion of wages substituted by pension), this makes the process of leaving the labor market nontrivial, since a large number of people of retirement age remain on the labor market after reaching retirement age.
Denisova (2017) examines individual exit trajectories of Russians from the labor market to pension-age economic inactivity applying survival analysis to the Russian Longitudinal Monitoring Survey (RLMS-HSE). The major research questions are the following: What determines the length of stay of older age groups in the Russian labor market? What is the role of the statutory retirement age in this process?
Data and research methodology
The RLMS-HSE for the period of over 20 years, from 1995 to 2015, is the empirical basis of the research (http://www.cpc.unc.edu/rlms). I limit the sample to age 45-72 as there is practically no retirement by age before age 45, and 72 years is the upper boundary of the working age definition internationally accepted by statisticians. I exclude from the sample those who are on retirement and did not work or seek work for the entire period of observation, since their decision to end working activity remained outside the observation period.
An episode in the survival analysis of exit from the labor market into pension-age inactivity is an episode of working life. The analytical time in this case is the age of the respondent. The failure event (the moment of exit from the labor market to pension-age economic inactivity) is defined by the simultaneous fulfillment of three conditions: the respondent does not work, does not look for a job, and receives retirement pension. Only the final exits from the labor market into inactivity are considered, while temporary exits are disregarded.
I evaluate proportional hazard models, which suggest that exogenous economic factors shift the baseline hazard function (which reflects the average entire sample hazard rate at each age) proportionally. A semi-parametric Cox model specification with robust errors clustered at individual level is used.
The vector of explanatory characteristics includes education; marital status; experience in the labor market (work at an enterprise with a state share; entrepreneurship versus work for wages); health characteristics (subjective and objective); settlement type; and attainment of statutory retirement age. In all cases, I control for the year of the survey.
Given the differences in the behavior of men and women in the labor market, the regression analysis is run separately for the subsamples of men and women. The statistical significance of the differences in returns to factors between men and women is tested based on the results of the full sample regression with interaction terms.
Averaged process of exit from the labor market
The averaged process of leaving the labor market pending on age is conveniently described through so-called Kaplan-Mayer’s survival function (an estimate of the survival process). As seen from Figure 1, the process of exit prior to age 55 for women and 60 for men is very slow, while the rate of exit becomes almost permanent and slows down after 70 years. Men stay in the labor market longer: 25% of women leave the labor market at the age of 58 years, whereas for men this age is 60. The threshold of 75% of the sample that left the labor market is reached in the sample of women by the age of 70, and 71 for men.
Determinants of exit
The analysis of older cohorts’ exit from the labor market via survival methods confirms important determinants of the process, previously identified in literature. The impacts of health and of financial incentives are in this group of results.
Figure 1. Survival functions, men and women
Health status is the key factor for men’s exit into inactivity: the exit to inactivity is accelerated by 71 percentage points for males with bad health, whereas for women this factor is statistically irrelevant.
A higher per capita household income is correlated with later exit from the labor market. A higher income from the main place of employment has no statistically significant effect when we control for household income and is at an extended boundary (15%) of statistical significance if we do not. Both variables indirectly reflect the pension replacement rate, and I interpret the results as an indirect confirmation that workers at the top part of the income distribution, being inadequately insured by the pension system, remain on the labor market longer.
The identified peculiarities of the exit to pension-age inactivity of the Russian elderly are of major interest. Unlike many developed countries, only highly skilled persons remain in the labor market longer than others, while the behavior of middle-skilled groups, and skilled and unskilled workers does not statistically differ between them.
Employment at state-owned enterprises slows down women’s exit to inactivity but is not significant for men. Self-employment and entrepreneurship prolong the presence in the labor force, by 41 percentage points for women.
The regression analysis demonstrates that the statutory retirement age has a significant impact on the time of exit from the labor market for both men and women, and the effect is significantly higher for women: the hazard rate of inactivity rises by 63 percentage points when a woman reaches 55 years, and by 25% when a man reaches 60. For men, an effect comparable in size is the self-assessment of health as poor.
The results, on the one hand, confirm those for developed countries: health status is the key factor for men’s exit into inactivity, and financial motives have a significant impact. At the same time, the peculiarities of the Russian labor market are reflected in a differing labor market exit process of various professional groups, in the sense that self-employment and entrepreneurship and work at state enterprises postpone exit into inactivity. The high sensitivity of women to the statutory retirement age, which by 2.5 times exceeds the sensitivity of men, is one of the new and unexpected results, taking into account that the statutory retirement age for women in Russia is very low by international standards. This questions the painlessness of rising the retirement age for women, should the decision finally be taken. Indeed, given the very low pension age for females, an (gradual) increase in the retirement age for women would seem not to raise strong objections. However, our result testifies that the normative border of the retirement age has a decisive influence on women’s choice of time of exit from the labor market, even under control (as far as data permits) on differences in education, situation in the labor market and family circumstances. In this situation, the process of rising the retirement age, if such a decision is taken, can be rather painfully accepted by those who so strongly focus on its current meaning in their life plans.
- Denisova, Irina, 2017, “Exit of senior age cohorts from the labor market: survival analysis approach” – forthcoming in Population and Economics.
- Maleva T.M., Sinyavskaya O.V., 2010 “Raising the retirement age: pro et contra, Journal of the New Economic Association, No. 8, pp. 117-139.
New research shows expanding mandatory schooling in conservative Muslim societies have broad positive effects on female empowerment but is not enough to overcome the significant barriers to female entry in the labor force.
Does expansion of public education empower women? A large literature documents the positive effects of education on women’s economic and social outcomes in developed countries, but we know less about its causal effects on women’s empowerment in Muslim societies where women’s participation in the labor market is limited and they often do not have control over their earnings or their own bodies (Doepke et al 2012). In fact, even though female education has been successfully expanding in many majority-Muslim countries, the number of legal rights enjoyed by women is few relative to men, and female labor-force participation remains low (UNDP 2005). The lack of a corresponding labor-force participation effect raises concerns over the efficacy of expanding education as a means of improving women’s rights in Muslim societies. On the other hand, education has been shown to have many important non-pecuniary effects outside the labor market, such as in health, marriage, and parenting style (Oreopolous and Salvanes 2011) and to the extent that these effects help empower women, they may constitute alternative mechanisms through which education may lead to women’s empowerment (even in the absence of large labor market returns). However, most of this research comes from countries and societies that are not majority-Muslim and where women do work to a larger degree. As such, disentangling non-pecuniary returns to education from its labor market (and thus pecuniary) returns is particularly challenging in most settings and whether education may empower women in the Muslim world remains an open question.
Even though scholars debate the fundamental causes for the severe degrees of gender inequality in Muslim societies, most posit a nexus of patriarchal culture, strong religious values, and restricting social norms as proximate explanatory factors. Historically, Lewis (1961) claims women’s status was “probably the most profound single difference” between Muslim and Christian civilizations. In more contemporary cross-country studies, Fish (2002) documents a negative cross-country correlation between having an “Islamic religious tradition” and female empowerment, while Barro and McCleary (2006) also show that Muslim countries tend to exhibit higher degrees of religious participation and beliefs. Comparing the effects of a business training program on female entrepreneurship among Hindu and Muslim women in India, Field et al (2010) find evidence in line with significantly stricter constraints to female labor-force participation among Muslim women. To the extent that barriers to entry due to religious values restrain women’s rights, an integral outcome of empowerment is therefore a woman’s ability to independently assert her own beliefs.
In a recent paper, Selim Gulesci and I exploit an extension of compulsory schooling in Turkey to estimate the causal effect of schooling on female empowerment (Gulesci and Meyersson 2014). Compulsory schooling laws have been extensively used to estimate returns to education in Western countries on labor market outcomes (Angrist and Krueger, 1991, Oreopoulos 2006), health and fertility (McCrary and Royer 2011, Lleras-Muney 2005, Black et al 2008) among others. We follow a similar strategy to provide meaningful causal parameters for the effect of a year of schooling on outcomes related to social status of women in Turkey, a majority-Muslim country.
In 1997, Turkey’s parliament passed a new law to increase compulsory schooling from 5 to 8 years. By this law, individuals born on or after September 1986 were bound to complete 8 years of schooling, whereas those born earlier could drop out after 5 years. Using the sample of ever-married women from the 2008 Turkish Demographic Health Survey (TDHS) we are able to observe outcomes 10 years after the law change was implemented.
We adopt a regression discontinuity (RD) design assigning treatment based on whether an individual’s month-and-year of birth was before or after the September 1986 threshold. As such, our identification strategy entails comparing cohorts born one month apart and relies on the assumption that these two groups should exhibit no systematic differences other than being subject to different compulsory schooling laws. We can thus calculate an RD treatment effect, illustrative of the causal effect of education for individuals born around the threshold.
Analysis of the sample of ever-married women focuses the RD treatment effects on a subset of the population that tends to be demonstratively poorer and more socially conservative, i.e. the very subpopulation that the reform was aimed at. In a comparison of ever- and never-married women, the reform only affected education among the former, and as a result, the exclusion of non-married women effectively means exclusion of non-compliers with the reform. This is a likely consequence of ex post single women being more likely to have attended school longer regardless of expanding reforms. We also show that the probability of selection into the married sample is not affected by the law.
Our results are as follow. First, we show the effect of the reform on women’s years of schooling. As a result of the reform, women’s average years of schooling increased by one year, and completion rates for junior-high (secondary) and high school completion increased by 24 and 8 percentage points (ppt) respectively. There is no significant impact of the reform on men’s schooling on average (mainly because the average man’s schooling in Turkey around the age threshold was already at a relatively high level). Thus, the reform effectively served to reduce the education gender gap by half.
Second, our RD estimates reveal that this additional year of schooling had significant secularizing effects. Ten years after the reform was implemented, and relative to sample means, women were 10 percent (8 ppt) less likely to wear a headscarf, 22 percent (10 ppt) less likely to have attended a Qur’anic study center and 18 percent (7 ppt) less likely to pray regularly.
Third, we find no evidence of schooling on the timing of either marriage or birth, nor on the number of children. We do however find significant effects on women’s decision rights with regards to both marriage and fertility decisions; a reform-induced year of schooling results in a 10 ppt (20 percent relative to the sample mean) increase in the likelihood of having a say in the marriage decision, and a 10 ppt (12 percent) increase in the likelihood of having a say in the type of contraceptive method adopted. We further find a reducing effect of schooling on the likelihood that a bride price was received by the women’s parents from their husband’s family upon their wedding.
Fourth, we document less pronounced and largely imprecise impacts on women’s labor market outcomes. Although our estimates indicate positive effects on non-agricultural employment in general, and self-employment in particular, these estimates are sensitive to the specification used. At the same time, we show significant positive effects of schooling on household wealth, largely driven by appliances related to women’s role as housewives. We are unable to explain this by observable increases in spousal quality, measured as husband’s years of schooling.
Altogether, our results indicate significant empowering effects of education, but whereas we document precise effects on decision rights, household wealth, and measures of social and religious conservatism, we fail to find equally concise effects on spousal and labor force outcomes. This prevents an interpretation relying exclusively on either labor market or assortative matching in the marriage market as the main channel of empowerment. In fact, an examination of heterogeneous effects reveal diverging effects depending on how socially conservative women’s backgrounds are; in rural areas, education pre-dominantly allows increased freedom to be more secular, greater decision rights over marriage, and less traditional marriages. In urban areas, education has similar effects, but also leads to increased labor force participation. We interpret this as increased education, and its associated bargaining power in the household, leading to different allocations depending on the preexisting level of women’s rights. Education may thus have only a partial effect on employment, as religious or cultural barriers to entry prevent women from realizing larger gains of education through the labor market.
Our paper adds to the research literature by providing meaningful causal parameters for the effect of a year of schooling on both social and religious outcomes for women in a majority-Muslim country. The findings point to a set of returns to schooling that take into context the socially conservative nature of the Turkish society where policies to increase schooling ultimately seem to improve women’s status (as captured by higher decision-making power and household wealth) but are unable to meaningfully break down the barriers that women face in entering the labor market, particularly in more conservative rural communities. While still having important empowerment consequences for women’s empowerment in Muslim societies, education may not be a magic bullet toward full emancipation. Policies hoping to achieve female empowerment will thus require complementary reforms in health and the labor market to address barriers to entry more directly.
- Denisova, I., and S.Commander, S.Commander and I. Denisova (2012), ‘Are skills a constraint on firms? New evidence from Russia’, EBRD and CEFIR/NES, mimeo
- Hausmann, R., and Klinger, B., (2007), “The Structure of the Product Space and the Evolution of Comparative Advantage”, CID Working Paper No. 146
- Volchkova, N., Output and Export Diversification: evidence from Russia, CEFIR Working Paper, 2011
- Angrist, Joshua D. and Alan. B. Krueger, 1991, “Does Compulsory Schooling Attendance Affect Schooling and Earnings?” Quarterly Journal of Economics, 106(1): 979-1014.
- Barro, Robert and Rachel McCleary, 2006, “Religion and Economy”, Journal of Economic Per- spectives, 20(2): 49-74.
- Black, Sandra, Paul Devereux, and Kjell G. Salvanes, 2008, “Staying in the Classroom and out of the Maternity Ward? The Effect of Compulsory Schooling Laws on Teenage Births”. Economic Journal, 118(530): 1025-54.
- Doepke, Matthias, and Michelle Tertilt, 2009, “Women’s Liberation: What’s in it for Men?”, Quarterly Journal of Economics, 124: 1541-91.
- Field, Erika, Seema Jayachandran and Rohini Pande, 2010, “Do Traditional Institutions Constrain Female Entrepreneurial Investment? A Field Experiment on Business Training in India”, American Economic Review Papers and Proceedings, 100: 125-29.
- Gulesci, Selim, and Erik Meyersson, 2014, “For the Love of the Republic – Education, Secularism, and Empowerment”, working paper.
- Lewis, Bernard, 1961, “The Emergence of Modern Turkey”, Oxford University Press: London.
- McCrary, Justin, 2008, “Manipulation of the Running Variable in the Regression Discontinuity
- Design: A Density Test,” Journal of Econometrics, 142(2): 698-714.
- Lleras-Muney, Adriana, 2005, “The Relationship between Education and Adult Mortality in the United States,” Review of Economic Studies, 21(1): 189-221.
- Oreopolous, Phillip, 2006, “Estimating Average and Local Average Treatment Effects of Education when Compulsory Schooling Laws Really Matter ”, American Economic Review, 96(1): 152-175.
- Oreopolous, Philip and K. G. Salvanes, 2011, “Priceless: The Nonpecuniary Benefits of Schooling”, Journal of Economic Perspectives, 25(1): 159-184.
- UNDP, 2005, “Arab Human Development Report 2005 – Towards the Rise of Women in the Arab World”.
Authors: Krzysztof Karbownik and Michal Myck, CenEA.
Wide spread entry of women into the labor force has been one of the most pronounced socio-economic developments in the 20th century, and high levels of female employment are crucial from the point of view of continued economic growth and financial stability of many welfare systems (Galor and Weil, 1996). At the same time, demographic changes determined by the current and future fertility levels will play a vital role in shaping these developments and will affect the costs of social programs. Given the potentially strong link between female employment and family size, it seems that understanding the relationship between the two ought to be at the heart of policy discussions, especially in countries that are characterized by both low fertility and low female employment. In particular, in light of rising unemployment in low-fertility countries, which have been most severely affected by the economic crisis such as Greece, Spain and Latvia, our findings may serve as a guide with respect to the relationship between fertility and labor supply in an environment, which will be more common in Europe in the near future.