A study conducted by the Economic Research Centre of the University of Cyprus, on the subject of labour market participation and retirement decisions, highlights the low labour market participation rates of older workers. The study, the results of which were published in June 2006, is the first of its kind to examine the factors affecting labour market participation at a microeconomic level, in particular among people aged 55–64 years.
The Economic Research Centre (Κέντρο Οικονομικής Έρευνας, ΚΟΕ) of the University of Cyprus has conducted a study on the subject of labour market participation and retirement decisions. The study examines for the first time at a microeconomic level the factors affecting labour market participation, in particular among people aged 55–64 years, using data from the Family Budget Surveys for 1996–1997 and 2002–2003. Results of the study were published in the KOE Information Bulletin of 8 June 2006.
Study findings
Lower participation rates among women
In the study, a breakdown of the labour participation rates according to sex shows that women are 33% less likely than men to participate in the labour market (based on the findings for the total sample used for the purposes of the study), while 40% fewer women than men in the 56–60 and 61–65 year age groups are likely to participate in the labour market. In other words, an increased tendency to exit or not to participate in the labour market is observed among women as they grow older.
At the same time, estimates confirm the trend of lower labour market participation among people aged 55 years and older. On the basis of the sample used in the study, people aged 56 years and older are up to 65% less likely to participate in the labour market than people aged 26–40 years.
Table 1: Labour market participation rates by age group and sex, 2004 (%)
Table Layout | Age group | % Men | % Women |
| 15–24 years | 5.44 | 5.10 |
| 25–39 years | 21.0 | 19.0 |
| 40–44 years | 7.4 | 6.3 |
| 45–54 years | 12.5 | 9.8 |
| 55–64 years | 7.5 | 3.4 |
| 65 years | 1.9 | 0.6 |
Source: Statistical Service, Labour Force Survey 2004
Level of education
Educational level appears to be a significant factor in influencing the rates of labour market participation. In this context, the level of participation among people aged 45–54 years with a secondary education appears to be higher than other groups; at the same time, it is important to note that college or university graduates are around 20% more likely to participate in the labour market compared with those without an education.
Table 2: Labour market participation of 45–54 year olds, by educational level, 2004 (%)
Table Layout | Level of education | % participation |
| Lower than upper secondary | 8.3 |
| Upper secondary | 7.1 |
| Third-level | 6.9 |
Source: Statistical Service, Labour Force Survey 2004
Financial status
The data also show a correlation between labour market participation and the household’s financial status. For example, income that is gained from sources other than paid employment may reduce the likelihood of labour market participation, while financial obligations such as having a loan may increase this likelihood.
The study findings also confirm that the significant differences between men and women’s labour participation rates can be explained to a large extent by educational characteristics and to a lesser degree by the household’s financial status.
Specifically, women’s likelihood of participating in the labour market, taking into account all other relevant characteristics, is 32%–44% higher among those who have graduated from college or university, compared with those without an education. The financial situation of the household is also significant in explaining the differences between men and women’s labour participation rates, in particular the level of debt recorded and the existence of income from sources other than paid employment, such as social benefits, rent, interest or profit.
Conclusions
A number of interesting conclusions can be drawn from the study’s findings. First, the gradual but ongoing improvement in education will help to maintain the employability of workers in the labour market. Through such initiatives, people who are nearing retirement age are less likely to face as many difficulties in competing with more educated, younger workers and will not be forced to withdraw as early from the labour market.
Furthermore, government efforts should focus on programmes aimed at enhancing the educational levels of women and at increasing the integration of women in the labour market. Women’s labour market participation should also be assisted by measures or incentives designed to improve the infrastructure of childcare provision.
Polina Stavrou, Cyprus Labour Institute (INEK-PEO)