Hiring older workers in Portugal

This paper asks why companies retain older workers while not hiring older workers in Portugal. The Portuguese case is particularly relevant to study this question, because the level of participation of older workers in the labor market is at least twice as high in Portugal when compared to European countries.

Using unique matched employer-employee data of 2007, from Quadros de Pessoal, this paper examines the determinants of hiring individuals aged 50 and older. The analysis considers the usual variables, but also the effect of several changes in the Portuguese pension system since 2000, which include new methods to calculate pensions–that take into account life time wages–reducing the replacement rate–through the introduction of a sustainability factor that depends on the average life expectancy–and the creation of reserve funds.

Like for other countries, the study finds as positive effects being male and the proportion of workers aged 65 years old or more and as negative effects working full-time and blue collar occupation. The levels of skills and education are the main exceptions. Those sectors with specific private occupational pension plans, hire younger workers since most of them establish a retirement age of about 60 years of age. The recruitment behavior of the Portuguese employers seems to be influenced by social security reforms promoting a longer permanence in the labor market, but further research is needed.

Click here to go to the paper by Maria Teresa Medeiros Garcia, and Elsa Fontainha, and José Passos.