· Between 2003 and 2013, employment among older age groups (55+) expanded by a faster rate than among younger age groups, partly due to the retirement age being raised by two years.
· The voluntary mobility rate among the 55+ cohort during the 2010–13 growth cycle was lower than during the 2004–06 cycle. This derived to a large extent from the business sector’s lower growth rate in the 2010–13 cycle, a development that was reflected in a decline in the job creation rate.
· The increase in the retirement age contributed to a reduction in mobility among those aged 55+. It appears that the increase caused the employees affected by it to somewhat reduce the risks they took in the labor market.
The increase in the retirement age[2] expanded employment among the pre-retirement age group (55+)—the employment rate for women increased by 10 percentage points in 2010–13 (after implementation of the law) compared to its rate in 2004–06 (the initial stages of the implementation of the law), while among younger age groups (35–44 and 45–54) it increased by lower rates, between only 6–7 percentage points. A similar picture was seen among men in the pre-retirement age—their employment rate increased by more than 7 percentage points, while among younger age groups it only increased by 3–5 percentage points.
In parallel with expanded employment, there was some decline in the mobility of workers between employers. Such movement entails a transfer of knowledge and professional experience, and the economic literature indicates that it improves the allocation of labor inputs between firms and thus increases labor productivity. A high rate of transfer at the worker’s initiative also contributes, on average, to an increase in wages and to career development, and is more characteristic of knowledge-based industries. Similar to empirical findings worldwide, data for Israel indicate that the job mobility rate declines with age, and that men typically have higher mobility than women. The tendency to switch employers is greater among those who have a working spouse, those who have moved between employers in the past, workers who are employed in temporary or part time positions, and workers who hold multiple jobs (in many cases these are part-time positions).
The mobility rate in 2003–13 ranged between 8–20 percent (Figure 1), and about 80 percent of those moving between employers did so at their own initiative.[3] About 56 percent of voluntary movers in 2013 did so after they had worked for their employer for not more than two years, and about 78 percent had worked for up to five years. The level of mobility in the 2004–06 growth cycle was 2 percentage points higher than the level in the 2010–13 cycle. The deceleration of GDP growth between the two periods, alongside several other factors, contributed to some reduction in mobility for all age groups. However, the current empirical study indicates that for individuals aged between 55 and the retirement age, another factor was at work: the increase in the retirement age by two years reduced mobility by 0.8 percentage points for women and by 0.7 percentage points for men. The increase in retirement age lengthens the period of time left to work, and thus may increase the benefit from moving between employers (if it comes with an increase in wages or an improvement in conditions that are important to the employee). However, the empirical study indicates that delaying the retirement age—the age at which employees are eligible for full pension rights and the old-age allowance—apparently caused a decline in employees’ willingness to take the risks inherent in switching jobs, chief among them risk of being laid off. This is because the probability of being laid off is greater the shorter the tenure with the employer is, and because at an older age there is a lower chance of rejoining the work force after a period of unemployment.
As noted, mobility improves the allocation of workers between employers and thus is associated with the development of productivity. Furthermore, there is a link between mobility in various age groups. Therefore, it is worthwhile strengthening the policy that encourages employment of older workers through creation of conditions that will contribute to mobility as well and will make it easier for workers to take risks. It is possible, for example, to increase the availability of professional training for older people, to make the conditions for receiving unemployment benefits at older ages more flexible, and to prepare programs encouraging employment of older people.
Figure 1
Share of voluntary movers, by gender and age-group, 2003–13
SOURCE: Based on sample from the Israel Tax Authority’s file of employed persons.
[1] Inter-firm mobility. In order to measure mobility, we take the number of people moving between employers between consecutive years, and calculate their share of total employed people. Identification of voluntary movers was based on the registration related to severance pay in the Israel Tax Authority’s file of employed persons. If the employees did not receive severance pay, we concluded that they left on their own volition. This identification method yields an estimation, which is exposed to two types of errors. One leads to an overestimate: the group includes employees who were laid off but nonetheless did not receive severance pay, because they worked for their employer for less than one year and are not eligible for those benefits. The second error type leads to an underestimate: the group does not include employees who left their workplace on their own initiative but nonetheless received severance pay. In order to assess the effect of the identification problem, empirical tests were also conducted only among employees with more than one year of tenure with their employer. The results are robust to this change.
[2] Between 2004 and 2009, the retirement age was increased gradually, from 60 to 62 for women and from 65 to 67 for men, due to the change in the Retirement Age Law, 5764-2004.
[3] The analysis does not deal with employees below age 35, as that group has a high incidence of job mobility deriving from acquisition of professional training and education, and we wanted to neutralize such mobility from the analysis to the extent possible.