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How Likely are Employers to Rehire Older Workers After Mandatory Retirement? A
Vignette Study Among Managers
Oude Mulders, Jaap*,1,2, van Dalen, Hendrik P.1,3, Henkens, Kène1,4,5, & Schippers, Joop2
This paper has been published in De Economist, and is available at
http://dx.doi.org/10.1007/s10645-014-9234-8
* Corresponding author:
Jaap Oude Mulders
Netherlands Interdisciplinary Demographic Institute
PO Box 11650
2502 AR, The Hague
E-mail: oudemulders@nidi.nl
Affiliations:
1 Netherlands Interdisciplinary Demographic Institute (NIDI-KNAW) / University of Groningen
2 Utrecht University School of Economics, Utrecht University
3 Tilburg School of Economics and Management (TISEM) and CentER, Tilburg University
4 Department of Sociology and Anthropology, University of Amsterdam
5 University Medical Center Groningen (UMCG), University of Groningen
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Abstract
With a vignette experiment among Dutch managers we examine employers’ considerations in the
decision to rehire employees after mandatory retirement. We specifically focus on the effects of
the employee’s downward wage flexibility (i.e., the willingness to accept a lower wage) and
contract flexibility (i.e., preference for a contract which allows flexible hours or employment).
The results show that employers are strongly affected by employees who offer to work for a
significant lower wage, but not by the employees’ preference for a particular labor contract.
Employers are overall quite disinclined to rehire employees after mandatory retirement, although
large differences exist between employees. Part of these differences can be explained by
managers having higher retirement age norms (i.e., the maximum age at which employers
consider employees suited for work in their organization).
Keywords: Bridge employment – Employers – Mandatory retirement – Older workers
JEL Classification: D22 –J23 – J26
Acknowledgements
The authors gratefully acknowledge the helpful comments of an anonymous referee and the
participants at the Feedback Forum of the Netherlands Interdisciplinary Demographics Institute.
The LISS panel data were collected by CentERdata (Tilburg University, The Netherlands)
through its MESS project funded by the Netherlands Organization for Scientific Research.
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1 Introduction
Under pressure of population aging retirement policies and practices have changed in many
OECD countries since the 1990s. Opportunities for early retirement under favorable conditions
have largely been abolished, there is a trend towards working longer, and the prevalence of
‘bridge employment’ and post-retirement employment has risen sharply (OECD, 2006; Pleau &
Shauman, 2012; Cahill et al., 2013). The growth in labor force participation of older workers is
mainly due to increased participation of workers between the ages of 50 and 65. Though
employment after the age of 65 is also increasingly prevalent, it is still relatively rare, especially
in European countries where mandatory retirement is a common practice (OECD, 2006; 2014).
One of the main difficulties for older workers is regaining a position on the labor market once
they have been dismissed or, as is the case in the present study, mandatory retirement ends their
formal employment relation. While an increasing proportion of workers would like to continue
working after mandatory retirement age and hence retire gradually from the labor market
(Kantarci & Van Soest, 2008), their reemployment after mandatory retirement is ultimately in
the hands of employers. In this paper, we study which factors affect employers’1 decisions to
rehire employees who want to continue working past the mandatory retirement age.
Theoretically, mandatory retirement is a necessary part of a long-term implicit contract in
which earnings grow more rapidly than productivity over the life cycle (Lazear, 1979; De Hek &
Van Vuuren, 2011). Young workers are de facto paid less than their worth, while older workers
are paid more. This arrangement increases the costs of shirking and hence keeps the worker
motivated throughout the contract period. Ending the employment contract at a collectively
determined fixed age is necessary to prevent workers from ‘overearning’ indefinitely. Although
1Werefertotheparticipantsofourstudyas‘employers’,althoughtheyaremainlylinemanagerswhohavethe
authoritytomakeemploymentdecisions.
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the implicit contract cannot be observed directly, a range of evidence for the US economy
compiled by Hallock (2009) suggests that this type of contract is subject to erosion but certainly
has not disappeared. In the case of the Netherlands, older workers in particular still enjoy the
benefits of the so-called implicit contract in terms of seniority based wage growth, tenure and
employment protection (cf. Conen et al. 2012a). These elements together with mandatory
retirement have been institutionalized in collective labor agreements and organizations’ human
resource policies.
The position of the older worker depends crucially on how employers assess and perceive
the productive value and the price of their labor services. From earlier research we know that
many employers have stereotypical views about older workers being less productive than their
younger colleagues (Posthuma & Campion, 2009; Van Dalen et al., 2010; Conen et al., 2012a).
These negative stereotypes seem to be reflected in employers’ behavior and policies to stimulate
and accommodate an extension of the working life. For example, Conen et al. (2012b) show that
only 13% of European employers would consider asking their employees to work past the age of
65 should they be confronted with a shortage of personnel. Other studies show that employers
are reluctant to formalize policies regarding bridge employment. They rather offer these
opportunities informally to specifically valuable employees who are approaching retirement or to
those who indicate their desire for bridge employment (Vickerstaff et al., 2003; Hutchens &
Grace-Martin, 2006). Retirees from outside the organization are even less likely to be considered
for employment, as their characteristics and skills are often hard to assess for an employer
(Hutchens, 2007).
Earlier studies examining the decision making process of employers regarding the
employment of (early) retirees show that employers strongly consider the employability of the
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applicant, in terms of health and experience with the job (e.g., Karpinska et al., 2011; 2013a).
However, these studies do not distinguish between the (re)employment of insiders (i.e., former
employees) and outsiders (i.e., retirees not previously connected to the firm), and do not
specifically consider reemployment after mandatory retirement. Also, an important missing
component in these studies is the flexibility of the employee: the willingness to accept a lower
wage and to work in a flexible employment arrangement. Downward wage flexibility may
crucially affect employers’ decisions in this matter as the demand for older workers is strongly
related to labor costs (Conen et al., 2012a; Hutchens, 1986). Furthermore it may also be the case
that employers value contract flexibility highly as this type of flexibility is particularly relevant
for bridge jobs – jobs covering the period between career employment and exit from the labor
force (Shultz, 2001). In understanding reemployment of older workers, we therefore focus
specifically on the effects of downward wage flexibility and contract flexibility2 on employers’
decisions. We study the reemployment decision in a vignette experiment among Dutch
employers. This method combines experimental and survey principles to elicit preference
structures or evaluations (Rossi & Anderson, 1982; Van Beek et al., 1997; Wallander, 2009).
With this study we contribute to the literature on the demand for older workers and
employment after retirement in three main ways. First, we focus on the demand for employees
who have reached the mandatory retirement age. Continued employment with the same employer
into old age is considered an appropriate way to increase the labor participation of seniors and
extend their working lives (OECD, 2006), which raises questions about the appropriateness of
mandatory retirement and the way it may impede employment past mandatory retirement age.
2Wedefine‘downwardwageflexibility’asthewillingnesstoacceptalowerwage;wedefine‘contractflexibility’as
apreferenceforamoreflexibleemploymentcontract.
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Second, our focus specifically lies with the effects of employee flexibility on employers’
decisions. When mandatory retirement approaches, many factors that might influence the chance
of reemployment are not or no longer under direct control of an employee. For example, older
workers are unlikely to be considered for training to update their firm-specific human capital
(Martin et al., 2014), and may have health problems which limit their employability. However,
there are factors that are under the employee’s control, such as downward wage flexibility and
contract flexibility, and these factors may also affect their chances of reemployment. These
factors have been largely ignored in previous research.
Third, we consider employers’ retirement age norms concerning the employability of older
workers as brought on by previous experience with older workers and personal beliefs
(Settersten & Hagestad, 1996). These norms may deviate from the institutionalized retirement
age norm that is set by the mandatory retirement age, and may help explain some of the large
differences found in employers’ behavior towards retirees (Karpinska et al., 2011).
The current study took place in the Netherlands. Here, mandatory retirement is very
common, with about 92% of the permanent labor contracts ending at state pension age (which is
being gradually raised from 65 to reach 67 in 2021; OECD, 2014). With the increase in
population aging the Dutch government is trying to facilitate post-retirement employment, as
most labor contract laws and collective labor agreements do not currently apply to employees
over the age of 65. The government is working on legislation that proposes applying the
minimum wage for people over the state pension age, as well as increasing the options for
flexible employment and shortening employers’ obligation for paid sick leave from two years to
six weeks (OECD, 2014).
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The remainder of this paper is organized as follows. Section 2 presents the theoretical
background on employers’ decision making in the context of reemployment after mandatory
retirement. Section 3 introduces the data and methods used to test our hypotheses. Section 4
presents the results. Section 5 concludes the paper.
2 Theoretical background
Whenever an employee indicates a desire to continue working past the mandatory retirement age,
an employer is likely to weigh the pros and cons of continued employment. Since mandatory
retirement formally ends the labor contract, the terms of a potential new contract are in principle
open for (re)negotiation. Various factors come into play. To structure our analysis of factors that
may influence employers’ decisions, we distinguish between factors that pertain to the employee
who wants to continue working and factors that pertain to the organizational context and the
individual employer making the actual reemployment decision.
2.1 Employee-level factors
First, we consider how employers’ decisions to rehire employees after mandatory retirement are
affected by the flexibility of these employees, in terms of downward wage flexibility, and
contract flexibility (i.e., a preference for a certain type of employment contract). Mandatory
retirement is the necessary termination point in an implicit contract, according to which
employees are ‘underpaid’ relative to their productivity at younger ages, but ‘overpaid’ relative
to their productivity at older ages (Lazear, 1979). Such a deferred compensation scheme
discourages shirking behavior, and is beneficial to both employers and employees in the long run
(Lazear, 1979; Gomez et al., 2002). However, in the case of reemployment after mandatory
retirement, long-term employment is most likely considered to be unfeasible, and employers are
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expected to want the new wage to more accurately reflect the employee’s level of productivity.
We therefore expect employers to be more likely to rehire employees who indicate a willingness
to accept a lower wage to continue working after retirement.
With regard to contract flexibility, employers’ preferences are not so straightforward.
Standard full-time employment is by many employers considered most practical with regard to
scheduling jobs and workload (Siegenthaler & Brenner, 2001). However, nonstandard
employment arrangements, such as part-time or on-call employment, may also have advantages
(Kalleberg, 2000), and are frequently used for the employment of (early) retirees (Oude Mulders
et al., 2013). Common reasons why employers have staff on part-time or on-call contracts are to
have them temporarily fill in for absent regular staff or to accommodate fluctuations in workload
(Houseman, 2001). In addition, a more flexible work arrangement in combination with a lower
workload may help maintain the productivity of an older worker (Skirbekk, 2008) and thus
contribute to a longer period of employment after mandatory retirement. On-call contracts have
the distinct advantage that they allow employers to keep their budget in check as no costs are
made when no work is done. Based on this, we expect employers to be more likely to rehire
those with a preference for on-call employment over those with a preference for either part-time
or full-time employment. We expect no difference between the latter two.
Next to the flexibility of employees, we include a number of other employee-level factors
that are expected to affect employers’ decisions. These are mainly related to the concept of
employability, which Fugate et al. (2004, p.16) define as “a form of work specific active
adaptability that enables workers to identify and realize career opportunities.” In the current
study, we consider knowledge and experience of the employee, his or her level of performance
until retirement, health, and social contacts. When employees possess unique knowledge and
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experience, and have functioned satisfactory until retirement, a higher productivity can be
expected after potential reemployment, making them more attractive to employers. Likewise,
employees in good health can be expected to be less risky compared to employees with weaker
health status. Employees with many valuable social contacts for the organization can help
employers profit from these contacts, while lacking those contacts makes an employee less
valuable. All these factors are expected to contribute positively to employers’ likelihood of
rehiring employees after mandatory retirement.
Finally, on the employee-level we consider the effect of the employee’s main motivation to
continue working. We distinguish between the employee mainly working for financial reasons;
to retain the social contacts at work; to have a feeling of personal satisfaction from work; and to
transfer knowledge to younger colleagues (Mor-Barak, 1995). These categories reflect motives
that are commonly found in empirical work (e.g., Dingemans & Henkens, 2014; Lynch, 2012;
McEvoy & Henderson, 2012). The perceived motivation of the employee to continue working
may influence the employer’s decision through a perceived fit or misfit with personal or
organizational values.
2.2 Employer-level factors
The decision to rehire employees after mandatory retirement is embedded in a broader
organizational context and is taken by an individual with certain beliefs about the skills and
qualities of employees working past a certain age. These employer-level factors may affect the
likelihood of reemployment after mandatory retirement for older workers. First, we consider the
labor market context of the organization. A considerable level of employment protection
commonly accompanies mandatory retirement policies and seniority wages (Gomez et al., 2002),
which makes older workers with long organizational tenure particularly costly to dismiss. When
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employers need to downsize their workforce due to a recession, mandatory retirement may be
welcomed as there are no costs involved, and rehiring mandatorily retired employees is not
expected to be a priority (Van Dalen & Henkens, 2013). In contrast, when an organization
operates in a tight labor market, employers are expected to be more likely to offer reemployment
to employees approaching mandatory retirement.
Second, we consider how employers may differ in their likelihood to rehire employees as a
result of their retirement age norms. Individual employers may differ in their attitudes and
behavior towards older workers because of their own experiences with older workers in their
organization, the observed attitudes and behaviors of similar others, or because of their own
personal values about the appropriateness and desirability of people working past a certain age
(Settersten & Hagestad, 1996). These norms may deviate from the institutionalized retirement
age norm that is set by the mandatory retirement age (often 65). We expect managers with higher
retirement age norms (i.e., who consider employees to be suited for work up to a higher age) to
be more likely to rehire employees after mandatory retirement.
3 Design and Methods
3.1 Data
In 2013, we gathered data on employers’ hiring behavior towards former employees through the
Longitudinal Internet Studies for the Social sciences (LISS) panel of CentERdata, Tilburg
University. The LISS panel consists of a representative sample of Dutch inhabitants who
participate in monthly internet surveys on a variety of topics. For the current study we selected
individuals who had reported to be in a management position. 864 individuals were approached
for participation in the survey, of which 698 responded, yielding a response rate of 81%. To
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ensure we only analyzed data from line managers who were involved in selection and
recruitment of employees, we asked the selection questions ‘Do you occupy a management
position within your organization?’ and ‘In the last ten years, have you had to take decisions
regarding recruitment and selection of employees?’. Respondents who were not managers
anymore (n = 45) or who did not deal with recruitment and selection (n = 98) were dropped from
further analysis, as well as respondents who had retired or gotten unemployed since the panel
first started (n = 46), and respondents who worked as freelancers (n = 66), leaving us with 443
respondents. Table 1 presents descriptive information of the final sample.
--- Table 1 ---
3.2 Measures
We collected data with a vignette study (also known as a factorial survey); a method that
combines survey questions with experimental methods, and is considered specifically suitable to
uncover the underlying structure of human judgments in social contexts (Rossi & Anderson,
1982; Wallander, 2009). The data collection was split up into two periods to limit the risk of so-
called ‘carryover effects’: when context items are asked prior to the target items in a survey, the
context items may increase the accessibility of material in the mind, which is then carried over
and used in answering the target items (cf. Tourangeau et al. 1989).
First, in March 2013 participants were asked to answer several questions related to their
organizations’ policies and practices towards older workers and retirees, and their individual
attitudes and behavior regarding the employment of older workers. For this study, we consider
the employer’s retirement age norm, which was measured with the question ‘At what age do you
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consider a person too old to work in your organization for 20 hours a week or more?’ The
answers were truncated between 50 and 803. The following background information on the
employer and the organization was gathered: employer’s gender (0 = Male; 1 = Female);
employer’s age; organization’s sector (15 answering categories that were divided into three main
sectors (industry; services and trade; (semi)public sector) and one ‘other’ category); the most
common educational level in the organization was dubbed the level of subordinates (low;
medium; high); and the organization’s percentage of older workers (defined as workers aged
50+; measured in categories: 0-10%; 10-20%; etc.).
In the second part of data collection, in May 2013, the participants were randomly assigned
to one of three experimental conditions related to the contract form, and were asked to evaluate
five vignettes. The vignettes contained descriptions of employees at the age of 65 who wanted to
continue working in either a full-time, part-time, or on-call employment capacity, depending on
the experimental condition4. Seven characteristics describing the employee were included in the
vignettes. Their possible values are presented in Table 2. The values of these characteristics were
randomized between vignettes. Each combination of characteristics is thus equally likely, which
allows us to reliably estimate the effects of each independent variable. For the dependent
variable, respondents answered the question ‘What is the likelihood that you would rehire this
employee on a(n) full-time/part-time/on-call contract?’, with the contract depending on the
experimental condition. Answers ranged from 1 (very unlikely) to 11 (very likely). An example
of a vignette is shown in Figure 1.
3Wetruncatedretirementagenormtoavoidproblemswithoutliers.Thisdidnotsubstantivelyalterourresults.
4Bydesign,participantswereshownfivedescriptionsofemployeeswhoallwantedtocontinueineitherafull‐
time,part‐time,oron‐callemploymentarrangement.Theemploymentarrangementismentionedinthevignette
description,aswellasinthequestionthatservesasthedependentvariable(seealsoFigure1).
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--- Table 2 ---
--- Figure 1 ---
3.3 Analysis
The data have a multilevel structure, with 2,215 vignette observations nested within 443
employers. Because multiple observations from the same respondent are not independent,
standard regression analysis is very likely to result in erroneous statistical estimations. We
therefore perform multilevel regression analysis to account for variance on both levels (Snijders
& Bosker, 1999). In the current study, the intra-class correlation of the empty multilevel model
(i.e., with no explanatory variables) is 0.43. This can be interpreted as the proportion of variance
that is accounted for by the employer level, or the correlation between values of two random
vignettes in the same random employer (Snijders & Bosker, 1999, p. 17). The relatively high
value of the intra-class correlation tells us that the nested structure is of large influence on the
dependent variable, and multilevel analysis is required to obtain accurate results. Multilevel
regression analysis implies that the intercept value and the strength of the predictor variables
may vary between respondents. This is tested with so-called random intercept and random slope
terms. In the current study, these terms are not of prime importance, but are only included to
optimize the model and therefore not reported5. The reported results are the unstandardized
regression coefficients averaged over all respondents6.
4 Results
5Randomslopeswereconsideredforallvignettevariables.Onlythosethatsignificantlyimprovedthemodelwere
includedinthefinalmodels(Snijders&Bosker,1999).
6Thecoefficientsshouldthusbeinterpretedintermsoflikelihoodofrehiring,consideringthedependentvariable
ismeasuredonascalefrom1to11.
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Table 3 presents the results of the multilevel regression analyses in three models. Model I
contains only the effects of the vignette characteristics; Model II also contains the employers’
characteristics from the survey7; Model III additionally contains several interaction effects
between vignette-level variables8. Note that reference categories were set so that the reference
employee is one with no downward wage flexibility, a preference for a full-time contract, low
employability, wanting to continue working for financial reasons, in an organization that needs
to downsize. As a result, all effects of the vignette-level variables are in the positive direction
and are directly comparable. The age and retirement age norm of employers have been centered,
so that the reference employer is 47.5 years old and holds a retirement age norm of 65.7 years.
--- Table 3 ---
First, we observe that all vignette characteristics, except contract flexibility, affect employers’
decisions. As expected, employers are more likely to rehire employees after mandatory
retirement who display downward wage flexibility, have valuable knowledge and experience,
have performed satisfactory until retirement, are relatively healthy, have many valuable social
contacts, and when the organization faces recruitment problems. These results are highly robust
across models.
In line with our hypothesis, employers are more likely to rehire employees who would
accept a 20% or 40% wage reduction than employees who would not accept a lower wage.
However, the difference between employees accepting a 20% and a 40% wage reduction is not
statistically significant. This suggests that employers attach value to employees making a
7ModelIIisnotasignificantimprovementoverModelI(χ²(9)=15.63;p‐value=0.075),butthisismainlydueto
thevariables‘sector’and‘levelofsubordinates’takingdegreesoffreedomwhilenotexplainingmuch.
8ModelIIIisasignificantimprovementoverModelII(χ²(4)=18.52;p‐value=0.001).
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substantial financial sacrifice to stay employed, but that the exact amount is of lesser importance.
The effect size of an employee accepting a 40% wage reduction is approximately equally large
as the employee having valuable knowledge and experience that is hard to replace, and the
employee being in good health. Employers also consider the employee’s main motivation in their
reemployment decision: they are more likely to rehire employees who are intrinsically motivated
(personal satisfaction, transferring knowledge) than employees who mainly work to retain the
social contacts at work or for financial reasons. However, we should note that the effects are
relatively small compared to the other employability effects. Contrary to our expectations,
contract flexibility does not affect employers’ likelihood of rehiring employees after age 65: they
are equally likely to rehire employees with a preference for full-time, part-time, or on-call
employment. This suggests that employers base their reemployment decisions on other factors,
and keep an open mind in accommodating the contract preferences of older workers.
The effects of the employer characteristics in Model II show that – as expected – employers
who hold higher retirement age norms are more likely to rehire employees after mandatory
retirement in their own organization. There is no significant difference between male and female
employers. However, we do observe that older employers are slightly less likely to rehire
employees after mandatory retirement than younger employers. This is in marked contrast to the
results found by Heyma et al. (2014), who find that older Dutch managers are more likely than
younger managers to hire older job seekers. However, they limit their attention to job seekers
below the age of 65, which may indicate a distinction in the minds of managers and employers
between older job seekers and retirees looking for a bridge job. We find no significant effects of
the employing organization’s sector, the most common level of subordinates, and the percentage
of older workers in the organization.
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Finally, we tested several interaction terms to examine whether the effects of downward
wage flexibility and contract flexibility differed for employees with different characteristics, and
whether the importance of the employability effects was related to the organizational labor
market context. Only the significant interaction effects are presented in Model III of Table 3. We
observe an interaction effect of the employee having ‘hard to replace knowledge and experience’
and accepting a lower wage offer. Both main effects increase in size, but a significant negative
interaction effect appears, suggesting that employers are not as strongly influenced by the
downward wage flexibility of an employee when he or she possesses knowledge and experience
that is hard to replace. In other words, the need for downward wage flexibility to get reemployed
is smaller for employees who have unique knowledge or experience, although downward wage
flexibility still increases their chances for reemployment. Also, we observe an interaction effect
of the employee’s performance and the organizational labor market context. The interaction
effect is significant and positive, while both main effects are slightly weakened, suggesting that
well performing employees are especially likely to get reemployed when there is no need for
downsizing.
Figure 2 offers a graphic representation of the interaction effects and the likelihood of
employers to rehire different types of employees. It shows predicted values of regression Model
III of Table 3 for four stylized types of employees in different organizational contexts. That is,
predicted values were calculated for employees with high employability (hard to replace
knowledge and experience, good performance until retirement, good health, many valuable
contacts for the organization, working for personal satisfaction) and high flexibility (40% wage
reduction, on-call contract preference); high employability and low flexibility (no wage
reduction, full-time contract preference); low employability (easy to replace knowledge and
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experience, not so good performance, not so good health, few valuable contacts for the
organization, working for financial reasons) and high flexibility; and low employability and low
flexibility.
--- Figure 2 ---
The figure shows that employers are very unlikely to rehire employees with low levels of
employability, regardless of their flexibility and the organizational labor market context.
However, the overall scores for the reemployment of employees with a high level of
employability are also relatively low, hovering around the neutral mark. This suggests that even
highly employable employees may need to accept a significant wage reduction to get their
employer to consider them for continued employment after mandatory retirement. Overall, it
seems that employers are quite unwilling to rehire employees after mandatory retirement, except
when they are highly employable, highly flexible, and the organization faces recruitment
problems.
5 Conclusion and discussion
Which factors influence employers’ decisions to rehire employees after mandatory retirement?
The current study has tried to answer this question with data from a vignette study among Dutch
employers. A key strength of this study is its specific contextual focus – reemployment of
employees after mandatory retirement – and its consideration of effects of employee downward
wage flexibility and contract flexibility on employers’ reemployment decisions.
The first main finding is that downward wage flexibility significantly affects employers’
reemployment decisions in the context of mandatory retirement. Employers are considerably
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more likely to rehire employees who are prepared to accept a significantly lower wage after
mandatory retirement. From a theoretical perspective, this was predicted because mandatory
retirement marks the end of the implicit contract in which wages and productivity are balanced
over the life cycle (Lazear, 1979), and employers probably want the post-retirement wage to be
more in line with workers’ productivity. Note that this does not necessarily imply that the older
worker has become less productive. It merely suggests that the seniority principle of an upward
sloping wage profile is not tenable and the wage level should be reconsidered once the
mandatory retirement age has been reached. In contrast, employers are not more likely to rehire
employees who have flexible contract preferences, such as part-time or on-call employment
compared to an employee with a fulltime contract. This suggests that employers make their
reemployment decision irrespective of the preferred employment contract of the employee.
Employers may perhaps be willing to accommodate the contract preferences of their older
workers, as this may contribute to their work satisfaction and productivity, and as a form of
reward for long organizational tenure (cf. Houseman, 2001). If so, this may help explain part of
the large diversity that exists in the way organizations deal with retirement issues and the
employment of older workers and retirees (Oude Mulders et al., 2013).
The second main finding is that employers are overall quite disinclined to rehire employees
after mandatory retirement, although large differences exist between employers, evidenced by
the relatively low scores on the dependent variable. A high level of employability of the
employee and a tight labor market context seem like necessary but not always sufficient
conditions for reemployment. Employees with a low level of employability are usually not
considered for reemployment, regardless of their flexibility, and organizations that need to
downsize have other priorities than reemploying employees after mandatory retirement. Still,
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there are employers who have a more positive view on employees who want to continue working
after mandatory retirement. Part of this can be explained by employers having higher retirement
age norms – norms considering employees to be suited for work in old age – which has proven
itself to also influence employers’ decision making in other contexts (Karpinska et al., 2013a;
2013b). Conversely, there are also employers that may not want to rehire employees after
mandatory retirement in any circumstance.
This study has some limitations. First, an inherent limitation in vignette studies is that
respondents estimate their response to hypothetical cases, which may not always translate into
actual behavior (Pager & Quillian, 2005). It is therefore important to study how employers in
practice deal with employees who seek reemployment after mandatory retirement, and whether
they are affected by the flexibility of the employee.
Second, we only studied the intended behavior of Dutch employers. In the Netherlands,
mandatory retirement is a common feature of labor contracts, with about 92 percent of
permanent labor contracts ending at state pension age (OECD, 2014). It would be interesting to
see whether employers in countries with different labor market institutions and where mandatory
retirement is less common react differently to employees that want to continue working after
mandatory retirement age. Also, a comparison with employers’ employment and retention
behavior in countries that have abolished mandatory retirement (such as Australia, UK and USA)
would be valuable.
Third, the organizational context in which these decisions are taken is more complex than
we have suggested here. In reality, mandatory retirement can be foreseen by both employer and
employee, and it is likely that informal arrangements are made before the actual date of
mandatory retirement (Vickerstaff et al., 2003).
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From the perspective of the employee seeking work after mandatory retirement, our results
imply that employees approaching retirement may attempt to increase their likelihood of
reemployment by expressing their willingness to accept a lower wage. However, our results also
suggest that older workers may have a hard time finding reemployment with the same employer
after mandatory retirement, even if they offer to work for a lower wage. Employees who want to
continue working but are not considered highly employable, or are employed in an organization
that needs to downsize may need to look for employment elsewhere. For them, mandatory
retirement could be a form of involuntary retirement, which could eventually lead to decreased
satisfaction with life (Dingemans & Henkens, 2014). However, banning mandatory retirement
may not solve this problem, as mandatory retirement is inherently tied to employment protection,
seniority wages and occupational and state pension plans (Gomez et al., 2002), which are
common features of many European labor markets. Banning mandatory retirement would imply
a complete restructuring of labor market institutions.
In conclusion, this study has demonstrated which factors affect employers in rehiring older
employees after mandatory retirement. Although the employer has the final say in who to hire
and who to let go, it is not all in the hands of employers. This study also suggests that employees
who display downward wage flexibility make themselves more attractive to employers. In other
words, the price of labor at older ages matters quite a lot and hence looking at both demand and
supply forces may indeed help to understand trends in working past the mandatory retirement
age.
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26
Table 1. Descriptive statistics of employers’ characteristics (N = 443).
VariableCategoriesMor%SD
GenderMale66.8%
Female33.2%
Age 47.52 10.01
Retirementagenorm 65.73 5.84
SectorIndustryandconstruction19.0%
Servicesandtrade27.8%
(Semi)publicsector27.3%
Other26.0%
LevelofsubordinatesLow23.5%
Medium41.3%
High35.2%
Percentageofolderworkers 33.97 18.95
27
Table 2. Characteristics included in the vignettes, and their possible values.
VignettecharacteristicPossiblevalues
OrganizationalcontextNeedtodownsize
Norecruitmentproblems
Recruitmentproblems
DownwardwageflexibilityNotwillingtoreducewages
Willingtoaccepta20%wagereduction
Willingtoaccepta40%wagereduction
KnowledgeandexperienceEasytoreplace
Hardtoreplace
PerformanceuntilretirementNotsogood
Good
HealthNotsohealthy
Ingoodhealth
SocialnetworkFewvaluablecontactsfortheorganization
Manyvaluablecontactsfortheorganization
MotivationtocontinueworkingForfinancialreasons
Toretainsocialcontactsatwork
Personalsatisfactionofworking
Totransferknowledge
28
Table 3. Multilevel regression results of the likelihood of rehiring employees after mandatory retirement.
ModelIModelII ModelIII
Coefficient S.E. Coefficient S.E. Coefficient S.E.
Employee‐levelfactors
Downwardwageflexibility(ref=None)20%reduction0.57 ***0.09 0.56 *** 0.09 0.73 *** 0.13
40%reduction0.69 ***0.10 0.69 *** 0.10 0.86 *** 0.13
Contractflexibility(ref=Full‐time)Part‐time‐0.02 0.22 ‐0.01 0.22 ‐0.01 0.22
On‐call0.24 0.22 0.25 0.22 0.26 0.22
Knowledgeandexperience(ref=Easytoreplace)Hardtoreplace0.69 ***0.08 0.69 *** 0.08 0.93 *** 0.13
Performanceuntilretirement(ref=Notsogood)Good1.40 ***0.09 1.40 *** 0.09 1.02 *** 0.14
Health(ref=Notsohealthy)Ingoodhealth0.70 ***0.08 0.69 *** 0.08 0.70 *** 0.08
Socialnetwork(ref=Fewvaluablecontacts)Manyvaluablecontacts0.48 ***0.08 0.48 *** 0.08 0.47 *** 0.08
Motivationforwork(ref=Forfinancialreasons)Retainsocialcontacts0.03 0.11 0.04 0.11 0.03 0.11
Personalsatisfaction0.33 **0.11 0.33 **0.11 0.33 **0.11
Transferknowledge0.30 **0.11 0.30 **0.11 0.30 **0.11
Employer‐levelfactors
Organizationalcontext(ref=Needtodownsize)Norecruitmentproblems0.46 ***0.09 0.46 *** 0.09 0.22 †0.13
Recruitmentproblems1.09 ***0.09 1.09 *** 0.09 0.76 *** 0.13
Retirementagenorm(centered) 0.04 *0.02 0.04 *0.02
Gender(ref=Male)Female ‐0.10 0.20 ‐0.09 0.20
Age(centered)‐0.02 *0.01 ‐0.02 *0.01
Sector(ref=Industry)Servicesandtrade 0.02 0.27 0.01 0.27
(Semi)Public ‐0.28 0.28 ‐0.29 0.28
Other ‐0.20 0.27 ‐0.19 0.27
Levelofsubordinates(ref=Low)Medium 0.06 0.24 0.07 0.24
High ‐0.13 0.25 ‐0.11 0.25
Percentageofolderworkers(aged50+;ref=0‐10%) ‐0.04 0.05 ‐0.04 0.05
Interactioneffects
Hardtoreplaceknowledgeandexperience+20%wagereduction ‐0.36 †0.18
Hardtoreplaceknowledgeandexperience+40%wagereduction‐0.38 *0.19
29
Goodperformance+norecruitmentproblemscontext 0.49 **0.19
Goodperformance+recruitmentproblemscontext 0.65 *** 0.18
Constant1.58 ***0.19 1.98 *** 0.40 2.05 *** 0.41
Employer‐levelvariance2.37 0.24 2.27 0.24 2.27 0.24
Employee‐levelvariance2.02 0.11 2.04 0.11 2.00 0.11
Log‐likelihood‐4681.33 ‐4673.52 ‐4664.26
Numberofvignettes(respondents) 2215 (443) 2215 (443) 2215 (443)
†p<0.1;*p<0.05;**p<0.01;***p<0.001
Note:Allmodelshavesignificantrandomslopesforwageflexibility,knowledge,performance,health,andsocialnetwork,whichmeansthatthese
effectsdiffersignificantlybetweenrespondents(e.g.,Snijders&Bosker,1999).Therandomslopesarenotreported,butareavailableonrequest.
30
Figure 1. Example of a vignette.
Thefollowingemployeehasreachedthemandatoryretirementageof65withinyourorganization.He
orshewouldliketocontinueworkinginonapart‐timebasis(twodaysperweek).Pleaseindicate,for
eachemployee,thelikelihoodthatyouwouldrehirethispersoninapart‐timeemployment
arrangement.
Organizationalcontext
LaborcontextLaborshortages
Employee
Downwardwageflexibility20%
KnowledgeandexperienceHardtoreplace
FunctioninguntilretirementGood
SocialnetworkFewvaluablecontacts
HealthNotsogood
MainmotivationtocontinueworkingSocialcontactsatwork
Whatisthelikelihoodthatyouwouldrehirethisemployeeinapart‐timeemployment
arrangement?
1234567891011
Veryunlikely NeutralVerylikely
31
Figure 2. Illustration of interaction effects.
Downsizing Balanced Shortages
Organizationallabormarketcontext
Highemployability
Highflexibility
Highemployability
Lowflexibility
Lowemployability
Highflexibility
Lowemployability
Lowflexibility
Likelihoodofreemployment
Veryunlikely
Neutral
Verylikely
Highflexibility: 40%wagereduction;on‐callcontractpreference.
Lowflexibility: Nowagereduction,full‐timecontractpreference.
Highemployability: Hardtoreplaceknowledgeandexperience,goodperformance,goodhealth,
manyvaluablecontacts,workingforpersonalsatisfaction.
Lowemployability:Easytoreplaceknowledgeandexperience,notsogoodperformance,notso
goodhealth,fewvaluablecontacts,workingforfinancialreasons.
