Labour force withdrawal of the elderly in South Africa

Vimal Ranchhod, University of Michigan

South Africans over age 50 spent most of their lives under the apartheid restrictions on employment and residency. As they now enter retirement they face new pressures from the impact that HIV/AIDS and high unemployment rates on the next generation. At the same time, these elderly have access to a state old age pension system that is among the most generous in the developing world and that delivers resources are an important source of support to South Africa’s many extended households. Decisions of the elderly about work and retirement are made in these complex circumstances. Drawing on excellent 2001 microdata, we analyze the age profile of labour force participation, focusing on the effects of the old age pension on retirement. We estimate probit regressions of labour force activity that include pension eligibility along with marital status, living arrangements, education, and geography. We find some evidence that pension eligibility increases retirement.