Educational Expansion as a Driver of Longer Working Lives? Regression Decomposition Analysis of Changes in Labour Force Participation at Older Ages in Twenty-first Century Europe

Abstract

This study investigates the contribution of educational expansion to changes in labour force participation among Europeans aged 55-74 between 2000 and 2019, while accounting for changes in educational inequalities in labour market activity. We use data from the European Union Labour Force Survey (EU-LFS) for 26 countries and Kitagawa-Oaxaca-Blinder decomposition methods to analyse the extent to which changes in the education structure may account for rises in labour force participation rates among older workers in these countries, and the degree to which returns to education have changed. Overall, we found that educational expansion is positively associated with increases in labour force participation, albeit with substantial cross-country variation in the scale of this association. A driving factor was the decrease in the share of the population with low education levels, followed by an increase in the share of those with high education levels. While activity rates rose in most countries and among all levels of education, the largest increases were observed among people with a medium level of education. Activity rates of low-educated older workers, especially women, grew at a substantially lower pace in some countries, exacerbating educational inequalities in labour force participation at older ages. The study suggests that educational expansion has been a driver of longer working lives in Europe. However, it also indicates that changes in health, working conditions and age norms at the microlevel, as well as pension and labour market reforms at the macrolevel, can be assumed to have played a dominant role in countries where increases in labour force participation were the most significant.