Out of society? Retirement affects perceived social exclusion in Germany

Perceived social exclusion (PSE) depends on individual access to resources (e.g. income and social networks) and recognition of a social status. Working provides individuals with both resources and a social status. This situation leaves the non-working population at a severe social disadvantage, which might partly be remedied by retirement.

We expected to find differential effects on PSE when individuals retire. For individuals working until retirement the transition might be mostly associated with a loss of resources (leading to an increase in PSE) and for individuals not working before retirement the transition might be more strongly associated with an increase in social status (leading to a decrease in PSE).

We used longitudinal data from the German Panel Study of Labor Market and Social Security (PASS) to estimate fixed effects panel regression models for 790 men and women experiencing the transition to retirement (4110 observations). Models were estimated separately for retired persons who worked or did not work prior to retirement.

At retirement those working prior to the transition reported lower levels of PSE than those not working. As expected retirement increased PSE for those previously working and for those not previously working retirement decreased PSE in the short term. Both effects remained stable after compensating for resource changes due to retirement.

Retirement reduced the differences in PSE between previously working and non-working groups. For those previously working retirement seemed to depict a loss of social acceptance whereas for those previously not working retirement seemed to indicate a reduction of stigmatization. The previous effect of the labor market, however, continued to affect individuals in retirement for a long time.