The labor participation rate in Slovenia has been lower than in the EU-15 (the members states prior to May 2004), particularly for the low-income and older individuals. Using simulations of tax and social benefits and public pensions, the paper shows how the current tax, welfare, and pension systems create disincentives to work among these groups. The paper finds that incentives to retire early are strong for men, especially low-wage earners. The marginal effective tax rates also make it costly for low-income individuals to work and negatively affect the probability of participating. The paper proposes reform measures to enhance work incentives and labor participation, which will be crucial for dealing with population aging and for achieving higher potential growth in Slovenia.In addition, a larger service factor due to an additional year of service and a larger bonus or a smaller penalty also ... We thus estimate the effective implicit tax on deferring retirement from time t to the following year: t t t accrual Pension wealth Pension ... effective implicit tax rate thus indicate that the pension system likely provides a strong incentive to exit the labor force. ... wealth from retiring at the current date and the maximum value of pension wealth achieved by retiring in the future.
|Title||:||Tax, Welfare, and Pension Reforms in Slovenia|
|Publisher||:||International Monetary Fund - 2006|