The fiscal impact of a higher employment rate among older people - particularly with regard to additional tax and social security revenue and potential additional expenditure in the pension system - will be quantified primarily on the basis of the EUROMOD tax/benefit microsimulation model.
The main aim is to show the extent to which a higher employment rate among older workers contributes to the financing of social security systems for Austria as a whole. An additional module will enable a comparison of the individual federal states. Certain increases in the employment rate by x percentage points or to a specific target value (to y %) and their fiscal effects are simulated. However, the potential employment effects of individual specific measures willl not be quantified.
EUROMOD covers all key features of social security contributions, income tax, and cash benefits, as well as indirect taxes (value added tax and excise duties), and enables the calculation of the effects of changes in labour market status and related incomes (as well as of policy changes) on the eligibility for (other) policies and on the resulting household incomes as well as fiscal revenue or expenditure. The latest EU-SILC data (EU-SILC 2024) linked to data from the 2019/20 household budget survey are used as input data.
The LMA add-on in EUROMOD is a tool that can be used to change the labour market status of individual observations based on probabilities or assumptions (in this specific case, increasing the employment rate among older people; original labour market status: retired, but possibly also unemployed or economically inactive; new labour market status: employed).
In addition to social (security), and income tax as classic elements of EUROMOD, consumption taxes (value added tax and excise duties) can also be simulated with EUROMOD on the basis of the combined input data set from EU-SILC and the household budget survey, assuming certain consumption elasticities (an increase in income by x leads to an increase of y in consumer spending, divided among the central COICOP groups).
Additional pension expenditure resulting from the increased number of contribution months due to additional employment or later retirement can be roughly estimated outside EUROMOD at the national level using detailed demographic statistics and actuarial tables (especially mortality rates). These projections are made for a medium to long-term time horizon (ten or thirty years).