The causal influence of pensions on the participation of older workers in the Ghanaian labour market

Abstract

Population ageing has stirred up policy discourse on pension coverage in developing economies. In most of these countries, a smaller proportion of older persons receive pensions in the form of regular payments from the state, with a considerable proportion of them engaging in active work to maintain their livelihood. While these descriptions generally apply to Ghana, the literature remains inconclusive on whether the absence of a pension is a primary driver of older persons’ continued engagement in work. This study employs instrumental variables to establish causality between pension and labour market participation of older workers in rural and urban Ghana. The paper uses the seventh round of the Ghana Living Standards Survey data set. It emerged from the data that the availability of pensions would take many older persons (both men and women) in the urban areas and many older women in rural areas out of active work. It was proposed that the government should enhance public education and awareness campaigns on the Tier Three pension scheme as a strategic measure to increase pension coverage among informal sector workers. A further suggestion is provided for the state to consider a non-contributory pension scheme to cover the poor and vulnerable older persons.