In western industrialised countries labour markets have traditionally been the arena of life through which individuals are integrated into the society. The labour markets do not provide only economic security for individuals, but also provide social contact. Fundamental changes in the labour market, globalisation and the development of the information society have lead to an increasing exclusion of individuals from the labour market. Unemployment and early retirement have become more common than ever in developed societies. This has affected also the life course of ageing people (Guillemard and Van Gunsteren, 1991). Nowadays individuals rarely leave the labour force at the official retirement age to take up their old age pension; rather it is more common that individuals exit the labour force due ill health or for other reasons many years before the official retirement age.

The aim of the welfare state is to guarantee its citizens a livelihood against unemployment, disability, old age and other risks which may reduce their full membership of the society. Full membership in a society is an often-used concept that refers to social, political and economic integration into the society. This view derives from T. H. Marshall's idea of the development of citizenship rights. Marshall (1950) identified civil, social and political rights as the key determinants of a civil society and citizenship for securing the well-being of citizens.

When labour markets fail to employ all willing and capable individuals it becomes the responsibility of the society to contribute to their economic security. The problem is that welfare states can contribute to individuals’ economic security but they are much less able to compensate for the loss of social integration (Pixley, 1993). The idea that exclusion from the labour market, in the form of unemployment, is connected to exclusion from other arenas of life in the social, political and economic arena has been relatively widely studied. These studies have shown that the negative effects of labour market marginalisation among the unemployed are significant (Burchell, 1994; Gallie et al, 1994; Åberg and Nordenmark, 2000).

Unemployment is usually the only definition of the labour-market marginalisation used in such studies. This is interesting, because many previous studies have pointed out that early retirement is, at least partly, a form of labour-market marginalisation. These studies regard early retirement as labour-market expulsion or as hidden unemployment (Walker, 1985; Casey and Laczko, 1989; Kolberg and Hagen, 1992; Hytti, 1998).