During most of the post-World War
II period, American men have been leaving the labor force at
earlier and earlier ages. Evidence suggests that this trend has
been under way for more than a century. However, in the
mid-1980s, this trend came to an abrupt halt. Male labor force
participation rates have been flat since 1985, and have actually
increased over the past several years. Understanding these issues
is especially important, given the looming increase in the Social
Security normal retirement age to 67 and the possibility of even
more increases in the ages of eligibility under Social Security
and Medicare reform.
Because of the influx of married
women into the labor market in the post-World War II period,
older women's participation rates did not decline as men's did.
In contrast, their rates were relatively steady, rising or
falling very slowly. Since the mid-1980s, however, older women's
participation rates have increased significantly. Many more older
men and women are working today than the pre-1986 trends would
have suggested.
Many older Americans leave the
labor force gradually, utilizing “bridge jobs” between
employment on a full-time career job and complete labor force
withdrawal. These bridge jobs are often part-time, often in a new
line of work, and sometimes involve a switch from wage and salary
work to self-employment. Estimates suggest that between one-third
and one-half of older Americans will work on a bridge job before
retiring completely, and for these workers retirement is best
viewed as a process, not as a single event.
These changes in retirement
behavior are consistent with societal changes that have altered
the relative attractiveness of work and leisure late in life.
Mandatory retirement has been outlawed for most American workers.
Social Security has become more age-neutral, no longer penalizing
the average worker who wants to continue working after age 65. An
increasing proportion of employer pension coverage has been in
defined contribution plans, which do not contain the age-specific
retirement incentives that many defined benefit plans do. The
composition of jobs has shifted from manufacturing to service
occupations. Americans are living longer and healthier lives, and
many look forward to years of productive activity after age 65.
These structural changes have
been accompanied by an important cyclical factor: the strength of
the American economy over the past decade. This has increased the
demand for all types of labor, including older workers. Evidence
suggests that there is more than this cyclical factor at work,
however, and that new attitudes about work late in life are
developing.
Labor supply decisions late in
life are correlated in expected ways with the individual's health
(measured in several ways), age, and pension and health insurance
status.
Retirement patterns in America
are much richer and more varied than the stereotypical one-step
view of retirement suggests. Public policy is changing in ways
that make continued work late in life more likely. If employers
are willing to provide flexible job opportunities to meet the
needs of these potential employees, then society can tap a
growing pool of older, experienced, and willing workers for years
to come.
