Chapter 3 RETIREMENT TRENDS AND LABOR FORCE With this century's dramatic increase in longevity, people are spending more time in all of life's major activities—in education, in work, and in retirement. Retirement is now an established institution and more and more older people are retiring well before age 65. For those older persons who need or want to continue to work, however, unemployment and age discrimination are serious problems. Older workers who are unemployed stay out of work longer than younger workers, suffer a greater earnings loss in subsequent jobs than younger workers and are more likely to become discouraged, giving up the job search altogether. The following section describes the current labor force and retirement trends of older workers. LIFETIME DISTRIBUTION OF EDUCATION, WORK, AND RETIREMENT RETIREMENT IS NO LONGER A LUXURY, IT IS NOW AN INSTITUTION Increased longevity and changing social and work patterns have contributed to dramatic changes during this century in the distribution of time devoted to major life activities such as education, work, retirement, and leisure. Compared to a century ago, children are spending more time in school, both men and women in their middle years are spending more time in work, and older people are spending more time in retirement. Retirement is now as much an expected part of a life course as family, school, or work. The portion of life spent in retirement has increased substantially since the beginning of this century (table 31, chart 3-1). In 1900, the average male had a life span of 46.3 years and only 1.2 years, or 3 percent, was spent in retirement or other activities outside the labor force. By 1980, the average male spent 19 percent of his 70 years in retirement, or 13.6 years. Thus, while life expectancy increased by 50 percent, average years in retirement increased 11 times. Although, on the average, males spent nearly 7 more years in the labor force in 1980 than in 1900, their working lives accounted for a smaller proportion of their lifespan in 1980 (55 percent), than in 1900 when males spent 69 percent of their lives working. The number of years spent in school also increased for males from an average of 8 years to 12.6 years between 1900 and 1980. The proportion of time devoted to education, however, only increased from 17 to 18 percent. Changes in distribution patterns of major life activities are very different for women. As more women have entered the labor force, an historic increase has taken place in the proportion of time spent in work outside the home. Since 1900, the average number of years spent by women in the labor force increased from 6.3 to 29.4 years and from 13 percent of the lifespan to 38 percent. TABLE 3-1-LIFECYCLE DISTRIBUTION OF EDUCATION, LABOR FORCE PARTICIPATION, RETIREMENT, AND WORK IN THE HOME: 1900-80 Source: U.S. Bureau of the Census. "Educational Attainment in the United States: March 1981 and 1980." Current Population Reports Series P20, No. 390 (August 1984) (median years of school for persons 25 years or older, 1940-1980). Best, Fred. "Work Sharing: Issues, Policy Options, and Prospects." Upjohn Institute for Employment Research, 1981, page 8 (1900 estimates of median years of school for persons 25 years or older). National Center for Health Statistics. Vital Statistics of the United States, 1984. Vol. 2, Section 6, March 1987 (life expectancy data). Smith, Shirley J. "Revised Worklife Tables Reflect 1979-1980 Experience." Monthly Labor Review Vol. 108, No. 8 (August 1985) (worklife estimates). (NOTE.-The data on average worklife and retirement presented above and in chart 3-1 illustrate the projected experience of a hypothetical cohort born in a given year if the rates of mortality, labor force participation, and educational attainment which prevailed at that time were held constant into the future. Worklife estimates are also prepared for people at various ages, according to whether they are in the labor force at those ages (see article by Shirley J. Smith cited in table 3-1 and chart 3-1.) The estimates of worklife shown in table 3-1 and chart 3-1 are averages which include people who die at relatively young ages, people who never enter the labor force, and people who work only sporadically or for small portions of their lives, as well as people who are in the labor force continuously for several decades. In addition, the estimated worklife figures do not necessarily represent continuous employment although they are portrayed as such in chart 3-1. These estimates do not represent solely the experience of career employees and should not be used to calculate the average age at retirement. For example, chart 3-1 and table 3-1 indicate that men had a life expectancy at birth of 70 years and a worklife expectancy of 38.8 years in 1980. With 12.6 years of schooling beginning after age 5, this implies retirement at age 56.4 whereas other data indicate the average age at retirement for people with significant amounts of labor force experience is between ages 60 and 65.) RETIREMENT MOST OLDER WORKERS RETIRE EARLIER THAN AGE 65 Since Social Security legislation was passed in 1935, age 65 has been commonly thought of as the "normal" retirement age. Today, however, most retirees leave work before they reach 65. A 1978 national survey of American attitudes toward pensions and retirement found that almost two-thirds of retirees had left work before age 65.1 The median age of retirement in this sample was 60.6. It is important to note that retirement is not necessarily synonymous with lack of employment. At the time of the survey, however, 81 percent of the retired respondents were not employed, 8 percent were employed part-time, and 5 percent were working full-time. Due to the current trend in early retirement, work life expectancy is low for older males and females (chart 3-2). Today, males age 60 average 4 years of remaining work life expectancy and older females average 3 years. At age 65, both males and females average 2 years. Early retirement may be a permanent fixture of the American economy. Even an increase in the eligibility age for full Social Security benefits and the elimination of mandatory retirement at age 70 is likely to have only minimal impact on future retirement ages. According to the National Commission for Employment Policy, economic analyses have shown that changing the age of eligibility for full Social Security benefits from age 65 to 67 by the year 2027 would have minimal effect on the actual age of retirement and 1 Harris, Louis and Associates. 1979 Study of American Attitudes Towards Pensions and Retirement. New York: Johnson & Higgins, 1979. |