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The Increasing Heterogeneity of Retirement in the USA: Interactions Between State, Firm, and Individual Determinants of Later-Life Labor Force Withdrawal

Abstract

The confluence of several institutional forces—Social Security benefit improvements and the availability of early retirement, the growth of employer-sponsored defined-benefit pension plans, and mandatory retirement ages—led to sustained early labor force withdrawal in the 1970s and 1980s. As these institutional forces were desynchronized and/or dismantled, the labor force participation rates of US workers age 55 and above began increasing in the mid-1990s. Warner shows, however, that this desynchronization of the state and firm institutional supports has led not simply to delayed retirement but to growing heterogeneity in retirement timing as workers’ household and individual characteristics have become increasingly consequential. Indeed, even as Social Security reform and changes in firm benefits incentivize delayed retirement, the retention of early Social Security retired-worker benefits at age 62 suggests that high levels of early retirement among the most disadvantaged workers will continue to anchor the growing heterogeneity in labor force withdrawal timing.

Keywords

  • Labor Force
  • Labor Force Participation
  • Early Retirement
  • Work Disability
  • Labor Force Participation Rate

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Fig. 15.1
Fig. 15.2

Notes

  1. 1.

    The term “Social Security” in the USA is the common name for the Old Age, Survivors, and Disability Insurance program that has its origins in the 1935 Social Security Act. This usage is different from other countries in which “social security” refers to the totality of social insurance provisions.

  2. 2.

    Throughout the chapter, I reference labor force participation rates (LFPRs). The LFPR is the ratio of persons in the labor force (employed or unemployed and looking for work) to the total civilian population. Given the relatively high turnover rates in the USA, tracking persons in the labor force, but not strictly “employed,” is standard.

  3. 3.

    The 1978 amendment to the Age Discrimination and Employment Act expanded the prohibition on age discrimination up to age 70, effectively abolishing mandatory retirement at the common age of 65. Subsequent amendments explicitly outlawed mandatory retirement at any age except for a few select classes (for example, commercial airline pilots, firefighters, law enforcement).

  4. 4.

    I describe exiting behavior in terms of labor force withdrawal to denote the multiple pathways by which older workers exit (for example retirement, work disability, and unemployment) and to acknowledge that even when workers describe their exits as “retirement” or receive Social Security retired-worker benefits, this may not reflect voluntary separation. The complexity of late-life labor force withdrawal in the USA is evident in the fact that retirement may be defined by labor force behavior, public or private pension receipt, or self-identification as “retired”—and the correspondence of these definitions varies across individuals (Ekerdt and DeViney 1990).

  5. 5.

    Unemployment provisions in the USA are comparatively quite weak, with graduated benefits typically ending after 26 weeks.

  6. 6.

    Social Security Disability Insurance (SSDI) benefits are available to those unable to work because of certified medical conditions expected to last at least one year. Beneficiaries have to wait 5 months after certification as disabled before SSDI benefits begin. In most cases, beneficiaries can also receive Medicare after 24 months of SSDI coverage.

  7. 7.

    The age-disaggregated LFPRs for persons aged 55–64 are not available prior to 1976.

  8. 8.

    A married or surviving spouse entitled to both a worker’s benefit and a dependent’s benefit (that is, “dual entitled”) receives his or her worker’s benefit plus the amount, if any, by which the spousal (survivor) benefit exceeds the worker’s benefit. A married person cannot receive both the full 50 % spousal (100 % survivor) benefit and his or her own covered worker benefit.

  9. 9.

    See http://www.ssa.gov/history/ret.html for a description of the RET.

  10. 10.

    The FRA increase is occurring in two stages. The first began in 2000, with the FRA increasing from 65 to 66 in yearly 2-month increments for the 1938–43 birth cohorts. The FRA remains 66 for the 1944–54 birth cohorts. The second stage will begin in 2017 when the FRA will increase from 66 to 67 in yearly 2-month increments for the 1955–60 birth cohorts.

  11. 11.

    Much of the following draws on findings presented in Warner and Hofmeister (2006),; though, to avoid repetitiveness, citations are limited.

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Warner, D.F. (2016). The Increasing Heterogeneity of Retirement in the USA: Interactions Between State, Firm, and Individual Determinants of Later-Life Labor Force Withdrawal. In: Hofäcker, D., Hess, M., König, S. (eds) Delaying Retirement. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-56697-3_15

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  • DOI: https://doi.org/10.1057/978-1-137-56697-3_15

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