Phased Retirement: Who Opts for It and Toward What End?

2.2 Labour Force Participation by Older Workers
Although the labour force participation of older Americans declined over the latter half of the twentieth century, there are indications that this trend is reversing. For persons aged 55 to 64, civilian labour force participation rates fluctuated from 56.7% in 1950 to a high of 61.8% in 1970 to a low of 55.7 in 1980 before resuming an upward trend to 61.9% by 2002. This rate is projected to be 61.6% in 2015. Labour force participation rates for older workers (aged 65-plus) have steadily declined since the 1950s, reaching 10.8% in 1985. However, labour force participation in this age cohort increased to 12.8% in 2000 and is expected to increase to more than 16% by 2015 (Toossi, 2002; 2004).
The median age of the labour force has also changed over the last 40 years. As Toossi (2004) has noted, the median age of the labour force attained a peak level of 40.5 in 1962. The median age decreased as the baby-boom generation entered the labour force, reaching 34.6 in 1982. Starting then, the median age of workers increased to 40 years of age in 2002. Although this recent increase in the median age of the workforce undoubtedly reflects the ageing of the baby boomers, it may also reflect the increase in labour force participation of persons 65 and older.
The nature of employment is changing in a manner that may facilitate continued work. In a survey of human resource managers undertaken by AARP, older workers were rated lower relative to other employees on such skill-related attributes as trying new approaches, learning new technologies, and having up-to-date job skills (AARP, 2000). However, the less physically demanding nature of an information-based economy may work to the advantage of older workers if their skills are upgraded. The number of workers aged 50 to 59 using a computer at work increased from 43.9% in 1993 to 50.7% in 1997, and this percentage is not much lower than the 55% for those aged 40 to 49. A similar rise was recorded for those 60 and older whose computer use at work increased from 27.3% in 1993 to 32.6 in 1997 (U.S. Census Bureau, 1995: Table 671; 2000: Table 690). Although the Census Bureau has not updated these numbers since 1997, more recent numbers show a similar trend for home computer ownership. The percentage of people aged 65 or older owning a computer rose from 8.3% in 1993 to 24.3% in 2000 (U.S. Census Bureau, 1993; 2001).
Change is also occurring in the structure of retirement and health benefits. Most notable among these changes has been the shift in sponsorship by employers from defined benefit pension plans to defined contribution plans such as 401(k)s. In 1980, there were more than 148,000 defined benefit plans that covered 30 million active workers (38% of the workforce), but by 1999 the numbers had shrunk — just under 50,000 defined benefit plans covered fewer than 23 million American workers (21% of the workforce). Over the same period, the number of defined contribution plans increased from 340,850 to 683,100 with an increase in workers covered from 14 million (14% of the workforce in 1980) to more than 46 million (43% of the workforce in 1999) (U.S. Department of Labour, 2004: Table E4). Defined benefit plans generally provide an annuity payout for the life of the worker or beneficiary, but defined contribution plans typically do not provide such a payout. Instead, a worker retiring on a defined contribution plan may exhaust his or her retirement assets and thereby be compelled to return to work.

2.3 Job Flexibility

The growth of the older workforce, with the concomitant relative decline in workers of younger ages, improvements in health status, certain institutional changes, and for some older Americans, the need for income may be combining to extend working life. An apparent extension of working life in turn may be changing norms for the transition to retirement and for the very idea of retirement. The idea of a set or standard retirement age has been replaced by a wide variety of workplace arrangements involving older persons (Wiatrowski, 2001). There are indications that the number of ‘bridge jobs’, that is, part-time or temporary jobs that bridge a career job and retirement, is increasing. Whether voluntarily or involuntarily, many older individuals continue working with an employer different from their career employer after they have ‘retired’ from the career job (Quinn and Kozy, 1996).
Moreover, flexibility in workplace schedules is increasingly common — 28% of full-time wage-and-salary workers aged 20 and older had flexible work schedules in 2004, an increase from 12% in 1985 (U.S. Department of Labour, 2004: Table A)5. 27% of workers between the ages of 55 and 64 had flexibility in setting work hours in 2004, and this percentage increased to 35% for the 65 and older age group (U.S. Department of Labour, 2004: Table 1). Increasing flexibility in workplace schedules may aid in adopting phased retirement programs.

2.4 The Role of Public Policy

A number of policy proposals could expand employment opportunities for older workers. These proposals include increasing the eligibility ages for early and/or normal retirement benefits under Social Security, indexing the Social Security eligibility ages to life expectancy, making Medicare the primary payer for health benefits for workers aged 65 and older, removing disincentives for benefit accruals in pension plans after attainment of the normal retirement age, encouraging more part time and flexible work arrangements, enhancing training for older workers, and improving enforcement of the Age Discrimination in Employment Act (Rix, 2004).

5 These figures refer to active employed and unemployed private sector workers. The same trends are seen using a different set of individuals. In terms of active workers, retirees, and beneficiaries, in 1980, defined benefit plans covered nearly 38 million, and by 1999, they covered 41 million Americans. The number of workers and beneficiaries covered by defined contribution plans increased from nearly 20 million in 1980 to more than 60 million in 1999 (U.S. Department of Labour, 2004: Tables E1, E5).

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