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

3. Research Literature Review

3.1. Determinants of Continued Labour Force Participation by Older Workers

Research on the determinants of continued labour force participation provides the basis for the methodology of this study. The literature identifies a host of factors that may affect continued work by older Americans including personal characteristics of the workers, household characteristics, and job-related characteristics.

3.1.1 Personal Characteristics

• Black, Hispanic, and female older persons — due to disadvantages in human capital, employment opportunities, and health characteristics — experience more involuntary job separation than white males, and the resulting periods of joblessness often result in a state of involuntary ‘retirement’ or labour force withdrawal (Flippen and Tienda, 2000).
• Highly educated individuals tend to continue working in old age (Haider and Loughran, 2001). The negative effect on labour force participation of low educational attainment is found to be stronger for women than for men and stronger for blacks than for non-blacks (Williamson and McNamara, 2001).
• Healthier individuals tend to continue working in old age (Haider and Loughran, 2001; Quinn et al., 1998). Conversely, negative health shocks may significantly change plans for continued work (Dwyer, 2001; Haider and Loughran, 2001), with poor health contributing to a decision to retire (Reitzes et al., 1998).

3.1.2 Household Characteristics

• Income and wealth are important factors when older people decide whether to continue working, but the effects are varied. Greater wealth is a major explanation for the historical decline in labour force participation of older male workers (Costa, 1998). The wealthier individuals, however, are most likely to be working in old age (Haider and Loughran, 2001). Such wealthy individuals may be able to cushion a drop in wage income by drawing on non-wage income from assets.
• Family size may influence continued employment at older ages. The propensity to retire has been found to be inversely related to the number of children present in the household, which may in turn reflect financial pressures caused by having dependents. The presence of children in the home is more likely to lead to continued work for women than for men (Reitzes et al., 1998).
• The employment and health status of a spouse appear to influence retirement and continued work decisions for married men and women. If a spouse is not employed and does not have health problems, the worker is more likely to retire, but the presence of health problems in a nonworking spouse reduces the retirement rates for men and women (Johnson and Favreault, 2001). For households in which both individuals work, evidence of spouses retiring at the same time suggests conscious efforts at coordination due to shared tastes for leisure (Reitzes et al., 1998; Gustman and Steinmeier, 1994).

3.1.3 Job-Related Characteristics

• Workers in physically demanding jobs are likely to retire earlier than other workers (Hayward, et al., 1989).
• Jobs that require more complexity and creativity and less repetition have been associated with delayed retirement (Reitzes et al., 1998; Hayward, et al., 1989).
• Job flexibility facilitates continued work, in part because it increases an employee’s job satisfaction (Reitzes et al., 1998; Hurd and McGarry, 1993). These occupational characteristics — physical demands, flexibility, and financial aspects — influence decisions concerning continued employment through a worker’s job satisfaction (Mueller, et al., 1994).
• Workers with defined contribution plans generally retire later than similar workers with defined benefit pension plans (Friedberg and Webb, 2000).
• Although employer-provided health insurance helps keep people in the labour force, the availability of health insurance in retirement is an important predictor of retirement (Gruber and Madrian, 2002). For example, one study found that the availability of employer-provided retiree health insurance increases the rate of exit through retirement by two percentage points per year if the employee shares the cost of insurance with the employer and by six percentage points per year if the cost of retiree health insurance is borne fully by the employer (Blau and Gilleskie, 2001). Retiree health benefits usually interact with the availability of private pensions in affecting retirement decisions (Wise, 1997).
• In a study of self-reported age discrimination, workers who experience age discrimination are much more likely to separate from their employers and are less likely to remain employed (Johnson and Neumark, 1997).

3.2 Defining and Measuring Partial Retirement

While phased retirement is the principal focus of this study, we discuss the literature on partial retirement first because of the similarities between partial retirement and phased retirement. For convenience, the study uses the term ‘partial retirement’ to mean part-time work for an employer different from one’s long-term employer. However, most research on alternatives to full retirement has used ‘partial retirement’ to apply to any gradual reduction of work, regardless of whether the employer remains the same.
Labour force participation rates are a widely used gauge of continued involvement by older individuals in the workplace (Quinn, 1999; Toossi, 2002; 2004). But the labour force participation rate is a poor indicator of the work-to-retirement transition. At any point in time, the observed labour force rate for an older age group is the product of older persons exiting and entering the workforce such that there is not a unidirectional flow of persons from work to retirement. Other measures are needed to assess changes in retirement outcomes (Hayward et al., 1994).
Another conceptual issue is the value of self-reporting versus an objective standard such as hours worked or earnings from a job. It is fairly clear that self-reports of retirement status can differ substantially from objective measures (Honig and Hanoch, 1985; Ruhm, 1990; Gustman and Steinmeier, 2000; but see note 7 of Gustman and Steinmeier, 1984). “Many who report themselves partially retired have earnings at or near previous levels, and many with substantially reduced earnings consider themselves either fully employed or fully retired.” (Honig and Hanoch, 1985: 23). Thus, defining retirement status only through self-reports may not be particularly helpful in pinpointing older workers in a particular transition to retirement.
Purely objective measures can also be problematic. For example, a decline in wages, whether due to job demotion or job displacement, may falsely signal phased retirement when in fact the worker has not reduced their hours or embarked on a transition to full retirement. The usefulness of self-reported status, then, is that it provides a signal of the individual’s intention. Some of the studies described below use a definition of partial retirement that combines self-reported status with an objective measure (Ruhm, 1990). The approach of this report, as discussed in the Methodology section, combines both self-reported retirement status and changes in the number of hours worked.

Pages: 1 2 3 4 5 6 7

Tags: , , , ,