Association for Public Policy Analysis & Management

Panel: Labor Force Participation Among Older Workers: The Role of Push and Pull Factors

(Social Equity)

In the last decade alone, the number of people age 60 and older increased by over 30 percent, from 48.1 million (2003) to 62.8 million (2013). The percentage of the population aged 65 and older continues to climb, and is projected to reach over 20 percent of the total population by 2050. At the same time the labor force participation rate (LFPR) of individuals age 55 and older has steadily increased since the 1990s, reversing the previous decades’ trend toward early retirement. The increase in older worker’s labor force participation is occurring in a number of ways. Some older workers are remaining longer in their career jobs. Others are transitioning into new career or bridge jobs. Yet others retire and then reenter the labor force. Federal agencies are well positioned to design responsive initiatives that address the employment and reemployment needs of an aging nation. However, it is unclear what renders a program or policy successful for older workers. The federal government needs to know what policies and programs can best help older workers increase their labor force participation. Rutledge and Crawford examine the potential impact on labor demand of reducing the price of older workers. They use a natural experiment – the adoption of premium restrictions and other forms of community rating for small-group health insurance plans, which reduces the price of older workers working in small businesses – to estimate the labor demand elasticity with respect to the effective wage that the employer faces. The results suggest that policy reforms that act as wage subsidies may be effective in increasing job opportunities for older workers. Cahill et al. document the impact of pension generosity on older workers’ tenure in the workforce. They examine the extent to which Oregon’s pension system—one of the most generous plans ever devised—incentivized mid-career and older teachers to remain in the K12 workforce. The results indicate that the generosity of Oregon’s Tier One money match provision did not reduce quit rates and encouraged earlier departures from the K12 workforce, with teachers leaving, on average, one year earlier than what would have been expected under Oregon’s full formula, defined-benefit plan. They conclude that pension generosity alone does not incentivize longer tenure. Finally, Wandner et al. examine the retirement outcomes of the early baby boomers before, during and after the Great Recession based on the occupational skill set. The goal of this study, funded by U.S. Department of Labor, is to fill an important gap about labor force transitions among baby boomers based on their skillset. The study answers several critical questions for policy-making. For instance, are the low-skilled individuals more likely to transition out of the labor force in the absence of a good job market, or are they more likely to be in bridge jobs since pension and savings may not be sufficient to sustain them in retirement. These questions have serious implications for policy-making whether related to safety-net programs, including unemployment insurance, Social Security, or employment and training, in general.