The Future of Age Integration in Employment

Retirement is a relatively new institution. Although formal retirement programs have been traced to the 19th century (Graebner, 1988), most older workers remained in the labor force until the creation of Social Security (Ransom and Sutch 1986). Those who did retire before the development of public retirement systems depended primarily on family support or individual savings (Carter and Sutch 1996; Costa 1998; Gratton 1996). Moreover, the low levels of retirement income available to most U.S. workers until the 1970s made retirement primarily a safety net for those older workers with declining health or unable to find a job. Among women, retirement from employment as a common life-course experience awaited the arrival at retirement of cohorts with extensive lifetime employment—a development that has only occurred in recent years. Hence, retirement for leisure is a new experience for the United States and other industrial societies and has existed in its current form for only about 25 years. Yet, this new pattern is now accepted as a "matter-of-course" aspect of modern society. Declining labor force participation among older men and women (Gendell and Siegel 1992) and the growth of leisure retirement have been produced by increases in Social Security benefits (Henretta and Lee 1996; Ippolito 1990), firm pensions (Hurd 1990), disability benefits (Henretta and Lee 1996), and a changing workplace (Henretta 1994a). Earlier retirement has produced a more age-segregated workplace. Retirement institutions and other employment changes remove older workers from the labor force at relatively early ages more thoroughly than in the past. In this essay, I discuss the direction and implications of current and possible future trends in workplace age integration. If current trends were to continue over the next 20 years, we would not expect much change in labor force participation patterns of older workers. Yet, there is good reason to expect that some of the trends supporting early retirement may shift in the near future in ways that favor greater labor force participation at older ages. I first discuss these trends–demographic change, revisions in Social Security retirement rules, and employment changes. I then discuss the ways that these changes may lead to a redefinition of the social significance of age and encourage employers to implement job redesign that will provide more attractive opportunities for older workers. Equally important is the interest of older workers in remaining in employment, and I discuss this issue as well. Though I will not actually measure age integration quantitatively, the analysis will focus on the level of labor force participation among the older population. This focus ignores the proportion of the younger population in employment, although labor force participation rates of younger workers have changed over time, particularly among women. Yet, as a practical matter, labor force participation among older age groups is currently so low that age integration of the workplace may be examined by focusing on their participation rates alone. The trends in men's and women's labor force participation have diverged somewhat in recent years. After large decreases in employment after age 60 during the 1970s and early 1980s, the rate of decline for men slowed noticeably during the late 1980s (Henretta 1994b). In the 1990s there has been virtually no change in the percentage of men aged 60–64 in the labor force, but between 1992 and 1997 there was a slight increase from 55.3 to 55.6%. It is likely that the declining unemployment and tight labor markets of the 1990s played a part in stabilizing labor force participation levels. However, the reasons for the end of the early retirement trend are not well understood (Quinn 1997, Quinn 1998; Ruhm 1996). The trend for women is somewhat different because of the higher level of midlife employment characteristic of more recent birth cohorts of women. During the 1970s and 1980s, the percentage of women aged 60–64 in the labor force increased very slightly, reflecting a balance between a trend toward earlier retirement and a trend toward higher midlife labor force participation rates among successive birth cohorts (Henretta 1994b). These trends continued during the 1990s, resulting in an increase in labor force participation from 37.1% in 1992 to 40.2% in 1997. These trends in labor force participation indicate virtually no change in employment age integration among persons 60–64 years old over the last 5 years. In the following sections, I review three factors that will be influential in determining the amount of employment age integration in the future: demographic trends, changes in public benefit systems, and the changing organization of work. During the second decade of the next century, the age composition of the U.S. population will be considerably different than it is today. The large postwar birth cohorts will be entering the age stratum that currently has high retirement rates. Because the cohorts that followed them were relatively small, the ratio of workers approaching retirement to those in younger age groups will be very different from today. Table 1 shows the birth years of the four cohorts that will be used to illustrate this process, and the ages of their members in 1996 and 2016. The postwar cohort, born between 1952 and 1956, ages from 40–44 years old in 1996 to 60–64 years in 2016. The preceding depression cohort (born 1932–1936) and the succeeding cohort (born 1972–1976) were both smaller than this one. In addition to the size of the cohort at birth, a cohort in later life is also affected by the mortality and immigration that occurred earlier. The changing projected age composition of the U.S. population between 1996 and 2015 is illustrated in Table 2 by using these cohorts (middle series projections from Bureau of the Census 1998a, Bureau of the Census 1998b). In 1996, the size of the 60–64 year age category was about half (.48) that of the 40–44 age category and slightly more than half (.56) that of the 20–24 age category. Hence, the cohort entering the standard retirement years around 1996 is relatively small in relation to the remaining potential workforce. The birth cohort that was aged 40–44 in 1996 will be noticeably reduced by mortality 20 years later. But, in relative terms it will be approximately as large (.98) as the population aged 40–44 at that time, and about .84 the size of the population aged 20–24. Hence, the cohort entering the ages at which retirement occurs will be relatively large. The implication of this cohort succession is not that cohort members literally replace each other in specific jobs. The constant disappearance of some jobs and the net creation of others in the economy is much too complex for such a model. Moreover, demography does not determine destiny. Population age composition is only one of many factors affecting employment patterns. But, given a particular level of demand for experienced workers (or workers overall) and holding other factors constant, the exit of the retirement age cohort in 2016 (or 2015) will affect employers much more than retirement does today. Similar data are often used to illustrate the increasing cost of retirement to the Social Security system or the implications for financial markets (as older workers sell their holdings to pay retirement expenses). A quite different implication is the possible effect on employers who will be losing large numbers of trained employees—a proportion that will be much more noticeable than the exit of retirees today. The implications of age composition for age integration will be discussed below. Throughout this century, members of more recent cohorts have been better educated than preceding ones. The postwar birth cohorts are the last ones for which this statement will be true. This change is illustrated by Table 3 (Bureau of the Census 1996). Note that the data shown in Table 3 are only for 1996. By examining birth cohorts who had reached the age at which almost all cohort members have completed formal schooling, it is possible to compare levels of attainment between cohorts. It can be seen that the depression birth cohort, aged 60–64 in 1996, has lower levels of schooling than younger cohorts. However, there is virtually no difference between the early 1950s and late 1960s birth cohorts. This comparison uses ages 25–29 (born in 1967–71) instead of ages 20–24 to capture those who have completed most of their schooling. While the retirement of the depression cohort will raise the educational level of the workforce, the same will not be true of the retirement of the 1950s cohort. This comparison does not include all relevant factors affecting the relative educational level of cohorts. First, it is possible that there will be more midlife returns to school. If so, cohort levels of schooling might increase noticeably throughout life. These new patterns may not involve traditional degree programs, and it is unclear whether today's young or midlife cohort will be more affected over the next 20 years. Second, it is often asserted that older workers have outdated skills. While this statement usually refers to job-specific training, one aspect of outdated skills has probably been the lower general schooling level of older workers that makes constant updating more difficult. In future years, this outdating of skills (which can be modified by lifelong learning) may be outweighed by the decline in verbal ability. According to Alwin 1991, verbal scores (adjusted for changes in education levels) are lower in successive cohorts born since the early part of the 20th century. However, up until the birth cohort of approximately 1948, this decline in verbal scores (controlling for education) was outweighed by the positive effect of higher levels of schooling on verbal scores. Hence, overall verbal scores were stable or rising among successive cohorts. Without more education to compensate for their lower verbal ability, young cohorts in the future may be less desirable employees than older cohorts. The retiring cohort in 2016 will be the cohort born in the early 1950s, just after the peak in verbal abilities. Hence, one of the often-cited advantages of young workers over old may no longer be true. Although the evidence is complex and sometimes ambiguous (Crimmins 1996), a growing number of studies report better health and less disability among members of successive cohorts in later life (Crimmins, Saito, and Reynolds 1997; Manton, Corder, and Stallard 1993; Manton, Stallard, and Corder 1997). If the preliminary evidence suggesting improved health among elderly people also indicates a trend that will affect younger cohorts as they age, we would expect future elderly cohorts to enjoy better health and more vigor at later ages (e.g., Fogel and Costa 1997). As with education, cohort change in health (as well as increasing longevity) may redefine the social meaning of age. Ages that today are considered "old" may be redefined as "middle-aged." Social and self-expectations for persons in their 60s and 70s may change with better health and vigor, as may the willingness of persons at these ages to engage in meaningful employment. Employers may change their attitudes in line with the change in social expectations and be more willing to create attractive opportunities for older workers. To the extent that employers create such opportunities, the willingness of older employees to continue working may depend, in part, on both their health and their health-driven perception of the significance of being a particular age. The Social Security retirement system has already been modified to alter the age of benefit receipt. The birth cohort of 1952 falls about in the middle of the phase-in period for these changes. Their age for full Social Security benefit receipt will be 66 years (instead of the current 65 years). Those receiving benefits at age 62 will receive 75% of the full amount, compared to 80% today (Social Security Administration 1995). While there is current discussion of proposals to move the age of Social Security benefit eligibility even later, further changes may not affect the 1952 birth cohort. A later eligibility age reduces the attractiveness of early labor force exit; hence, its likely qualitative effect is delayed retirement. It is difficult to predict the size of the effect because of the importance of employer pension benefits, which are projected to be more common and provide a higher proportion of income in the period after 2010 (Reno 1993). Workers with good employer defined pension benefits may continue to retire early (Wise 1997). Some employers who wish to shed older workers may supplement pensions to compensate for the Social Security changes; or, alternatively, employers may change pension plans to encourage later retirement if they become concerned about losing a large number of their trained workers to retirement. Workers in poor health may continue to leave the labor force with either Social Security disability benefits or reduced Social Security retirement benefits. Those workers with small or no pensions are likely to work longer (Wise 1997). While all these factors make the quantitative effect of a change in the Social Security retirement age uncertain, the expected effect of later Social Security benefit receipt will clearly be increased age integration in the workplace as more older workers—especially those without company pensions—continue in the labor force. The nature of employment also has been changing in ways that are likely to encourage paid work at later ages than today. Henretta 1994a, published as a chapter in Age and Structural Lag (Riley, Kahn, and Foner 1994), examined the ways that age structures employment careers through state and workplace rules and institutions that provide both increasing rewards with longer tenure as well as a defined exit point. Henretta argued that the long-term trend of increasing institutional support for age-structured employment careers had halted or perhaps reversed. This change has resulted from the combined effects of trends in pension provision, the distribution of employment across industries, and the organization of work within firms. The implication for younger workers is that they are less likely to spend their careers in jobs that provide increasing rewards and security for longer tenure with the firm. older the is for more patterns of the that more jobs will be available to older workers. I and illustrate the greater and to the may be in the increasing proportion of pension defined pensions instead of the more traditional defined benefit The characteristic of defined plans that reduces the age of employment is that they the benefit of defined benefit many defined benefit plans encourage retirement relatively after first pension eligibility because the higher benefits through further work are not to the pension by working By the growth in defined which to retire at a specific age, reduces this for early defined benefit will continue to affect many workers (Wise 1997). A second change in employment has been the growth of at the relative of in the are more likely to have and employment are to be in and often the to Hence, they more opportunities for older workers to or employment As a of increasing and change, some employers a smaller proportion of their employees in long-term employment and more in is on These trends can be illustrated in employment, there to be a growth in the of and in First, cost less because of lower and of benefits. Second, of makes to changing demand to end tenure in in part, toward the same would provide with greater in determining the of In the earlier (Henretta I discuss evidence that a increase in the of these among employers to on of these labor First, of labor in the postwar has been by the growing labor force. As more women move employment, there may not be an of workers. Second, employers are likely to a of long-term and employees because there are they will not wish to to While most workers continue to have relatively long-term to their the in age has implications that by age among older by pension This can be illustrated with the earlier of employment. While some young and midlife because of family or other the would probably more traditional age-structured employment. older who have pension benefits, not have the same and may be attractive opportunities because they income and continued to the life of the without the of a job. older (or older without pension would probably find a job no more attractive than a younger changes have potential First, the large relative number of older workers in the future and their relatively high educational level is likely to make them after in a number of on the continued growth of employment, the shift in the ratio of older to younger workers that employers may be less likely to encourage early retirement may to older workers. might include the redesign of jobs so that older employees can increased of the leisure by their pension in employment. The of an increasing number of employers to such opportunities will be by the trends in employment and the changing organization of work. the growth of work organization that on and increased a to create jobs that will workers and may be attractive to older workers. It is very likely that increased employment opportunities for older workers will be employers may encourage early retirement by workers in declining employment to workers in growing The of the older working population without pension or with low pension will continue to employment, those with large pension may The in age integration is the balance between these different population will change the balance so that more workers will be in the labor force because of The increased of defined pensions and the change in Social Security benefit ages will increase willingness to continue work. The growing of employment may provide the through which and will be change may also have an important on institutions and As large cohorts have through of life they have social and and 1986). a large cohort through later life not change Social structures young and old as compared to a large category of between young and old people have been those in the middle have been work from the of a older persons because they are from the most important A large cohort through later life may such health may the age at which members of this cohort as levels of education may lead many to be with the social to older the large size of the cohort will that older people will have a large effect on social attitudes through their in the and other of life. The redefinition of age and does not that will to work Some will leisure or meaningful of employment, by pensions and But, the is that a large older cohort in good health has the potential for a redefinition of with to employment and social a change would support the by employers to or older The discussion to this has primarily on the demand for older in the older population and the nature of employment that may lead some employers to or older workers. will be the of older workers to this in Social Security will that those workers without pensions are likely to work The shift to defined plans reduces the number of persons affected by the for early retirement in many defined benefit the other the higher proportion of workers projected to receive pension benefits may the number of persons in continued work. to possible of older workers is to the attitudes of today's older workers toward focusing on that interest in the of employment that may be in the The and Retirement with aged in a number of about for this analysis is a of all people to paid work they others would to continue some paid work. about to this indicate that an of men and women they would to continue some paid for men and for women. Yet, other evidence from this that there is only in the current jobs by this cohort. those who are currently a large are with only of men and of women being may greater in determining the amount one will that is not the (Hurd 1993). in a job that a large may not be it is full Among current of men and of women usually work or more for or more these relatively they their work on their current job. three of men and women it would not be These some about the amount of to among the cohort now approaching retirement. This of is likely to on the high because it is not the that these the amount of that would actually at older ages. If we that those who are who work less than full time, full or who they on their current job have half of currently men and of women have some The greater work of women is with their higher of being in employment. The percentage who have is the percentage who they would to continue some work after retirement. Moreover, in the only about one of they have in although most would to continue some work. The evidence that either job changing from to jobs will be or job redesign changes at retirement are often not a particularly attractive skills may not be and of a with an employer be In many continued work changing entering low paid employment, and not skills. The of opportunities in employment a in employer resulting from in employment and the of (Hurd as well as employer To the degree that demographic change future employers to older workers as a and of potential they may engage in job redesign and some in to this of The analysis of retirement plans that older workers would be in increased employment The and benefits of increased age integration increase in older from those without firm pensions and by reduced Social Security retirement benefits, will be a to those in poor the other greater opportunities in employment will benefit those who continued work and those in good health who to The growth of the labor force, attractive to some younger is to most because it often less jobs. These may be less for some older they are at the cost of greater over the life for all cohorts as discussed work would not be the first of many older workers who pension Social trends are the of one I have argued in this that a number of trends will in the near with the likely that more older persons will in the labor force Some trends are likely to greater demand for older continued growth in employment. These trends include the population age composition and the high education and levels of cohorts born around changes will to the of older changes in Social Security eligibility the shift to defined pension and the health of successive cohorts. The of these changes is likely to be an increase in the employment of older workers for those without pensions as well as more employment, particularly for those with pension The for the of or employment that can the likely employer demand and is the redefinition of jobs and the of more employment This already used by employers for workers of all is an of a work organization that may or older workers. on workers retirement today indicate interest in work. Hence, employer to older workers will likely with toward greater age integration. in the in the of the U.S. Population in Age 1996 and 2015 series projections from Bureau of the 1998a, of the U.S. Population in Age 1996 and 2015 series projections from Bureau of the 1998a, and Ages in the 1996 Bureau of the 1996. and Ages in the 1996 Bureau of the 1996. This was the of the on on Age and Structural for at the in a on of Age

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