The Pros of Staying in the Workforce Past 65 - presented by Prudential and SlateCustom

The Pros of Staying in the Workforce Past 65

The Pros of Staying in the Workforce Past 65


The Pros of Staying in the Workforce Past 65

Whether it's at your current job or new self-employment, it benefits everyone.


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Older Americans are working more years than forecasts have predicted – and that can be a good thing, according to Michael D. Giandrea, a research economist in the Office of Productivity and Technology at the U.S. Bureau of Labor Statistics. When older workers stay in the workforce past 65, either in “bridge” jobs or as a self-employed workers, there are benefits for individuals, employers and the country as a whole. His responses in this interview are his own and do not necessarily reflect the opinions or policies of the Bureau of Labor Statistics or the Department of Labor. 

Why is self-employment an attractive option for many older workers? 

For two main reasons: First, like younger individuals, many workers appreciate the challenges and rewards of operating their own business and being their own boss.  Surveys of the self-employed continually find this to be the most important cause of self-employment. Second, older workers often look for a way to transition from full-time career employment to something less demanding while still remaining active in the labor force.  For many reasons, employers are unable or unwilling to allow workers to reduce hours to part-time status. Fixed costs of employment and benefits are primarily the culprit. Self-employment enables older individuals to manage their work hours in a manner that better meets their needs. The typical self-employed worker spends fewer hours at work than the typical wage-and-salary worker.  Our research, along with that of many other economists like Karoly and Zissimopoulos, have found that self-employed older workers remain in the labor force longer than similar wage-and-salary workers, but work fewer hours compared to wage-and-salary workers (when they’re still in the labor force).


How many older workers are opting for self-employment?

Every 6-8 years, Steven Hipple of the Bureau of Labor Statistics has written a Monthly Labor Review article detailing the prevalence of self-employment (both incorporated and unincorporated) across demographic characteristics.  The most recent paper finds that there were approximately 1,580,979 self-employed workers age 65 and older in 2009.  This compares to approximately 4,481,640 wage-and-salary workers age 65 and older in 2009.  The Employment and Earnings report from 2013 also provides an estimate, but self-employed in that case includes only those who are self employed and unincorporated.  The number for those 65 and older in 2013 was approximately 1,292,000.  But again, this leaves out incorporated self-employed.

Why is it beneficial for older workers to delay departure from the labor force? Why is it in employers’ interests to retain their older workers?

I think that as a society we have to be concerned about the cost of supporting those who are not in the labor force.  By delaying exiting the labor force, older workers continue to produce goods and services valued by society.  They also may delay claiming Social Security retirement benefits which may be both beneficial for the Social Security Administration (fewer claimants now reduces outlays and increases revenues as these workers continue to pay payroll taxes) and for the workers  (each year that retirement benefits are delayed until age 70 increases the annual benefit by about 8%, which is a great rate of return). To the extent that self-employment enables individuals to remain in the labor force longer than they otherwise would have, both workers and government budgets seem to benefit. Work done by the Sloan Center on Aging and Work at Boston College has demonstrated that older workers continue to be important contributors to a vibrant workplace.  They often have many years of experience; they are reliable, dependable, and they’re dedicated to their jobs.  Keeping these workers employed can be valuable for employers for all these reasons.  We’re beginning to see more focus on this phenomenon and trying to improve workplace flexibility through partial or phased retirement, job sharing, and other means. 


What are "bridge" jobs?

Generally speaking, economists and sociologists who research older workers have referred to bridge jobs as those that follow career employment and precede labor force exit.  Our research relies on a similar definition: We start with full-time career workers as those who work more than 1600 hours per year and have been at the same (self-reported) job for 10 years or more.  Bridge jobs are jobs that follow these and precede full labor force exit.  The jobs can be full-time or part-time, higher wage or lower wage, the same occupation or a different one.  Because so many older workers want to remain in the labor force but cut back the intensity of their employment by working fewer hours, many have turned to bridge employment.  As I mentioned above, firms are often unable or unwilling to reduce hours for employees.  Because of this, workers tend to leave their career job and transition to another job – typically, but not necessarily, for a reduced wage and for fewer hours per week or fewer weeks per year. 

What kinds of older workers tend to take bridge jobs? 

Bridge employment can be a positive for workers who are able to maintain networks of friends and associates, who are able to find interesting or rewarding work, and increase their income above what it would have been if they had fully retired.  Conversely, there are many individuals who are forced to take bridge jobs because of financial constraints like low Social Security retirement benefits, small or nonexistent pension benefits, or a need to work for health insurance benefits (among other reasons). Our research has found both of these types of workers: those who take bridge jobs because they want to and those who take them because they have to. 


How common is bridge job employment among older workers?

Sadly, as is usual with economists, there are lots of qualifiers and conditions, but our findings have remained pretty consistent over the last 10 years: Among workers with full-time career jobs who have left those jobs, about 60% take some type of bridge employment.  The correlates of bridge employment are many.  Those with high and those with low career job wages are more likely to take bridge jobs before complete retirement (i.e. possibly those who have to work and those who want to work). Those with defined contribution pensions or no pensions are more likely to take bridge jobs than those with defined benefit pensions.  Those who leave their career jobs at younger ages are more likely to take bridge jobs than those who left at older ages. Those who are in good or excellent health are more likely to take bridge jobs than those in fair or poor health.   

How much longer are men and women staying in the workforce than they did in the past? 

Gary Burtless and others have documented a steady decrease in the average retirement age – measured as the age at which one half of the men have stopped working.  It declined steadily until the mid 1980s.  At that point the average retirement age was 62 for men.  Since that time, the average retirement age has rebounded to 65.  Moreover, employment and earnings from the BLS contains a table detailing labor force participation by age.  We’ve seen a steady increase in participation rates over the last couple decades for those age 65 or older.

What are the different ways Americans are leaving the labor market? 

We’ve seen workers remaining in the labor force a little longer than they were in the 1970s and 1980s.  Among those who had full-time career jobs and have left those jobs, about 60% have taken bridge jobs before exiting the labor force completely.  Many of these bridge jobs are lower wage and primarily fewer hours. A small percentage are continuing to work into their 70s.  Some of this comes from our research and some from research using the Current Population Survey. We like to describe a process whereby workers reduce their attachment to the labor force gradually, often over the span of years, before a complete labor force exit.  We define retirement as a complete labor force exit – working 0 hours.  Others have more flexible definitions whereby individuals self-describe as retired or not.  This can sometimes be tied to age (like turning 62 or 65), or to claiming Social Security retirement benefits (even while still receiving some income from employment), or to leaving a career job.  It’s really up to the individual to describe what retirement is to him or her.  Researchers require more stringent definitions (like ours of no work for income) because of our need to classify and quantify. 

Interview by Jordan G. Teicher.