Mandatory retirement: How the abolition of mandatory retirement continues to change America in unexpected ways.

All you need to know about retirement.
April 14 2011 7:02 AM

Please Take the Gold Watch. Please!

The abolition of mandatory retirement, and how it changed America in unexpected ways.

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Given these financial changes, the elimination of mandatory retirement has allowed people to work as long as they need to for as long as they feel able. The argument of Working Longer is that many Americans should shift their planned retirement from their early to late '60s, which will dramatically increase the financial security of their nonworking years. And Quinn writes that given the demographic bulge of older Americans, keeping them in the workforce will ease the burden on entitlement programs.

But social scientists love to find perverse incentives and unintended consequences, and in this case, some say protecting older workers' ability to stay on the job has also made employers more reluctant to hire them.

"Basically, it's a mess," says Sass of the world of retirement today. He says employers liked mandatory retirement because it allowed for an orderly and predictable departure from the payroll. But that certainty is gone at a time that, more than ever, older workers need to find new jobs. In the 1980s, Sass says, about 75 percent of 50-year old workers would be at the same company 10 years later. Today, only half of 60 year-olds are working at the same place that employed them at age 50. In Working Longer, he and Munnell float what he calls the "somewhat scandalous" suggestion that the prohibition on mandatory retirement be repealed—allowing companies to impose it, he suggests, at the "politically feasible" age of 70. "Unless employers have an assurance they have a way to get rid of older employees, they won't hire older workers," he says.

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Being stuck with people who just won't accept it's time to go is particularly acute in academia. A 2006 article in the Boston Globe found that more than 9 percent of tenured professors on Harvard's faculty of arts and sciences were 70 or older, compared with none in 1992. (The abolition of mandatory retirement laws started applying to colleges and universities only in 1994.) The article notes that Columbia University offered generous financial incentives to get older faculty to leave, yet it had a higher percentage of tenured faculty over age 70 than Harvard. Former Harvard President Lawrence Summers said, "The aging of the faculty, caused in large part by the absence of mandatory retirement, is one of the profound problems facing the American research university."

The United States was one of the first countries to abolish mandatory retirement, this British government report finds, and it was eventually followed by Australia and New Zealand. This year, the United Kingdom will eliminate mandatory retirement. Other countries with aging populations and decreasing numbers of workers are grappling with their mandatory retirement laws. In Japan, the mandatory retirement age has gradually increased; it started at 55 in 1994 and will become 65 in 2013. In France, the mandatory retirement age private employers can impose increased to 65 from 60 in 2003.

Joanna Lahey, an assistant professor at the Bush School of Government and Public Service at Texas A & M University, says that in Europe—and elsewhere—there's a widespread, but mistaken, belief that if an old person keeps working a young person will be prevented from finding a job. "It's not true," she says. "More people working means greater productivity, which expands the economy. When women entered the labor force, they didn't actually take men's jobs away. There isn't a fixed number of jobs." (Lahey says even at universities it's more complicated than an old professor blocking a young one. For instance, she says, increasingly when one professor retires that slot is filled by two, or more, nontenured adjuncts.)

In the United States, there remain a few exemptions to the anti-mandatory retirement laws. Public safety is the biggest one: Pilots are stripped of their epaulets at age 65, and air-traffic controllers stop telling them when to land at age 56 (although there are some exemptions for them). In addition, the law lets companies remove highly paid, high-responsibility employees at age 65. Lahey says this is a rarely used mechanism that allows firms to gracefully retire over-the-hill executives in danger of destroying the place.

Ironically, this was used against the Hoover Institution's Campbell, who in time went from being a young director to an old director. Over the years, he had an increasingly combative relationship with the administrators of Stanford University. The university had had enough and told him he was retiring when he turned 65. Campbell threatened an age discrimination suit, but the Board of Trustees cited the exemption. The man who made his reputation by hiring forcibly retired scholars was himself forcibly retired.

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