Working Longer in the U.S.

and Around the

World: Trends and Explanations

Courtney Coile
Wellesley College and NBER

National Press Foundation

March 11, 2018
 Labor Force Participation of U.S. Men Age 55+,
1948-2016
100

90

80

70
Participation Rate

60

50

40

30

20

10

0
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013
55-64 65+
Source: Bureau of Labor Statistics (series LNU01300190 and LNY01300199).
Source: Costa, The Evolution of Retirement, 1998.
 Labor Force Participation of Men Age 60-64,
100%
Various Countries, 1980-2014

CA
80% DK
FR
DE
60%
IT
JP
NE
40%
ES
UK
US
20%
BE
SE

0%
1980 1985 1990 1995 2000 2005 2010
Source: Coile, Milligan, and Wise, “Working Longer: Introduction and Summary,” in Social Security and
Retirement Around the World: Working Longer, forthcoming.
 Labor Force Participation of U.S. Women Age 55+,
100
1948-2016
90

80

70
Participation Rate

60

50

40

30

20

10

0
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013
55-64 65+
Source: Bureau of Labor Statistics (series LNU01300347 and LNU01300354).
 Labor Force Participation by Year,
CPS Women Ages 55-74
100%

90%

80%

70%

60%
55-59
50% 60-64
65-69
40%
70-74
30%

20%

10%

0%
1980 1985 1990 1995 2000 2005 2010 2015
Source: author’s calculations from the Current Population Survey
 Labor Force Participation of Women Age 60-64,
Various Countries, 1980-2014
100%
CA
80% DK
FR
DE
60%
IT
JP
40% NE
ES
UK
20%
US
BE
0% SE
1980 1985 1990 1995 2000 2005 2010
Source: Coile, Milligan, and Wise, “Working Longer: Introduction and Summary,” in Social Security
and Retirement Around the World: Working Longer, forthcoming.
 Average Retirement Age,
U.S. Men and Women, 1980-2016
65

64

63

62

61

60

59

58

57

56

55
1980 1985 1990 1995 2000 2005 2010 2015
Men Women
Source: author’s calculations from the Current Population Survey.
 Recap of Labor Force Trends
• Men:
• U-shaped pattern in US and other developed countries --
LFPR fell for a century but rising since mid-1990s
• Participation levels differ across countries (50 points higher in
Japan than France in 2014)
• Typical increase in LFP at 60-64 since 1995 is 10-15 points
(but 35 points in Germany and 45 in Netherlands)
• Women:
• Rising LFP since mid-1990s, varying patterns earlier
• Levels differ (2/3 in Japan vs. 1/4 in France in 2014)
• Increases of 10-20 points since 1995 (higher in
Germany/Netherlands)
• Average age of retirement has increased by 2 to 2.5
years for U.S. men and women
 Why Are We Working Longer? The Theories
• Improving health and longevity
• Better health  fewer health-related early retirements
• Living longer  work longer to finance retirement consumption
• Rising education
• Those with more education retire later, so more educated
population  later retirement
• Rising participation among women (affects men)
• Leisure time is more valuable when spouses are together, so more
working women  more working men
• Shifts in pensions and retiree health insurance (US)
• Defined contribution (401k-style) pension plans lack incentives to
retire at specific ages, so shift from defined benefit  work longer
• Decline in retiree health benefits may induce more to work to 65
• Changes in public pension programs
• Higher retirement ages, other changes affect incentive to work
 Theory #1: Improving Health

Mortality Rates at Age 60, 1980-2014

2.5% 2.5%
Men Women
2.0% 2.0%

1.5% 1.5%

1.0% 1.0%

0.5% 0.5%

0.0% 0.0%
1980 1990 2000 2010 1980 1990 2000 2010

CA DK FR DE IT JP CA DK FR DE IT JP
NE ES UK US BE SE NE ES UK US BE SE
Source: Coile, Milligan, and Wise, “Working Longer: Introduction and Summary,” in Social Security and
Retirement Around the World: Working Longer, forthcoming.
 Theory #1: Improving Health
• Evidence from mortality:
• Mortality rate has fallen continuously, both during periods of
falling LFP and rising LFP
• Countries with larger mortality improvements do not necessarily
have larger increases in LFP.
• Evidence from other health measures:
• Trends in self-assessed health flat or do not match LFP trend
• But how can improving health (mortality) and rising LFP
not be related?
• Some people retire due to poor health, but most do not
• There is substantial health capacity to work at older ages
• Conclusion: relatively good health (for most) at older ages
facilitates longer work lives, but there is little evidence
that improving health is causing people to work longer
Source: Coile, Milligan, and Wise, “Health Capacity to Work at Older Ages: Evidence from the US”, in D.
Wise, ed., Social Security and Retirement Around the Work: Capacity to Work, University of Chicago Press,
 Theory #2: Rising Education

Share Ages 55-64 with a College Education, 1980-2014

0.40 0.40
Men Women
0.35 0.35

0.30 0.30

0.25 0.25

0.20 0.20

0.15 0.15

0.10 0.10

0.05 0.05

0.00 0.00
1980 1990 2000 2010 1980 1990 2000 2010

CA DK FR DE IT JP CA DK FR DE IT JP
NE ES UK US BE SE NE ES UK US BE SE
Source: Coile, Milligan, and Wise, “Working Longer: Introduction and Summary,” in Social
Security and Retirement Around the World: Working Longer, forthcoming.
Source: Coile, “Working Longer in the U.S: Trends and Explanations,” in Social Security and
Retirement Around the World: Working Longer, forthcoming.
Source: Coile, “Working Longer in the U.S: Trends and Explanations,” in Social Security and
Retirement Around the World: Working Longer, forthcoming.
Source: Coile, “Working Longer in the U.S: Trends and Explanations,” in Social Security and
Retirement Around the World: Working Longer, forthcoming.
 Theory #2: Rising Education
• Evidence from cross-country comparisons:
• As with longevity, education has risen during periods of
falling LFP and rising LFP
• Countries with larger increases in education do not
necessarily have larger increases in LFP.
• How can rising education and LFP not be related?
• Large increases in education over time + large differences in
LFP by education = simulations suggest rising education from
1995 on may account for a substantial share of rising LFP
• But exercise caution – similar calculations from 1980 would
predict large increases in LFP 1980-1995
• In the US, increases in LFP within education groups over time
• Conclusion: at a minimum, education is not the only
reason for rising LFP
 Theory #3: Rising Participation among Women

Labor Force Participation of Women Ages 35-44, Lagged 20 Years

100%

90%

80% CA
DK
70% FR
60% DE
IT
50%
JP
40% NE
ES
30%
UK
20% US
BE
10%
SE
0%
1980 1985 1990 1995 2000 2005 2010
Source: Coile, Milligan, and Wise, “Working Longer: Introduction and Summary,” in Social Security and
Retirement Around the World: Working Longer, forthcoming.
 Theory #3: Rising Women’s Participation
• Evidence from cross-country comparisons:
• Idea: if more women ages 35-44 were in the labor force 20
years ago, do more men ages 55-64 work today (presumably
because their wives are more likely to work)?
• Yes -- countries with larger increases in past participation of
younger women have larger increases in men’s LFP.
• Schirle (2008) suggests that rising women’s LFP can explain
1/4 of increase in men’s participation in US, 1/3 in UK, 1/2 in
Canada
• Conclusion: this is one of the factors leading to rising
LFP for men
Theory #4: Pensions and Retiree Health Benefits
 Pension Wealth by Age of Retirement
in a Typical DB Plan, Male Median Earner, 1980
300,000

250,000

200,000

150,000

100,000

50,000

0
55 56 57 58 59 60 61 62 63 64 65 66 67 68 69

Source: author’s calculations.

 Implicit Tax Rate on Earnings by Age Due to DB Plan
Accruals, Male Median Earner, 1980
30%

20%

10%

0%
55 56 57 58 59 60 61 62 63 64 65 66 67 68 69

-10%

-20%

-30%
Median Earner, Pens Only
Source: author’s calculations.
 Theory #4: Pensions and Retiree Health Benefits
• Pensions:
• Idea: Defined benefit (DB) plans have incentives to retire at
specific ages; defined contribution (DC) plans do not.
Friedberg and Webb (2005) suggests that absence of DB
incentives leads workers to retire 2 years later.
• Simple calculation suggests 25% decline in DB pensions  6-
month increase in average age of retirement (~1/4 of total)
• Retiree health insurance:
• Similar calculation suggests decline in retiree health
insurance  1-month increase in average age of retirement
• Conclusion: changing employer-sponsored benefits
has led to rising LFP for men in the US; not as relevant
for other countries
 Theory #5: Public Pension Reform
• Why public pensions may affect LFP:
• “Wealth effects”: If receive more (less) than paid in contributions,
are better (worse) off and may retire earlier (later)
• “Accrual effects”: most public pensions are DB-style plans, also
contain incentives to work/retire at particular ages
• Early retirement age: if individual wishes to retire but is liquidity-
constrained, reaching early retirement age may trigger retirement
• Normal retirement age: may establish social norm
• Much evidence supporting these effects
• Accrual: Gruber & Wise (1999) find 80-90% of differences across
countries in LFP at older ages due to pension incentives
• Early retirement age: Burtless and Moffitt (1986) find spike in
retirement at age 62 emerged only after SS available then
• Normal retirement age: Mastrobuoni (2009) finds 2-month
increase in NRA  1-month increase in average retirement age
• Change to Social Security (US):
• 1) NRA increasing from 65 to 67; 2) benefit from delaying
claiming after NRA rose from 3 to 8%; 3) elimination of SS
earnings test after NRA
• Changes in other countries:
• Increases in ERA/NRA, including to equalize for men and
women: Belgium, Denmark, France, Germany, Italy, Japan,
Netherlands, Spain, UK.
• Changed the benefit formula to reduce benefit costs:
Canada, France, Germany, Italy, Spain, UK
• Increased incentive to work: Canada, Denmark, France,
Germany, Italy, Japan, Spain
• Limited access to other pathways to retirement
(disability/unemployment insurance, special early
retirement): Belgium, Canada, Germany, Netherlands, Spain
Source: Coile, Milligan, and Wise, “Working Longer: Introduction and Summary,” in Social
Security and Retirement Around the World: Working Longer, forthcoming.
Source: Coile, Milligan, and Wise, “Working Longer: Introduction and Summary,” in Social
Security and Retirement Around the World: Working Longer, forthcoming.
Source: author’s calculations.
Source: author’s calculations.
 Conclusions
• Men and women in the US and in other developed
countries are working longer
• Many plausible explanations: health, education,
women’s work, employer benefits, pensions
• Apportioning the share due to each is difficult
• In US case, about 6 months due to women’s work, 7 months
to changing benefits, and 6 months to NRA increase –
together explain 60-75% of rise in average retirement age
• Across countries, strongest evidence for women’s work and
pensions.
• In future work, will estimate how much of the increase in
work is due to changing pension incentives and parameters.