Longer working years? | The Institute for Successful Longevity

March 30, 2017

By Neil Charness, Ph.D.

There is an interesting development in terms of older adult participation in the paid labor force — people are working longer, reversing a decades-long trend toward earlier retirement.

The huge Baby Boom cohort has expressed interest in working past “normal” retirement periods of age 62, with partial pension, and age 65 for full pension. (Retirement with full Social Security benefits comes at age 67 for those born after 1960 and between 66 and 67 for Baby Boomers.)

Of course, not long ago people worked their entire lives, before national governments became rich enough to support the creation of social safety nets such as Social Security here in the United States (instituted in 1935). One of the earliest national plans was established in 1889 in Prussia/Germany by Otto von Bismarck, then chancellor, with entitlement set at age 70 (not the mythical 65 most people have heard of, though the government eventually set the earliest pensionable age to 65 in 1916, years after Bismarck’s death). There were private pension plans long before public ones, with the first in the United States apparently being that by the American Express Company in 1875. By 1929, nearly 400 retirement plans were in operation.

This work-longer trend is occurring at a time of dropping participation rates in the labor force. The participation rate is defined as the proportion of the civilian non-institutional population that is in the labor force. Non-institutional means those people 16 years of age and older residing in the 50 states and the District of Columbia who are not inmates of institutions (penal, mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.

There are a number of reasons that older adults might be staying longer at work. One factor may be the shift of risk from companies to individuals for private retirement savings, marked by companies dropping defined benefit-pension plans, which pay fixed and predictable pensions, to defined-contribution plans, where the individual is responsible for investing with uncertainty about the payoff on retirement if investments go sour.

Another is the trend of not having pensions offered at all in some, usually smaller, companies, especially for low-wage workers. Another is that the centuries-long increases in life expectancy (which may now be reversing) is making people aware of the possibility of outliving their financial resources, so they retire later as a buffer against that uncertainty.

Certainly there are other cost-shifts that have occurred, for instance, in paying for health benefits, that make people more uncertain about whether they have saved enough for increasing health care costs while retired. (No Virginia, there is no Uncle Sam or Santa Claus to pay for extended skilled nursing home care should you be incapacitated at the end of life, until you exhaust all your financial resources.) Those are the negatives that may be driving later retirements.

There are also positives. People in white-collar work environments may want to remain, perhaps at less intensity (part-time) to maintain social networks at work, as well as for the extra income. They may find considerable satisfaction in their work too, as does this blogger. Those trends may not occur in many physically demanding blue-collar work environments: think coal mining, where most everyone retires as early as possible (age 62 in the United States).

So, our work force is going to be increasingly older. So, an interesting question is: how are we preparing to support an aging work force? There are some predictable age-related trends that show little sign of changing, such as decreasing perceptual, cognitive, and psychomotor abilities with increased age. Countering negative trends in many abilities as people age is the increase in knowledge that people continue to acquire until quite late in life. Obsolescence is probably more of a threat to older worker productivity than loss in abilities. Given the need to maintain productivity (which has slowed in recent years), we now need to contemplate how to keep all age groups up to date and well-equipped to enhance work force productivity.

There are still biases against training and promoting older workers, though the literature suggests that an economic case can be made for training older workers. Training and retraining methods best-suited for older workers are not yet clear cut, at least on the research evidence front, though there are some useful resources that provide guidelines.

So, we have some interesting challenges, particularly the desire of Baby Boom workers to stay employed longer, yet we need to allow for those in physically demanding settings or those in poor health to retire earlier and with true social security. Can we take advantage of the knowledge that older workers have acquired over their increasingly lengthy careers (perhaps through mentor roles)? How can we best compensate for any ability losses (through work-place redesign) and for obsolescence (with new training)? Now is the time for all of us to get to work on this issue.

A silk worker in the 1940s works from home in Patterson, New Jersey, as he’s no longer part of the factory work force; life for older workers has changed since then, but challenges remain in the 21st century economy.

Neil Charness, Ph.D., is the William G. Chase Professor of Psychology at Florida State University and director of the Institute for Successful Longevity.