Understanding the Aging Workforce Defining a Research Agenda (2022) / Chapter Skim
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4 Individual and Social Factors That Influence Employment and Retirement Transitions
4 Individual and Social Factors That Influence Employment and Retirement Transitions
Pages 79-98
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From page 79... ...
It also highlights the social resources that enable or constrain the pathways to work and retirement at older ages, such as family and household structure and social capital. Later chapters (5, 6, and 7)
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From page 80... ...
Since financial security plays an important role in shaping preferences and expectations for work and constraints on work opportunities at older ages, the next sections focus on contributors to financial security at older ages: financial literacy, employer pensions, Social Security, wealth and income, and debt. The discussion then turns to family and household characteristics, including the roles of caregiving, joint retirement, and family structure.
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From page 81... ...
Further complicating the relationship between health and retirement timing is the job lock phenomenon, which occurs when an individual continues to work in order to maintain access to health insurance benefits until they reach the age of eligibility for Medicare, regardless of the presence of health conditions (Fisher, Ryan et al., 2016)
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From page 82... ...
. In sum, the evidence suggests a strong relationship between poor health and retirement that appears to be causal; however, mental and cognitive health have received less research attention than physical health.
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From page 83... ...
An individual's level of education may be influenced by any number of factors -- family background, race and ethnicity, willingness to trade between present costs and future benefits, and so on -- that may continue to have a direct effect on labor force participation throughout the life course and at older ages, making it difficult to draw conclusions from an observational study. Future work in this area might fruitfully make use of exogenous variation in education, for example variation due to changes in compulsory schooling laws, which previously had been used to study the effect of education on health (Lleras-Muney, 2005)
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From page 84... ...
Family background also plays a key role, as those whose parents have had more education or own stocks or retirement savings accounts have higher rates of financial literacy. Financial literacy may play a role in retirement decisions by enabling planning and thus allowing workers to retire earlier (and/or with higher retirement resources)
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From page 85... ...
Black people are more likely to be employed in the public sector, where participation in pension plans is nearly universal. Hispanic people are more likely than non-Hispanic White people and Black people to be employed in firms with less than 100 employees and to work part-time, which are both settings that are less likely to offer employer benefits such as pension plans.
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From page 86... ...
Black and Hispanic people historically have had lower average earnings than non-Hispanic White people, and hence they have received lower Social Security benefits. The redistributive component of Social Security has meant that, in 2016, the average Social Security replacement rate (that is, the portion of previous annual wages that Social Security replaced)
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From page 87... ...
. For non-Hispanic White, Black, and Hispanic people the median income increased for those at the 10th, 50th, and 90th percentiles between 1970 and 2016 (Table 4-3)
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From page 88... ...
, which proposes that individuals smooth their consumption over the life course, borrowing during periods in which income is lower and saving when income is higher. Non-Hispanic White people increased their savings at a higher rate during the period approaching retirement, when lifetime income trajectories peak, and then began to spend down their wealth in retirement; however, this theoretical perspective was not empirically supported by the wealth accumulation behaviors of racial and ethnic minorities.
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From page 89... ...
They also found that Black and Hispanic people were less likely to invest in high-risk and high-yield assets (e.g., stocks) and more likely to invest in housing or other real estate than non-Hispanic White people who have more diversified investment portfolios.
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From page 90... ...
The existing literature consistently finds that access to health insurance is a key driver of retirement decisions. Numerous studies indicate that having retiree health insurance through an employer raises the probability of retirement by 30 to 80 percent, reducing the average age of retirement by six to 24 months (Gruber and Madrian, 2004)
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From page 91... ...
FAMILY AND HOUSEHOLD STRUCTURE Family roles and responsibilities, as well as evolving household structures, shape work and retirement trajectories at older ages. This section reviews how unpaid work in the form of informal caregiving constrains opportunities for, and choices to, engage in paid work in later adulthood, particularly for women, racial and ethnic minorities, and individuals with limited education.
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From page 92... ...
However, a small body of literature suggests that the costs of providing such care may also lead some caregivers to extend employment at older ages. More research is needed to fully understand the heterogeneity of caregiving experiences among older informal caregivers, the ways in which caregiving contexts shape and constrain work opportunities and the quality of work available to caregivers, and work characteristics that enable or constrain caregivers' ability to engage in both informal caregiving and paid employment.
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From page 93... ...
. From the perspective of social stratification, individuals within homogenous social networks tend to have strong social ties but redundant information about economic opportunities, thereby limiting new information concerning job opportunities; whereas weak social ties are a product of heterogeneous social networks that promote nonredundant information that may foster new information concerning jobs (Granovetter, 1981)
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From page 94... ...
argues social compositions and social structures vary by race, ethnicity, gender, and nativity, and may contribute to longstanding labor force participation inequities. Age is another important dimension, as older adults are more likely to access their social capital to find employment, whereas younger people are more likely to rely on their human capital (Gayen et al., 2010)
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From page 95... ...
Race and ethnicity may also shape the timing of exits, with White people both better positioned in the labor market and having more resources (health, education) than Black people, Hispanic people, or other minority groups (Moen et al., 2021; Lahey, 2018; Stainback et al., 2018; Zajacova et al., 2014; Warner and Brown, 2011; Willson, 2003)
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From page 96... ...
The economic effects of these differences in education on employment and income cumulate over the life course, affecting access to public and private retirement benefits and wealth accumulation, resulting in large racial-ethnic disparities in financial resources and security at older ages. Although almost 90 percent of older nonHispanic White workers receive Social Security benefits, only 81 percent of older Black workers, and 75 percent of older Hispanic workers do so.
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From page 97... ...
. Emerging research suggests COVID-19 has had particularly acute impacts on the labor force participation of Black, Indigenous, and People of Color, as well as older adults (Miller, 2020; Moen et al., 2020)
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From page 98... ...
• Changes in the retirement landscape -- notably the shift from DB to DC pension plans -- have put much more responsibility on workers to make financial decisions that affect their retirement security. Research suggests that financial literacy can affect financial decision-making, and also that pension plan provisions such as default contribution rates or investment allocations strongly influence decisions.
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