Trends in Employment and

Income in Old Age:

Do We Really Have to Work ‘til We Die?

Slides by Gary Burtless

The Brookings Institution
Washington, DC
Older Americans: Retirement trends
• The typical age at retirement in the US fell for
more than a century up until about 1990
• Since the early 1990s the average retirement age has
been increasing, first in the USA & later in nearly all
other rich countries
• Has the trend toward later retirement been driven by
– Cuts in the social safety net?
– Cuts in employer pensions?
– Other factors?
 Chart 1. Average retirement age of American men,
1910-2016
Youngest age at which fewer than 50% of
men are in active labor force (in years)
76

74

72

-12 70
years 68

66

64 +3
years
62

60
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Source: Decennial Census (1910, 1940, 1950, and 1960) and BLS Current Population Survey files (1965-2016).
Chart 2. Labor force participation rates at ages 60, 62, 65, and
70 among American men, 1910-2011

Percent of population in indicated age group

90

80

70 Age 60

60
Age 62
50
Age 65
40

30 Age 70

20

10
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Source: Decennial Census (1910, 1940, 1950, and 1960) and BLS Current Population Survey files (1965-2011).
Why did average age at retirement fall
through 1990?
1. Americans were getting richer. Much richer.
2. Social Security (1940 =>); Medicare (1966 =>)
3. Workplace/Employer-sponsored pensions (1945 =>)
4. In short, higher lifetime incomes and rising wealth
allowed many aged families to live comfortably, even
without a breadwinner in the household
5. Both the US gov’t and employers created institutions
(like pensions & old-age health insurance) that
permitted non-savers to stop working at a younger age
Chart 3. Change in labor force participation rates by age
group, both sexes, 1948-1989
Change in labor force participation rate, 1948-1989
(Percentage points)
25
20
15 20.7
14.5 18.3
10 15.4
5
3.4
0
-5 -1.4

-10
-15.2
-15
-20
16-19 20-24 25-34 35-44 45-54 55-64 65+
Age group

Source: BLS Current Population Survey files (1948 and 1989).

Why did trend toward earlier retirement
go into reverse after 1990?
1. Americans stopped getting richer, or at least saw their
wealth climb more slowly.
2. Social Security stopped growing more generous
 At the same time, the benefit rules stopped encouraging
retirements at 65
 Rule changes stopped penalizing work after pensions began
3. Coverage under employer-sponsored pensions also
stopped expanding after the mid-1970s
4. Traditional (DB) workplace pensions replaced by 401(k)s
5. Private employers phased out retiree health benefits
Chart 4. Change in labor force participation rates by age
group, both sexes, 1989-2011
Change in labor force participation rate, 1989-2011
(Percentage points)
15
10
9.9 11.3
5 2.0 6.3 7.7
0
-1.0
-5 -7.3 -2.6 -2.0 -2.1 -2.6
-10
-15
-20 -21.8

-25

Age group
Source: BLS Current Population Survey files (1989 and 2011).
Chart 5. Employment rates among Americans 65-69 and 70-74
years old, 1981-2015

Employment-population ratio
(Percent of noninstitutionalized population)

30 Age 65-69
Age 70-74

20

10

0
1980 1985 1990 1995 2000 2005 2010 2015

Source: U.S. BLS.

 Chart 6. Labor Force Participation Rates in Eight Rich Countries,
2002 and 2014

Participation rate among persons Participation rate among persons

65-69 (%) 70-74 (%)
50 50 50 50
2002 41
40 2014 40 40 40
32
30 26 30 30 30
24
21 22 26 19
20 20 20 20
14
13
8 10 11
10 13 10 10
6 6 10
4
2
0 0 0 0
FRA ITA GER UK SWE CAN USA JAP FRA ITA GER UK SWECAN USA JAP
Country Country

Source: OECD.
Older Americans: Wage and income trends

• Population aging has tilted age distribution of

potential labor force toward the old
• Rising participation rates among Americans past 60 have
tilted actual workforce even more sharply toward aged

• Finally, surging relative wages of workers past 60 have

tilted overall earnings still more steeply in favor of
older workers
• These employment & wage trends are driven partly by
rapid gains in educational attainment among old.
Chart 7. Older workers are now receiving higher hourly pay
than pay earned by prime-age workers: 1985-2011

Hourly wage earned by 60-74 year-olds as a percent of average hourly wage

earned by 25-59 year-olds
130

Men
120
Women

110

100

90

80
1985 1990 1995 2000 2005 2010

Source: Author’s calculations with 1985-2011 CPS files.

Chart 8. Year-round earnings of older workers have also
improved relative to those earned by prime-age workers

Annual earnings of 60-74 year-olds as a percent of annual earnings

of 25-59 year-olds
110

Men
100
Women

90

80

70

60
1985 1990 1995 2000 2005 2010

Source: Author’s calculations with 1986-2011 CPS files.

Chart 9. Rise in Employment & Relative Earnings Has Helped
Fuel Big Gains in Real Median Income Among the Aged,
1979-2016
Percent increase in real median income by age group

60

64
40

20
18
9 9 9
0
25-34 35-44 45-54 55-64 65 & older
Age group

Source: U.S. Census Bureau.

Chart 10. Percent increase in household income using
administrative records rather than survey responses, by
percentile of old-age income distribution (2012 income)

Percent change in measured income

30
30
20
26
22
10 14 16
12 13

0
5 10 25 50 75 90 95
Percentile of household income distribution
(Householder is 65 or older)

Source: Adam Bee and Joshua Mitchell, "Do Older Americans Have More
Income than We Think?" SESHD Working Paper #2017-39 (July 2017).
Chart 11. Percent of Aged Households in Each Quintile of the U.S.
Before-tax, Post-transfer Income Distribution, 1979 and 2011

Percent
40
39

30

20 24
22 22 22
19
10 14 14
11 13

0
Bottom 2nd Middle 4th Top Bottom 2nd Middle 4th Top

1979 2011
Source: Authors’ tabulations based on CBO, The Distribution of Household Income
and Federal Taxes, 2011 (November 2014).