Obstacles to Working Longer

Richard W. Johnson
Urban Institute

National Press Foundation

March 12, 2018

People Are Living Longer, Raising Retirement Costs Unless People Work
Longer and Delay Retirement

Life Expectancy at Age 62, by Sex and Cohort

30

25 Women

20
Men

15

10

0
1962 1972 1982 1992 2002 2012 2022 2032 2042 2052 2062 2072 2082

Year Turning Age 62

Source: Social Security Administration

(2005). 2
 Benefits of Working Longer
• Older workers pay taxes, engage in productive activities,
delay receipt of retirement transfers
• Grows the economy, improves the fiscal outlook

• Workers earn more, over their lifetimes, by delaying

retirement
• Raises future earnings base for Social Security and pensions
• Workers can save more for retirement

• Delaying retirement reduces time that savings must last

• Accrue actuarial credits by delaying Social Security take up

• By working one more year, people can, on average, raise

old- age income by 9% (Butrica, Smith, and Steuerle 2006)
• For low-income people, working one more year raises income
16% 3
Over the past two decades, older men have been working more

Male labor force participation rates by age, 1995 and 2016

Source: Johnson and Wang (2017)

4
But between 1970 and 1995, Older Men Reduced Their Labor Supply

Male labor force participation rates by age, 1970 and 1995

Source: Johnson and Wang (2017)

5
Participation Rates Also Soared for Older Women over the Past Two
Decades

Female labor force participation rates by age, 1995 and 2016

Source: Johnson and Wang (2017)

6
But Employment for Older Women Didn’t Change Much between
1970 and 1995

Female labor force participation rates by age, 1970 and 1995

Source: Johnson and Wang (2017)

7
Are the Benefits to Working Longer Available to Everyone?

• People with limited education

• People with health problems

• Workers who lose their jobs

• Workers in physically demanding jobs

8
Better-Educated Older Adults Are More Likely to Participate in the Labor
Force Than Those with Less Education

Labor Force Participation Rates at Ages 65+ by Sex and Education, 2016

34.7

23.9 23.3
20.7
19.9

13.4 12.3

7.3

Not high school graduate High school graduate Some college College graduate

Men Women

Source: Johnson and Wang (2017)

9
Gains in Labor Force Participation over the Past Two Decades by Men
Ages 65+ Were Concentrated among College Graduates
Labor force participation rates for men ages 55+ by education, age, 1970 and 1995

Source: Johnson and Wang (2017)

1
0
Between 1995 and 2016, Women’s Labor Force Participation Rates
Increased at Ages 62 to 64 for all Educational Groups
Labor force participation rates for women ages 55+ by education, age, 1995 & 2016

Source: Johnson and Wang (2017)

11
More than One-Half of Employed Adults Ages 51 to 55 Develop a New
Medical Condition by Age 62

Percentage of Workers Ages 51 to 55 who Develop a New Medical

Condition by Age 62

58.4 59.3 57.6

All Men Women

Note: Medical conditions include arthritis,

Source: Author’s analysis of the back problems, cancer, diabetes, heart
Health and Retirement Study . problems, lung problems, psychological
problems, and stroke. 12
New Medical Conditions in Midlife Are More Common among Those
with Limited Education than College Graduates

Percentage of Workers Ages 51 to 55 who Develop a New Medical

Condition by Age 62
62.1 61.3 58.8
54.8

Not High school grad High school grad Some college Four-year college grad

Note: Medical conditions include arthritis,

Source: Author’s analysis of the back problems, cancer, diabetes, heart
Health and Retirement Study . problems, lung problems, psychological
problems, and stroke. 13
By Age 62, Nearly One-Quarter of Employed Adults Ages 51 to 55
Develop a Health Problems that Limits Their Work

Percentage of Workers Ages 51 to 55 who Develop a Work-Limited Health

Problem by Age 62

23.1 23.3 22.9

All Men Women

Source: Author’s analysis of the Health and Retirement Study .

14
Workers with Limited Education Are Especially Likely to Develop a Work-
Limiting Health Problem

Percentage of Workers Ages 51 to 55 who Develop a Work-Limited Health

Problem by Age 62

31.3

26.8
24.1

15.4

Not high school grad High school grad Some college Four-year college grad

Source: Author’s analysis of the Health and Retirement Study .

15
Work-Limiting Health Problems Are Also Common among People of
Color

Percentage of Workers Ages 51 to 55 who Develop a Work-Limited Health

Problem by Age 62

30.3
26.6

21.9

Non-Hispanic White African American Hispanic

Source: Author’s analysis of the Health and Retirement Study .

16
Men’s Work Limitations at Ages 63 to 65 Worsened between
1996 and 2014
Percentage of Men Ages 63 to 65 with Work Limitations,
1996 and 2014
43

33 33
28 27

20

All Never attended college Attended college

1996 2012
Source: Johnson (2018).
17
 For Women, the Presence of Work Limitations at Ages 63 to 65 Increased
Significantly Only for Those Who Did Not Attend College
Percentage of Women Ages 63 to 65 with Work Limitations,
1996 and 2014
42

34
31
29
24
19

All Never attended college Attended college

1996 2012
Source: Johnson (2018).
18
 Employment at Ages 62 to 64 Increased Significantly between 1996 and
2014, but Only for Those without Work Limitations

Percentage of Adults Ages 63 to 65 with Significant Earnings in

Previous Year, 1996 and 2014

48

39
36
32

23 24

11 9 8
6

All No work Some work No work Some work

limitations limitations limitations limitations

Men Women

1996 2012
Source: Johnson (2018). 19
For Men Ages 62 to 64, Social Security Retirement Benefit Claiming Fell
Over Time for Those with No Work Limits, while Disability Benefits
Increased for Those with Limits
Percentage of Men Ages 63 to 65 with Social Security Income in
Previous Year, 1996 and 2014
63
57 57
52
47
42 40

28

1 1

All No work Some work No work Some work

limitations limitations limitations limitations

Retirement benefits Disability benefits

1996 2012
Source: Johnson (2018).
20
 Social Security Benefit Claiming Also Fell for Women Ages 63 to 64 with
No Work Limitations

Percentage of Women Ages 63 to 65 with Social Security Income

in Previous Year, 1996 and 2012
71
65
58
55 53
46
36
32

2 1

All No work Some work No work Some work

limitations limitations limitations limitations
Retirement benefits Disability benefits

1996 2012
Source: Johnson (2018).
21
 Household Income at Ages 62 to 64 Did Not Significantly Increase
between 1996 and 2014 for Those with Health Limitations
Mean Real Household Income for Adults Ages 63 to 65 in Previous
Year, 1996 and 2014

$99,500
$84,400
$74,700 $74,900

$57,600 $58,500
$43,800
$40,000 $37,700
$33,500

All No work Some work No work Some work

limitations limitations limitations limitations

Men Women

1996 2012
Source: Johnson (2018).
22
About One-Quarter of Employed Adults Ages 51 to 55 Experience a
Subsequent Job Layoff by Age 62

Percentage of Workers Ages 51 to 55 Who Are Subsequently Laid Off by

Age 62

25.2 25.7
24.7

All Men Women

Source: Author’s analysis of the Health and Retirement Study .

23
The Likelihood that Older Adults Lose Their Jobs Has Not Changed Much
Over Time

Percentage of Workers Ages 51 to 55 Who Are Subsequently Laid Off by

Age 62, by Time Period

30.9

26.3
23.1

1992-2002 1998-2008 2004-2014

Source: Author’s analysis of the Health and Retirement Study .

24
Layoffs Are Especially Common Among Older Workers With Limited
Education

Percentage of Workers Ages 51 to 55 Who Are Subsequently Laid Off by

Age 62

31.7

26.4 25.4
21.6

Not high school grad High school grad Some college Four-year college grad

Source: Author’s analysis of the Health and Retirement Study .

25
Older Laid-Off Workers Spend More Time Unemployed Than Their
Younger Counterparts

Percentage of Laid-Off Workers Still Out of Work After 12 Months, 2008

to 2012, by Age
65

47

39
35

25-34 35-49 50-61 62+

Source: Johnson and Smith (2018).

26
When Older Laid-Off Workers Become Reemployed, They Experience
Larger Wage Losses Than Their Younger Counterparts

Median Percentage Change in Monthly Earnings, Pre- and Post-

Unemployment Job, 2008 to 2012, by Age
25-34 35-49 50-61 62+

-5.6

-11.0

-17.9

-30.0

Source: Johnson and Smith (2018).

27
Three-Quarters of Employed Adults Ages 51 to 55 Experience Some
Shock—Work Disability, New Medical Condition, or Layoff—by Age 62

Percentage of Workers Ages 51 to 55 who Develop a Work-Limited Health

Problem, New Medical Condition or Layoff by Age 62

72.6 72.8 72.3

All Men Women

Source: Author’s analysis of the Health and Retirement Study .

28
Workers with Limited Education Are Especially Likely to Experience a
Shock

Percentage of Workers Ages 51 to 55 who Develop a Work-Limited Health

Problem, New Medical Condition or Layoff by Age 62

79.9
74.0 74.2
67.0

Not high school grad High school grad Some college Four-year college grad

Source: Author’s analysis of the Health and Retirement Study .

29
Many Older Workers Are Employed in Physically Demanding Jobs

Percentage of Workers in Jobs that Require Lots of Physical Effort Most of

the Time, by Age and Sex, 2014

37.1
34.7
32.1 33.1
30.1
27.1

All Men Women

55-61 62-65

Source: Author’s analysis of the Health and Retirement Study .

30
Older Workers Who Did Not Attend College Are Especially Likely to Face
Physical Job Demands

Percentage of Workers in Jobs that Require Lots of Physical Effort Most of

the Time, by Age and Education, 2014

50.1
44.6

26.5 24.3

Age 55-61 Age 62-65

No more than HS Attended college

Source: Author’s analysis of the Health and Retirement Study .

31
 Conclusions
• Removing work disincentives at older ages is an important
policy goal, but some older workers will always face challenges
• Raising Social Security’s retirement age without implementing
any policies to protect low-income people, those with health
problems, could undermine retirement security
• Policy options include strengthening Social Security disability
insurance, altering Social Security’s retirement benefit formula
to make the system more progressive, and providing more job
supports for older adults

32