Working Paper: NBER ID: w3420
Authors: Robin L. Lumsdaine; David A. Wise
Abstract: The American population is aging rapidly. Persons 65 and over who now constitute about one-fifth of the population will constitute about two-fifths of the population by 2040. In addition, individuals are living longer. Yet the labor force participation of older Americans has fallen dramatically in recent years. This paper discusses this trend and the principal arguments put forth to explain it. The paper is in two parts. The first part reviews trends in labor force participation and associated trends in Social Security (SS) coverage, firm pension plan coverage, and other factors that are likely to be associated with the labor force participation trends, including demographics. The second part of the paper discusses the incentive effects of SS and retirement plans, with emphasis on firm pension plans.
Keywords: Aging; Labor Force Participation; Social Security; Pension Plans
JEL Codes: J14; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased Social Security and pension benefits (H55) | Increased incentives for retirement (J26) |
| As individuals age (J26) | Disutility of work increases (J29) |
| As individuals age (J26) | Desire for leisure rises (J29) |
| Increased age (J14) | Decision to retire (J26) |
| Increased Social Security and pension benefits (H55) | Retirement age benefits received are substantial (J26) |
| Decline in productivity with age (J26) | Labor force participation rates of older individuals are declining (J26) |
| Increasing life expectancy of older individuals (J26) | Consumption support over a longer retirement period (D15) |
| Increasing life expectancy of older individuals (J26) | Influences retirement decisions (J26) |