Using the CPS to track retirement trends among older men Essay

Changes in the age structure of the population and dramatic declinesin work activity among older men have made retirement trends a criticalsocial issue. The economic and political ramifications of these trendsare considerable: Already, declines in retirement age have combined witha rising life expectancy and changing age distribution, among otherfactors, to put pressure on public and private pension systems.

Intergenerational conflicts may also arise, particularly during periodsof high unemployment; for example, early retirement inducements areoften used by employers seeking to avoid laying off younger workers.And, labor shortages could occur as the number of retires increases inrelation to the number of new labor force entrants. It has always been difficult to identify the age at which peopleretire because separation from the labor force is often neitherabrupt–part-time work is very common among older workers–norfinal–many older persons reenter the labor force after a period ofabsence. In addition, retirement status is best defined by current workactivity for some purposes, while for others, pension receipt is themore appropriate criterion. Given the types of data that are mostreadily available, a simple definition of retires is often used, such asthose who receive Social Security retirement benefits, or those above acertain age, such as 5, who are not in the labor force. Transitions from work to retirement are probably best tracked bylongitudinal surveys, which follow the same individuals for a period oftime. Among the most notable of these are the Retirement History Surveyand the Continuous Work History Sample of the Social SecurityAdministration, and the National Longitudinal Survey, conducted by theCenter for Human Resource Research, Ohio State University. Longitudinalsurveys are particularly useful because of the considerable amount ofdemographic and other personal information available on individuals inthe survey.

A drawback of many longitudinal surveys is that they focuson persons in a limited age range at the time of the initial survey,which means that they cannot provide comparisons between these and othercohorts of workers. One does not need to follow the same people to track a group’slabor force trends. Unlike the longitudinal surveys, the CurrentPopulation Survey (CPS) relies on a rotating sample–that is, ahousehold (technically, an address) is in the sample for a limited timeand is then replaced. In the CPS, 25 percent of the sample changes eachmonth. But, while the survey does not follow the same people for longperiods, the sample can “represent” the same group over time.In other words, within the limits of sampling reliability, any randomsample of persons 55 years of age at one point in time would representthe same group as a different sample of 54-year-olds surveyed a yearearlier. Because of the long history of the CPS and the frequency ofobservation, the survey can provide an excellent overview of changes inretirement trends.

The data can be used in three ways. Thecross-sectional view examines the labor force characteristics of personsof different ages at a fixed point in time. The time-series viewexamines the behavior of one or more demographic groups at differenttimes. A third, the cohort view, follows the same people, or a samplerepresenting the same people, as they age. This view has the advantageof permitting one to consider the unique history of each populationgroup when assessing its present labor force status. “Retirement” data from the CPS have generally been usedwith the time-series approach to track changes in labor forceparticipation rates for broad age groups, usually persons 55 to 64 yearsand 65 years and over.

However, since 1963 CPS data have been availableon labor force characteristics by single year of age and by sex, forpersons age 55 to 74. Thus, the CPS provides a better vantage pointthan most longitudinal surveys in that it follows work histories of manycohorts through their older years. This summary presents these previously unpublished data for oldermen and estimates of rough retirement histories for differentgenerations of these men. A simple definition of retirement is used forthis purpose; all men over age 55 who are not in the labor force aredeemed to be retired. Conversely, all who are working, whether full orpart time, and all those actively looking for work are not retired. Labor force participation rate–the proportion of the population inthe labor force at each age–for men between ages 55 and 74 are shown intable 1 for the years 1963-83.

From these estimates, two types ofretirement histories are calculated, using the cohort perspective, forthe 1904-22 birth cohorts. (Insufficient data are available for earliercohorts, and later cohorts are not old enough to be included.) Table 2shows the proportion of the population of each cohort that had retiredat any particular age.

These estimates are additive, that is, addingacross gives the proportion of a cohort that had retired as of a certainage. These retirement rates are depicted to chart 1, which shows thepercentage of men in even-year birth cohorts who were out the laborforce as of selected ages. The heights of the five sections of each barrepresent the percentages of men who were retired by age 61, and ofthose who subsequently retired at ages 62, 63 and 64, 65, and 66 to 70.Of course, the retirement histories of the younger cohorts are not yetcomplete. The second type of retirement history is provided in table 3, whichgives the probability of someone who is in the labor force as of acertain age leaving the labor force the next year.

For example, thistable shows the probability that someone who was in the labor force atage 65 in 1970 would be out of the labor force at age 66 in 1971. The difference in the two types of “retirement rates” isthat the first shows the proportion of the population of each cohortleaving the labor force at each age, while the second shows theproportion of those in the labor force at each age leaving it the nextyear. In other words, table 2 answers the question, “At what agedid men in each cohort leave the labor force?” For example, amongthe 1904 cohort, 3.1 percent left the labor force at age 60, and 2.2percent did so at age 61. Table 3 answers the question, “What isthe probability of someone who was in the labor force as of a certainage retiring (that is, leaving the labor force) the next year?”Among the 1904 cohort, 3.

5 percent of 59-year-old labor forceparticipants retired at age 60; of those left in the labor force, 2.6percent retired at age 61, and so forth. In using any of these data, one should keep in mind that, as in anysample industry, the results shown may differ from the true populationvalues, largely because of sampling error. The problem of statisticalreliability of the estimates becomes more acute as the size of the groupbeing counted declines. Thus, apparently inconsistent trends or oddoccurrences (such as the two positive retirement rates shown in tables 2and 3) may be attributable, at least in part, to sampling error, and toother types of measurement error such as response or coding errors.Users should intrepret the estimates for specific cells in each tablewith some caution; the data are best used to show general trends inretirement behavior.

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