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John R. Besl and Balkrishna D. Kale
Will the massive baby-boom generation spend it's "golden years" at leisure in the next century or will this group continue working well past the standard retirement age? Federal budget deficits and project funding shortfalls in Social Security and Medicare lead many to worry about their retirement years. Besides possible cuts in government programs for the elderly, growing numbers of employers have been terminating traditional defined benefit pension plans which provide a fixed income during retirement.1 In tandem with low personal savings rates, these cuts could cause a swell in the number of older persons in the labor force by forcing many baby-boomers to continue working well beyond the ages at which their parents left the labor force.
Widespread discussions on expected growth in the older labor force (defined in this article as workers ages 55 and older) have occurred for quite some time, however, this article take on another aspect of this phenomenon. It focuses on anticipated change in the distribution of the older population on one demographic characteristic - education. As younger and more highly educated cohort's age and replace today's older population, the educational composition of the 55-and-older age group will inevitably change. The effect of this change on our future labor force has not been sufficiently explored, but is bound to have significant implications for both the quality and quantity of the future labor force.
Another factor to consider is that Social Security and pensions replace a smaller portion of income for workers in skilled occupations than for workers in an unskilled jobs. As a result, "opportunity cost" of leaving the labor force rises, on average, with the increased years of schooling. In other words, a typical college-educated worker sacrifices more income by retiring than does a worker who failed to finish high school. Higher education thus creates a financial incentive to remain in the labor force, through these higher opportunity costs. In addition, intangible benefits such as enhanced job satisfaction, and tangible factors like cleaner and safer working environments, serve to bolster labor force participation among well-educated older persons.
This excerpt is from an article published in the June 1996 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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Footnotes
1 Evelyn M. Kitagawa, and Philip M. Hauser, Differential
Mortality in the United States: A Study in Socioeconomic
Epidemiology (Cambridge , MA, Harvard University Press, 1973).
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