September 2002, Vol. 125, No. 9
Précis
New economy, better work?
Men’s retirement puzzle
Changes in technology have generally been associated with changes in the labor market. The impact of increasing computerization of the economy is no exception, according to two recent reports. Statistics Canada analysts Marie Drolet and Rene Morissette compare the employees of "knowledge-based" firms to other workers. They find that among full-time workers in Canada, the average workweek in knowledge-based industries is just slightly longer than that for others. Hourly earnings, in contrast, were significantly higher in knowledge-based industries and workers in those industries were more likely to be covered by insurance plans, including supplements to the national medical care program in Canada, and to be offered a variety of personal and family support programs. Drolet and Morissette based their Perspectives on Labour and Income article on Canada’s Workplace and Employee Survey a linked file containing both employer and employee components.
The Canadian research is complemented by some of the investigations Richard B. Freeman has made concerning the relationship between using computers and the Internet at work and one’s hours at work and hourly earnings. Freeman’s NBER working paper, "The Labour Market in the New Information Economy," is more broadly based than Drolet and Morissette as it focuses on the 40 to 50-plus percent of workers in the United States that report using the Internet or computers at work. In regressions that include only computer use, Freeman finds a 5- to 6- percent increase in hours worked and an earnings premium of about 15 percent. Internet use alone is associated with a similar increase in work hours and perhaps a slightly larger earnings premium. The joint effect of Internet and computer use is about 7 percent more hours and nearly 20 percent higher hourly earnings.
Are these "New Economy" jobs better jobs? Drolet and Morissette note that workers in knowledge-based firms "received high wages, had good fringe benefits, profited from fitness and recreation services as well as employee assistance programs and were often in jobs whose requirements matched their education level. On the other hand, some of them worked fairly long hours, and those in service-producing knowledge-based workplaces were less likely to have a formal grievance system."
Freeman concludes that Internet and IT technologies have made important changes in the demand for labor, in wages and earnings, in jobseeking and recruiting, and in the way unions operate. He expects that "in the foreseeable future more labour market transactions—job search, recruitment, and matching—will occur over the Web and that union members and non-members alike will look to the Web as their way of learning how to address workplace problems."
Since 1985, the actual track of the labor force participation rates for men in the age groups around 65 years have broken above their long-term trends. For at least three decades, these rates had been trending downward; since 1985 they have been roughly stable or slightly rising since then. In the Federal Reserve Bank of Kansas City’s Economic Review, Richard Johnson investigates some of the reasons these changes may have occurred.
Johnson first examines several aspects of Social Security—taxation of benefits, the potential for additional reduction of benefits, and the reduction in the "penalty" for working past the age of 65—and finds only the latter to have had a measurable, albeit small, impact. Second, although there is a theoretical case for the shift toward defined-contribution pension plans contributing to later retirement—it is rarely costly to defer retirement under such a plan—the trend toward them and away from defined-benefit plans started at least 5 years before the changes in participation rate trends. Third, Johnson finds that the slower overall rate in labor force growth would not have much long-term effect in terms of encouraging older men to stay in the labor force.
Johnson concludes that what is in essence a reversal of a trend toward a reduced labor supply is still a puzzle and "the longer the trend in male retirement ages is stable or rising, the more puzzling it will be."
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