The Gerontologist 40:286-292 (2000)
© 2000 The Gerontological Society of America
The Future of Age Integration in Employment
John C. Henretta, PhDa
a Department of Sociology, University of Florida, Gainesville
Correspondence: John C. Henretta, PhD, P.O. Box 117330, University of Florida, Gainesville, FL 32611-7330. E-mail: jch{at}soc.ufl.edu.
Retirement is a relatively new institution. Although formal retirement programs have been traced to the 19th century (Graebner, 1988), most older workers remained in the labor force until the creation of Social Security (Ransom and Sutch 1986
). Those who did retire before the development of public retirement systems depended primarily on family support or individual savings (Carter and Sutch 1996; Costa 1998; Gratton 1996). Moreover, the low levels of retirement income available to most U.S. workers until the 1970s made retirement primarily a safety net for those older workers with declining health or unable to find a job. Among women, retirement from employment as a common life-course experience awaited the arrival at retirement of cohorts with extensive lifetime employment—a development that has only occurred in recent years. Hence, retirement for leisure is a new experience for the United States and other industrial societies and has existed in its current form for only about 25 years. Yet, this new pattern is now accepted as a "matter-of-course" aspect of modern society.
Declining labor force participation among older men and women (Gendell and Siegel 1992) and the growth of leisure retirement have been produced by increases in Social Security benefits (Henretta and Lee 1996; Ippolito 1990), firm pensions (Hurd 1990), disability benefits (Henretta and Lee 1996), and a changing workplace (Henretta 1994a). Earlier retirement has produced a more age-segregated workplace. Retirement institutions and other employment changes remove older workers from the labor force at relatively early ages more thoroughly than in the past.
In this essay, I discuss the direction and implications of current and possible future trends in workplace age integration. If current trends were to continue over the next 20 years, we would not expect much change in labor force participation patterns of older workers. Yet, there is good reason to expect that some of the trends supporting early retirement may shift in the near future in ways that favor greater labor force participation at older ages. I first discuss these trends–demographic change, revisions in Social Security retirement rules, and employment changes. I then discuss the ways that these changes may lead to a redefinition of the social significance of age and encourage employers to implement job redesign that will provide more attractive opportunities for older workers. Equally important is the interest of older workers in remaining in employment, and I discuss this issue as well.
Though I will not actually measure age integration quantitatively, the analysis will focus on the level of labor force participation among the older population. This focus ignores the proportion of the younger population in employment, although labor force participation rates of younger workers have changed over time, particularly among women. Yet, as a practical matter, labor force participation among older age groups is currently so low that age integration of the workplace may be examined by focusing on their participation rates alone.
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A Review of Recent Labor Force Participation Trends
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The trends in men's and women's labor force participation have diverged somewhat in recent years. After large decreases in employment after age 60 during the 1970s and early 1980s, the rate of decline for men slowed noticeably during the late 1980s (Henretta 1994b). In the 1990s there has been virtually no change in the percentage of men aged 60–64 in the labor force, but between 1992 and 1997 there was a slight increase from 55.3 to 55.6%. It is likely that the declining unemployment and tight labor markets of the 1990s played a part in stabilizing labor force participation levels. However, the reasons for the end of the early retirement trend are not well understood (Quinn 1997, Quinn 1998; Ruhm 1996).
The trend for women is somewhat different because of the higher level of midlife employment characteristic of more recent birth cohorts of women. During the 1970s and 1980s, the percentage of women aged 60–64 in the labor force increased very slightly, reflecting a balance between a trend toward earlier retirement and a trend toward higher midlife labor force participation rates among successive birth cohorts (Henretta 1994b). These trends continued during the 1990s, resulting in an increase in labor force participation from 37.1% in 1992 to 40.2% in 1997.
These trends in labor force participation indicate virtually no change in employment age integration among persons 60–64 years old over the last 5 years. In the following sections, I review three factors that will be influential in determining the amount of employment age integration in the future: demographic trends, changes in public benefit systems, and the changing organization of work.
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Demographic Context of the Early 21st Century Age Composition
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During the second decade of the next century, the age composition of the U.S. population will be considerably different than it is today. The large postwar birth cohorts will be entering the age stratum that currently has high retirement rates. Because the cohorts that followed them were relatively small, the ratio of workers approaching retirement to those in younger age groups will be very different from today. Table 1 shows the birth years of the four cohorts that will be used to illustrate this process, and the ages of their members in 1996 and 2016. The postwar cohort, born between 1952 and 1956, ages from 40–44 years old in 1996 to 60–64 years in 2016. The preceding depression cohort (born 1932–1936) and the succeeding cohort (born 1972–1976) were both smaller than this one. In addition to the size of the cohort at birth, a cohort in later life is also affected by the mortality and immigration that occurred earlier.
The changing projected age composition of the U.S. population between 1996 and 2015 is illustrated in Table 2 by using these cohorts (middle series projections from Bureau of the Census 1998a, Bureau of the Census 1998b). In 1996, the size of the 60–64 year age category was about half (.48) that of the 40–44 age category and slightly more than half (.56) that of the 20–24 age category. Hence, the cohort entering the standard retirement years around 1996 is relatively small in relation to the remaining potential workforce. The birth cohort that was aged 40–44 in 1996 will be noticeably reduced by mortality 20 years later. But, in relative terms it will be approximately as large (.98) as the population aged 40–44 at that time, and about .84 the size of the population aged 20–24. Hence, the cohort entering the ages at which retirement occurs will be relatively large.
The implication of this cohort succession is not that cohort members literally replace each other in specific jobs. The constant disappearance of some jobs and the net creation of others in the economy is much too complex for such a model. Moreover, demography does not determine destiny. Population age composition is only one of many factors affecting employment patterns. But, given a particular level of demand for experienced workers (or workers overall) and holding other factors constant, the exit of the retirement age cohort in 2016 (or 2015) will affect employers much more than retirement does today. Similar data are often used to illustrate the increasing cost of retirement to the Social Security system or the implications for financial markets (as older workers sell their holdings to pay retirement expenses). A quite different implication is the possible effect on employers who will be losing large numbers of trained employees—a proportion that will be much more noticeable than the exit of retirees today. The implications of age composition for age integration will be discussed below.
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Education Level
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Throughout this century, members of more recent cohorts have been better educated than preceding ones. The postwar birth cohorts are the last ones for which this statement will be true. This change is illustrated by Table 3 (Bureau of the Census 1996). Note that the data shown in Table 3 are only for 1996. By examining birth cohorts who had reached the age at which almost all cohort members have completed formal schooling, it is possible to compare levels of attainment between cohorts. It can be seen that the depression birth cohort, aged 60–64 in 1996, has lower levels of schooling than younger cohorts. However, there is virtually no difference between the early 1950s and late 1960s birth cohorts. This comparison uses ages 25–29 (born in 1967–71) instead of ages 20–24 to capture those who have completed most of their schooling. While the retirement of the depression cohort will raise the educational level of the workforce, the same will not be true of the retirement of the 1950s cohort.
This comparison does not include all relevant factors affecting the relative educational level of cohorts. First, it is possible that there will be more midlife returns to school. If so, cohort levels of schooling might increase noticeably throughout life. These new patterns may not involve traditional degree programs, and it is unclear whether today's young or midlife cohort will be more affected over the next 20 years. Second, it is often asserted that older workers have outdated skills. While this statement usually refers to job-specific training, one aspect of outdated skills has probably been the lower general schooling level of older workers that makes constant updating more difficult.
In future years, this outdating of skills (which can be modified by lifelong learning) may be outweighed by the decline in verbal ability. According to Alwin 1991, verbal scores (adjusted for changes in education levels) are lower in successive cohorts born since the early part of the 20th century. However, up until the birth cohort of approximately 1948, this decline in verbal scores (controlling for education) was outweighed by the positive effect of higher levels of schooling on verbal scores. Hence, overall verbal scores were stable or rising among successive cohorts. Without more education to compensate for their lower verbal ability, young cohorts in the future may be less desirable employees than older cohorts. The retiring cohort in 2016 will be the cohort born in the early 1950s, just after the peak in verbal abilities. Hence, one of the often-cited advantages of young workers over old may no longer be true.
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Health and Disability
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Although the evidence is complex and sometimes ambiguous (Crimmins 1996), a growing number of studies report better health and less disability among members of successive cohorts in later life (Crimmins, Saito, and Reynolds 1997; Manton, Corder, and Stallard 1993; Manton, Stallard, and Corder 1997). If the preliminary evidence suggesting improved health among elderly people also indicates a trend that will affect younger cohorts as they age, we would expect future elderly cohorts to enjoy better health and more vigor at later ages (e.g., Fogel and Costa 1997). As with education, cohort change in health (as well as increasing longevity) may redefine the social meaning of age. Ages that today are considered "old" may be redefined as "middle-aged." Social and self-expectations for persons in their 60s and 70s may change with better health and vigor, as may the willingness of persons at these ages to engage in meaningful employment. Employers may change their attitudes in line with the change in social expectations and be more willing to create attractive opportunities for older workers. To the extent that employers create such opportunities, the willingness of older employees to continue working may depend, in part, on both their health and their health-driven perception of the significance of being a particular age.
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The Changing Context of Government Regulation
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The Social Security retirement system has already been modified to alter the age of benefit receipt. The birth cohort of 1952 falls about in the middle of the phase-in period for these changes. Their age for full Social Security benefit receipt will be 66 years (instead of the current 65 years). Those receiving benefits at age 62 will receive 75% of the full amount, compared to 80% today (Social Security Administration 1995). While there is current discussion of proposals to move the age of Social Security benefit eligibility even later, further changes may not affect the 1952 birth cohort. A later eligibility age reduces the attractiveness of early labor force exit; hence, its likely qualitative effect is delayed retirement. It is difficult to predict the size of the effect because of the importance of employer pension benefits, which are projected to be more common and provide a higher proportion of income in the period after 2010 (Reno 1993). Workers with good employer defined pension benefits may continue to retire early (Wise 1997). Some employers who wish to shed older workers may supplement pensions to compensate for the Social Security changes; or, alternatively, employers may change pension plans to encourage later retirement if they become concerned about losing a large number of their trained workers to retirement. Workers in poor health may continue to leave the labor force with either Social Security disability benefits or reduced Social Security retirement benefits. Those workers with small or no pensions are likely to work longer (Wise 1997). While all these factors make the quantitative effect of a change in the Social Security retirement age uncertain, the expected effect of later Social Security benefit receipt will clearly be increased age integration in the workplace as more older workers—especially those without company pensions—continue in the labor force.
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Changing Employment
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The nature of employment also has been changing in ways that are likely to encourage paid work at later ages than today. Henretta 1994a, published as a chapter in Age and Structural Lag (Riley, Kahn, and Foner 1994), examined the ways that age structures employment careers through state and workplace rules and institutions that provide both increasing rewards with longer tenure as well as a defined exit point. Henretta argued that the long-term trend of increasing institutional support for age-structured employment careers had halted or perhaps reversed. This change has resulted from the combined effects of trends in pension provision, the distribution of employment across industries, and the organization of work within firms. The implication for younger workers is that they are less likely to spend their careers in jobs that provide increasing rewards and security for longer tenure with the firm. For older workers, the expectation is for more variable patterns of career endings plus the possibility that more noncareer jobs will be available to older workers. I summarize and illustrate the argument below; greater detail and references to the literature may be found in the original source.
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Changing Pensions
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An increasing proportion of pension coverage involves defined contribution pensions instead of the more traditional defined benefit plans. The key characteristic of defined contribution plans that reduces the age structuring of employment is that they lack the benefit "cliff" of defined benefit plans. That is, many defined benefit plans strongly encourage retirement relatively soon after first pension eligibility because the higher benefits accrued through further work are not equal to the pension payments forgone by working longer. By contrast, the growth in defined contribution plans, which lack incentives to retire at a specific age, reduces this strong incentive for early retirement, though defined benefit incentives will continue to affect many workers (Wise 1997).
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Changes in Industrial Structure
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A second change in employment has been the growth of service industries at the relative expense of manufacturing. Firms in the service sector are more likely to have contingent and part-time employment arrangements. Service firms are smaller, tend to be in competitive sectors, and must often adjust the workforce to demand. Hence, they present more opportunities for older workers to obtain part-time or short-term employment contracts.
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Within-Firm Changes in Employment
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As a result of increasing competition and technological change, some employers keep a smaller proportion of their employees in long-term "career" employment and more in shorter-term positions whose continuation is contingent on demand. These trends can be illustrated in academic employment, where there appears to be a growth in the use of adjunct faculty. Colleges and universities gain in two ways. First, adjunct faculty cost less because of lower per-course salary and lack of benefits. Second, use of adjunct faculty makes adjustments to changing student demand easier. Proposals to end tenure in universities are, in part, directed toward the same end. Fixed-term contracts would provide managers with greater flexibility in determining the mix of teaching staff. In the earlier article (Henretta 1994a), I discuss evidence that suggests a modest increase in the use of these arrangements among employers generally. Osterman 1988 points to two limitations on use of these contingent labor arrangements. First, employers' use of contingent labor in the postwar era has been aided by the growing female labor force. As more women move into full-time employment, there may not be an adequate supply of contingent workers. Second, employers are likely to want a mix of long-term and short-term employees because there are certain tasks they will not wish to entrust to part-time employees.
While most workers continue to have relatively long-term ties to their employers, the decrease in age structuring has implications that vary by age and, among older workers, by pension entitlement. This point can be illustrated with the earlier example of academic employment. While some young and midlife faculty choose adjunct status because of family or other responsibilities, the majority would probably prefer more traditional age-structured employment. For older faculty who have substantial accrued pension benefits, short-term teaching assignments do not have the same drawbacks and may be attractive opportunities because they allow income supplementation and continued access to the life of the university without the responsibilities of a full-time job. An older faculty member (or any older worker) without substantial pension entitlement would probably find a part-time job no more attractive than a younger employee.
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The Significance of Demographic Changes
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Demographic changes have several potential effects. First, the large relative number of older workers in the future and their relatively high educational level is likely to make them highly sought after in a number of fields. Conditional on the continued growth of employment, the shift in the ratio of older to younger workers implies that employers may be less likely to encourage early retirement and, instead, may take steps to retain older workers. Such steps might include the redesign of jobs so that older employees can take increased advantage of the leisure afforded by their pension accumulations while continuing involvement in employment. The ability of an increasing number of employers to offer such opportunities will be aided by the shifting trends in employment sectors and the changing within-firm organization of work. That is, the growth of work organization that focuses on shorter-term relationships and increased subcontracting provides a natural area to create jobs that will need workers and may be attractive to older workers.
It is very likely that increased employment opportunities for older workers will be uneven. For example, employers may encourage early retirement by workers in declining employment areas while trying to retain workers in growing areas. The segment of the older working population without pension entitlement or with low pension entitlement will continue to seek full-time employment, whereas those with large pension entitlements may prefer shorter-term commitments. The key point in considering workforce age integration is the balance between these different trends. Shifting population characteristics will change the balance so that more workers will be retained in the labor force because of employers' efforts. The increased use of defined contribution pensions and the change in Social Security benefit ages will increase workers' willingness to continue work. The growing use of contingent employment may provide the vehicle through which employers' and employees' interests will be joined.
Demographic change may also have an important impact on institutions and culture. As large cohorts have passed through youthful phases of life they have spawned social and cultural revolutions (Braungart and Braungart 1986). Why should a large cohort passing through later life not likewise change institutions? Social structures treat young and old as distinct categories, compared to a large undifferentiated category of adults between them. Both young and old people have been assigned nonwork roles, whereas those in the middle have been assigned work roles. Exclusion from the central institution of a "work society" (Kohli 1986) devalues older persons because they are effectively excluded from the most important institution signifying adult status. A large cohort moving through later life may challenge such stereotypes. Improved health may push back the age at which members of this cohort define themselves as "old." High levels of education may lead many to be dissatisfied with the social roles commonly assigned to older people. And, the large size of the cohort will mean that older people will have a large effect on social attitudes through their involvement in consumption, politics, the workplace, and other spheres of life.
The redefinition of age and aging does not imply that everyone will want to work longer. Some will eagerly choose leisure or meaningful involvement outside of employment, aided by pensions and private saving. But, the key point is that a large older cohort in good health has the potential for a revolutionary redefinition of aging–both with respect to employment and social involvement generally. Such a change would support the attempts by employers to attract or retain older employees.
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Will Older Employees Want To Work Longer?
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The discussion to this point has focused primarily on the demand for older workers—changes in the older population and the nature of employment that may lead some employers to hire or retain older workers. What will be the supply of older workers to fill this demand? Changes in Social Security will mean that those workers without pensions are likely to work longer. The shift to defined contribution plans reduces the number of persons affected by the incentive for early retirement found in many defined benefit plans. On the other hand, the higher proportion of workers projected to receive pension benefits may reduce the number of persons interested in continued work.
Another way to examine possible supply of older workers is to examine the attitudes of today's older workers toward retirement, focusing on questions that imply interest in the types of flexible employment that may be offered in the future. The Health and Retirement Study, conducted with respondents aged 51–61 in 1992, contains a number of questions about postretirement plans. Most useful for this analysis is a question asked of all respondents: "Some people want to stop paid work entirely when they retire, while others would like to continue doing some paid work. What about you?" Responses to this question indicate that an overwhelming majority of men and women say they would like to continue some paid work–over 77% for men and 71% for women.
Yet, other evidence from this survey suggests that there is only limited flexibility in the current jobs held by this cohort. Of those respondents who are currently working, a large majority are employees, with only 23% of men and 14% of women being self-employed. Self-employment may give greater flexibility in determining the amount one will work, though that is not always the case (Hurd 1993). For example, self-employment in a job that requires a large capital investment may not be profitable unless it is pursued full time. Among current employees, 85% of men and 65% of women usually work 35 or more hours for 50 or more weeks per year. Of these full-time workers, relatively few say they could reduce their regular work hours on their current job. About three quarters of men and women say it would not be possible.
These data, taken together, allow some estimates about the amount of flexibility to reduce hours among the cohort now approaching retirement. This estimate of flexibility is likely to err on the high side because it is not necessarily the case that these indicators reflect the amount of flexibility that would actually exist at older ages. If we assume that those who are self-employed, who work less than full time, full year, or who say they could reduce hours on their current job have flexibility, half of currently employed men and 58% of women have some flexibility. The greater work flexibility of women is consistent with their higher probability of being in contingent employment. The percentage who have flexibility is far below the percentage who say they would like to continue some work after retirement. Moreover, in the modal case (the full-time, full-year employee), only about one quarter of respondents say they have any flexibility in hours although most would like to continue some work. The evidence suggests, therefore, that either significant job changing from preretirement to postretirement jobs will be required, or significant job redesign must occur.
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The Redesign of Jobs
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Job changes at retirement are often not a particularly attractive option. Job skills may not be transferable, and intangible aspects of a relationship with an employer cannot be transferred. In many cases, continued work requires changing firms, entering low paid employment, and not utilizing accumulated skills. The absence of part-time opportunities integrated in career-type employment reflects a rigidity in employer behavior resulting from fixed costs in employment and the technology of production (Hurd 1993) as well as employer attitudes. To the degree that demographic change leads future employers to see older workers as a large, desirable, and needed pool of potential employees, they may engage in creative job redesign and incur some costs in order to attract this source of employees. The analysis of retirement plans presented above suggests that older workers would be interested in increased employment opportunities.
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Negative Aspects of Increased Age Integration of Employment
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The costs and benefits of increased age integration fall unevenly. An increase in older full-time workers, drawn partly from those without firm pensions and motivated by reduced age-62 Social Security retirement benefits, will be a disadvantage to those in poor health. On the other hand, greater opportunities in full-time employment will benefit those who desire continued full-time work and those in good health who lack sufficient resources to retire. The growth of the contingent labor force, attractive to some younger workers, is unattractive to most because it often offers less secure jobs. These disadvantages may be less compelling for some older workers; yet, they are purchased at the cost of greater insecurity over the life course for all cohorts and, as discussed earlier, contingent work would not be the first choice of many older workers who lack significant pension accumulation.
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Conclusion
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Social trends are seldom the result of one factor. I have argued in this essay that a number of underlying trends will combine in the near future, with the likely result that more older persons will remain in the labor force longer. Some trends are likely to produce greater demand for older workers, assuming continued growth in employment. These trends include the shifting population age composition and the high education and ability levels of cohorts born around 1950. Other changes will contribute to the supply of older workers, including changes in Social Security eligibility ages, the shift to defined contribution pension plans, and the improving health of successive cohorts. The result of these changes is likely to be an increase in the full-time employment of older workers for those without pensions as well as more part-time employment, particularly for those with significant pension entitlement. The model for the type of part-time or part-year employment that can join the likely employer demand and worker supply is the redefinition of jobs and the use of more short-term, contingent employment arrangements. This model, already used by employers for workers of all ages, is an example of a work organization that may retain or attract older workers. Data on workers nearing retirement today indicate substantial interest in postretirement part-time work. Hence, employer efforts to retain older workers will likely meet with success, leading toward greater age integration.
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Acknowledgments
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This essay was prepared under the auspices of the National Institute on Aging Program on Age and Structural Change (PASC) for presentation at the 1998 American Sociological Association Meeting in a session on "Policy Implications of Age Integration."
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