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Journal Article
How Do Local Labor Markets Affect Retirement?
Compared with prime-age workers, older workers face an easier path out of the labor force if they lose their jobs during a recession. However, premature job exits or earnings losses in the years leading up to retirement may be particularly devastating to retirement savings. The authors analyze the impact of recent business cycles on retirement using multifaceted job transitions of older workers. They focus on local labor markets because older workers are particularly unlikely to move for work. Surprisingly, the biggest effect of a higher local unemployment rate on older workers is to raise ...
Working Paper
Occupational Choice, Retirement, and the Effects of Disability Insurance
There is much variation in the physical requirements across occupations, giving rise to great differences in later-life productivity, disability risk, and the value of Social Security Disability Insurance (SSDI). In this paper, I look at how such differences across occupations affect initial career choice as well as the extent to which SSDI, which insures shocks to productivity due to disability, prompts more people to choose physically intense occupations. Using data from the Health and Retirement Study (HRS) and the Current Population Survey (CPS), I estimate a dynamic model of occupational ...
Working Paper
Pandemic labor force participation and net worth fluctuations
The U.S. labor force participation rate (LFPR) experienced a record drop during the early pandemic. While it has since recovered to 62.2% as of December 2022, it was still 1.41 pp below its pre-pandemic peak. This gap is explained mostly by a permanent decline in the LFPR for workers older than 55. This paper argues that wealth effects driven by the historically high returns in major asset classes such as stocks and housing may have influenced these trends. Combining an estimated model of wealth effects on labor supply with micro data on balance sheet composition, we show that changes in net ...
Working Paper
Time Averaging Meets Labor Supplies of Heckman, Lochner, and Taber
We incorporate time-averaging into the canonical model of Heckman, Lochner, and Taber (1998) (HLT) to study retirement decisions, government policies, and their interaction with the aggregate labor supply elasticity. The HLT model forced all agents to retire at age 65, while our model allows them to choose career lengths. A benchmark social security system puts all of our workers at corner solutions of their career-length choice problems and lets our model reproduce HLT model outcomes. But alternative tax and social security arrangements dislodge some agents from those corners, bringing ...
Working Paper
"The Great Retirement Boom": The Pandemic-Era Surge in Retirements and Implications for Future Labor Force Participation
As of October 2022, the retired share of the U.S. population was nearly 1-½ percentage points above its pre-pandemic level (after adjusting for updated population controls to the Current Population Survey), accounting for nearly all of the shortfall in the labor force participation rate. In this paper, we analyze the pandemic-era rise in retirements using a model that accounts for pre-pandemic trends in retirement, the cyclicality of retirement, and other factors. We show that: more than half of the increase in the retired share are “excess retirements†that would likely not ...
Working Paper
Labor Force Participation: Recent Developments and Future Prospects
Since 2007, the labor force participation rate has fallen from about 66 percent to about 63 percent. The sources of this decline have been widely debated among academics and policymakers, with some arguing that the participation rate is depressed due to weak labor demand while others argue that the decline was inevitable due to structural forces such as the aging of the population. In this paper, we use a variety of approaches to assess reasons for the decline in participation. Although these approaches yield somewhat different estimates of the extent to which the recent decline in ...
Working Paper
Breaking the Implicit Contract: Using Pension Freezes to Study Lifetime Labor Supply
This paper studies the elimination of traditional pensions and subsequent adoption of 401(k) plans by U.S. employers. Using thousands of firm-level natural experiments, it shows that unexpected losses in future compensation engendered by pension plan transitions induce premature retirement for some workers and delayed retirement for others. Observed heterogeneity in retirement behavior is indicative of differences in wealth and in preferences for leisure. Using credibly identified treatment effects as estimation targets, it fits a structural model of retirement and uses the model to evaluate ...
Working Paper
Reconsidering the Consequences of Worker Displacements : Firm versus Worker Perspective
Prior literature has established that displaced workers suffer persistent earnings losses by following workers in administrative data after mass layoffs. This literature assumes that these are involuntary separations owing to economic distress. This paper examines this assumption by matching survey data on worker-supplied reasons for separations with administrative data. Workers exhibit substantially different earnings dynamics in mass layoffs depending on the reason for separation. Using a new methodology to account for the increased separation rates across all survey responses during a mass ...
Working Paper
Labor Force Transitions at Older Ages : Burnout, Recovery, and Reverse Retirement
Partial and reverse retirement are two key behaviors characterizing labor force dynamics for individuals at older ages, with half working part-time and over a third leaving and later re-entering the labor force. The high rate of exit and re-entry is especially surprising given the declining wage profile at older ages and opportunities for re-entry in the future being uncertain. In this paper we study the effects of wage and health transition processes as well as the role of accrues work-related strain on the labor force participation on older males. We find that a model incorporating a work ...
Working Paper
Saving and Wealth Accumulation among Student Loan Borrowers: Implications for Retirement Preparedness
Borrowing for education has increased rapidly in the past several decades, such that the majority of non-housing debt on US households' balance sheets is now student loan debt. This chapter analyzes the implications of student loan borrowing for later-life economic well-being, with a focus on retirement preparation. We demonstrate that families holding student loan debt later in life have less savings than their similarly educated peers without such debt. However, these comparisons are misleading if the goal is to characterize the experience of the typical student borrower, as they fail to ...