The labour market behaviour of older individuals

Overview

Abstract (English)

This dissertation investigates several aspects of the labour force participation and retirement decisions of older individuals, introduced in Chapter 1. Chapter 2 examines how several components of Canada’s income security system could affect individuals’ incentives to retire. The components of Canada’s income security system are documented and we show how they act to change the incentives to retire through a series of simulations. This chapter also provides a thorough survey and critical review of the international evidence on public pensions and retirement, with the broad weight of the evidence suggesting that the structure of public pensions contributes to the decision to retire. In Chapter 3 I fill some of the gaps in the Canadian literature on retirement decisions, which has focused almost exclusively on the role of public pensions. In this chapter I extend the analysis of Baker et al. (2003, 2004a) to examine not only the effects of public pensions, but also the effects of health and employer-provided pensions on individuals’ decisions to enter retirement. Using data from the Survey of Labour and Income Dynamics, my main finding is that having poor health, or the occurrence of health events such as the onset of a disability, significantly increases an individual’s likelihood of entering retirement. Another key contribution to the Canadian literature is the finding that individuals are responsive to the financial incentives found in employer-provided pension plans. Additionally, my estimates indicate that individuals consider their entire financial picture when making their retirement decisions. Chapter 4 seeks to explain the substantial increases in older men’s labour force participation rates that have been observed since the mid-1990s. Using data from the U.S. March Current Population Survey, the Canadian Labour Force Survey, and the United Kingdom Labour Force Survey, I investigate the hypothesis that husbands treat the leisure time of their wives as complementary to their own leisure at older ages. Given this complementarity, a large portion of the increase in older men’s participation rates may be explained as a response to the recent increases in older women’s participation in the labour force, which are largely driven by cohort effects. The methodology of Dinardo, Fortin, and Lemieux (1996) is used to decompose the changes in older married men’s participation rates, demonstrating that increases in wives’ participation in the labour force can explain roughly one quarter of the recent increase in participation in the U.S., up to one half of the recent increase in participation in Canada, and up to two fifths of the recent increase in the U.K. Older men’s educational attainment is also an important factor explaining recent increases in participation, yet cannot be expected to drive further increases in participation rates. In contrast, expected increases in older wives’ participation over the next decade are expected to drive further increases in older men’s participation rates.

Abstract (French)

This dissertation investigates several aspects of the labour force participation and retirement decisions of older individuals, introduced in Chapter 1. Chapter 2 examines how several components of Canada’s income security system could affect individuals’ incentives to retire. The components of Canada’s income security system are documented and we show how they act to change the incentives to retire through a series of simulations. This chapter also provides a thorough survey and critical review of the international evidence on public pensions and retirement, with the broad weight of the evidence suggesting that the structure of public pensions contributes to the decision to retire. In Chapter 3 I fill some of the gaps in the Canadian literature on retirement decisions, which has focused almost exclusively on the role of public pensions. In this chapter I extend the analysis of Baker et al. (2003, 2004a) to examine not only the effects of public pensions, but also the effects of health and employer-provided pensions on individuals’ decisions to enter retirement. Using data from the Survey of Labour and Income Dynamics, my main finding is that having poor health, or the occurrence of health events such as the onset of a disability, significantly increases an individual’s likelihood of entering retirement. Another key contribution to the Canadian literature is the finding that individuals are responsive to the financial incentives found in employer-provided pension plans. Additionally, my estimates indicate that individuals consider their entire financial picture when making their retirement decisions. Chapter 4 seeks to explain the substantial increases in older men’s labour force participation rates that have been observed since the mid-1990s. Using data from the U.S. March Current Population Survey, the Canadian Labour Force Survey, and the United Kingdom Labour Force Survey, I investigate the hypothesis that husbands treat the leisure time of their wives as complementary to their own leisure at older ages. Given this complementarity, a large portion of the increase in older men’s participation rates may be explained as a response to the recent increases in older women’s participation in the labour force, which are largely driven by cohort effects. The methodology of Dinardo, Fortin, and Lemieux (1996) is used to decompose the changes in older married men’s participation rates, demonstrating that increases in wives’ participation in the labour force can explain roughly one quarter of the recent increase in participation in the U.S., up to one half of the recent increase in participation in Canada, and up to two fifths of the recent increase in the U.K. Older men’s educational attainment is also an important factor explaining recent increases in participation, yet cannot be expected to drive further increases in participation rates. In contrast, expected increases in older wives’ participation over the next decade are expected to drive further increases in older men’s participation rates.