Early retirement: an idea whose time has passed?

Robert Samuelson

WASHINGTON – We may be witnessing the last gasp of early retirement – not just in the United States but in many industrialized countries. Considering the high unemployment since the 2008 financial crisis, you might expect the opposite. Early retirement would flourish. It would strike many unemployed older workers as the path of least resistance. Can’t get a job? Retire instead. Surely this has happened, but it’s being diluted by a determination to work longer. Early retirement is in retreat.

So finds a new study of 20 advanced countries done by economists Gary Burtless and Barry Bosworth of the Brookings Institution, a think tank. Excluding countries with depression-like unemployment – Greece, Portugal, Spain and Ireland – all these nations have experienced higher labor force participation by older workers since 2007. Some gains are startling. In Germany, the share of the 60-to-64 population with jobs went from 33 percent in 2007 to 47 percent in 2012; in the Netherlands, from 30 percent to 44 percent.

This continues a trend of working longer that started in the 1980s and 1990s. In the United States, 52 percent of the 60-to-64 population held jobs in 2012, the same as in 2007. But the share of older people with work or searching for a job – the broad definition of “labor force participation rate” – has continued to rise. Translation: a shrinking share of older Americans are dropping out of the labor force and relying exclusively on retirement benefits and savings.

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What’s occurring is a massive shift in private behavior. For most of the 20th century, working years decreased in industrial countries. People stayed in school longer and retired earlier. In 1910, reports Burtless, more than half of American men aged 73 were still working; by 1994, half of men aged 62 had retired. This is now shifting: In 2011, only at 64 had half of men retired. At 65, men’s labor force participation rate was 46 percent, up from the historical low of 31 percent in 1982. Trends for women are similar.

The causes lie in a messy mix of public policy, improved health, and changes in lifestyles and economic conditions. For the United States, Burtless cites: an increase in Social Security’s eligibility age for full benefits from 65 to 66; a shift among employers from “defined benefit” pensions (which provide payments until recipients’ death) to “defined contribution” pensions (which provide support only until pension savings are exhausted); and higher education levels among baby boomers. “Better educated people retire later in life,” he says, “and baby boomers are much better educated than previous generations.”

Similar factors are probably at work abroad: cuts in public programs – or fear of cuts; more economic uncertainty; longer lives and jobs that are less physically demanding. Still, a few advanced countries retain low retirement ages: prominently, France, Italy and Belgium. In 2012, only about 20 percent of their aged 60-to-64 populations had jobs.

On the whole, the lengthening of working lives is a good thing, though with one big caveat. First, the benefit: As populations age, countries no longer can afford to have growing numbers of elderly supported by declining numbers of young and middle-aged. Welfare states are strained, and the costs of caring for the elderly are a main cause. People need to remain productive for longer. Now, the caveat: This transition is happening at an awful time. Without stronger economic recoveries, jobs taken by older workers contribute to the high unemployment of the young.

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Robert Samuelson’s column is distributed by The Washington Post Writers Group.