Using the CPS to track retirement trends among older men Essay

Changes in the age structure of the population and dramatic declines
in work activity among older men have made retirement trends a critical
social issue. The economic and political ramifications of these trends
are considerable: Already, declines in retirement age have combined with
a rising life expectancy and changing age distribution, among other
factors, to put pressure on public and private pension systems.
Intergenerational conflicts may also arise, particularly during periods
of high unemployment; for example, early retirement inducements are
often used by employers seeking to avoid laying off younger workers.
And, labor shortages could occur as the number of retires increases in
relation to the number of new labor force entrants.



It has always been difficult to identify the age at which people
retire because separation from the labor force is often neither
abrupt–part-time work is very common among older workers–nor
final–many older persons reenter the labor force after a period of
absence. In addition, retirement status is best defined by current work
activity for some purposes, while for others, pension receipt is the
more appropriate criterion. Given the types of data that are most
readily available, a simple definition of retires is often used, such as
those who receive Social Security retirement benefits, or those above a
certain age, such as 5, who are not in the labor force.

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Transitions from work to retirement are probably best tracked by
longitudinal surveys, which follow the same individuals for a period of
time. Among the most notable of these are the Retirement History Survey
and the Continuous Work History Sample of the Social Security
Administration, and the National Longitudinal Survey, conducted by the
Center for Human Resource Research, Ohio State University. Longitudinal
surveys are particularly useful because of the considerable amount of
demographic and other personal information available on individuals in
the survey. A drawback of many longitudinal surveys is that they focus
on persons in a limited age range at the time of the initial survey,
which means that they cannot provide comparisons between these and other
cohorts of workers.


One does not need to follow the same people to track a group’s
labor force trends. Unlike the longitudinal surveys, the Current
Population Survey (CPS) relies on a rotating sample–that is, a
household (technically, an address) is in the sample for a limited time
and is then replaced. In the CPS, 25 percent of the sample changes each
month. But, while the survey does not follow the same people for long
periods, the sample can “represent” the same group over time.
In other words, within the limits of sampling reliability, any random
sample of persons 55 years of age at one point in time would represent
the same group as a different sample of 54-year-olds surveyed a year
earlier.



Because of the long history of the CPS and the frequency of
observation, the survey can provide an excellent overview of changes in
retirement trends. The data can be used in three ways. The
cross-sectional view examines the labor force characteristics of persons
of different ages at a fixed point in time. The time-series view
examines the behavior of one or more demographic groups at different
times. A third, the cohort view, follows the same people, or a sample
representing the same people, as they age. This view has the advantage
of permitting one to consider the unique history of each population
group when assessing its present labor force status.



“Retirement” data from the CPS have generally been used
with the time-series approach to track changes in labor force
participation rates for broad age groups, usually persons 55 to 64 years
and 65 years and over. However, since 1963 CPS data have been available
on labor force characteristics by single year of age and by sex, for
persons age 55 to 74. Thus, the CPS provides a better vantage point
than most longitudinal surveys in that it follows work histories of many
cohorts through their older years.



This summary presents these previously unpublished data for older
men and estimates of rough retirement histories for different
generations of these men. A simple definition of retirement is used for
this purpose; all men over age 55 who are not in the labor force are
deemed to be retired. Conversely, all who are working, whether full or
part time, and all those actively looking for work are not retired.



Labor force participation rate–the proportion of the population in
the labor force at each age–for men between ages 55 and 74 are shown in
table 1 for the years 1963-83. From these estimates, two types of
retirement histories are calculated, using the cohort perspective, for
the 1904-22 birth cohorts. (Insufficient data are available for earlier
cohorts, and later cohorts are not old enough to be included.) Table 2
shows the proportion of the population of each cohort that had retired
at any particular age. These estimates are additive, that is, adding
across gives the proportion of a cohort that had retired as of a certain
age. These retirement rates are depicted to chart 1, which shows the
percentage of men in even-year birth cohorts who were out the labor
force as of selected ages. The heights of the five sections of each bar
represent the percentages of men who were retired by age 61, and of
those who subsequently retired at ages 62, 63 and 64, 65, and 66 to 70.
Of course, the retirement histories of the younger cohorts are not yet
complete.


The second type of retirement history is provided in table 3, which
gives the probability of someone who is in the labor force as of a
certain age leaving the labor force the next year. For example, this
table shows the probability that someone who was in the labor force at
age 65 in 1970 would be out of the labor force at age 66 in 1971.



The difference in the two types of “retirement rates” is
that the first shows the proportion of the population of each cohort
leaving the labor force at each age, while the second shows the
proportion of those in the labor force at each age leaving it the next
year. In other words, table 2 answers the question, “At what age
did men in each cohort leave the labor force?” For example, among
the 1904 cohort, 3.1 percent left the labor force at age 60, and 2.2
percent did so at age 61. Table 3 answers the question, “What is
the probability of someone who was in the labor force as of a certain
age retiring (that is, leaving the labor force) the next year?”
Among the 1904 cohort, 3.5 percent of 59-year-old labor force
participants retired at age 60; of those left in the labor force, 2.6
percent retired at age 61, and so forth.



In using any of these data, one should keep in mind that, as in any
sample industry, the results shown may differ from the true population
values, largely because of sampling error. The problem of statistical
reliability of the estimates becomes more acute as the size of the group
being counted declines. Thus, apparently inconsistent trends or odd
occurrences (such as the two positive retirement rates shown in tables 2
and 3) may be attributable, at least in part, to sampling error, and to
other types of measurement error such as response or coding errors.
Users should intrepret the estimates for specific cells in each table
with some caution; the data are best used to show general trends in
retirement behavior.

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