Has the Displacement of Older Workers
Increased?
Alicia H. Munnell, Steven Sass, Mauricio Soto, and Natalia Zhivan
Center for Retirement Research at Boston College
“Pathways to a Secure Retirement”
National Press Club, Washington DC
August 11, 2006
The decline in the retirement age needs to
reverse…
Average Retirement Age for Men, 1961-2004
67
66
Age
65
64
63
62
61
60
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
Source: Authors’ calculations of the U.S. Bureau of Labor Statistics. 1962-2005. Current Population Survey.
1
…because Social Security replacement rates are
declining…
Estimated Social Security Replacement Rates for the Medium Earner, 2002 and 2030
50 %
41%
40 %
39 %
36 %
33%
30 %
30 %
20 %
10 %
0%
2002
2030
Reported replacem ent rate (20 30 incorporates extension of Norm al Retirem ent Age)
After Medicare Part B deduction
After personal incom e taxation
Source: Authors’ calculations based on Alicia H. Munnell. 2003. “The Declining Role of Social Security.” Just the Facts on
Retirement Issues. Center for Retirement Research at Boston College.
2
…and the shift to 401(k) plans has produced
small balances.
Workers with Pension Coverage, by Pension Type, Survey
of Consumer Finances 1983, 1992, and 2004
70 %
19 83
6 3%
6 2%
19 9 2
60%
50 %
20 0 4
44%
40 %
40 %
30 %
26 %
20 %
16 %
20 %
17%
12%
10 %
0%
Defin ed ben efit on ly
Defin ed con tribution - 40 1(k) on ly
Both
Source: Alicia H. Munnell and Annika Sundén. 2006. “401(k) Plans Are Still Coming Up Short.” Issue Brief No. 44. Chestnut Hill, MA:
Center for Retirement Research at Boston College.
3
But bad things happen to people in their fifties,
making continued work difficult.
Incidence
Incidence of Selected Personal Shocks, HRS 1992 - 2002
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
41%
19 %
7%
Major Medical
Condition
Severe Disability
7%
Widowed
Laid off
Source: Richard W. Johnson, Gordon B.T. Mermin, and Cori E. Uccello. “How Secure Are Retirement Nest Eggs?” Issue Brief No.
45. Chestnut Hill, MA: Center for Retirement Research at Boston College.
4
Question: Have displacement rates increased for
older workers?
Older Displaced Workers as a Percent of Total Displaced Workers,
1984, 1994, and 2004
12%
10%
10%
8%
8%
6%
1984
1994
8%
2004
6%
5%
5%
5%
4%
4%
4%
2%
0%
50-54
55-59
60-64
Age
Source: Authors’ calculations of the U.S. Bureau of Labor Statistics. 1984-2004. Current Population Survey and Displaced Workers
Survey.
5
Many factors can affect displacement rates of
older workers:
•Greater educational attainment
•Shift from goods to services
•Shift from defined benefit to defined contribution plans
•Aging of baby boom
•Changing tenure
Source: Alicia H. Munnell, Steven Sass, Mauricio Soto, and Natasha Zhivan. 2006. “Has the Displacement of Older Workers
Increased?” Paper prepared for the 8th Annual Joint Conference of the Retirement Research Consortium, Washington, DC. August 1011, 2006.
6
Data suggest tenure of older workers has
declined.
Percent of Men and Women Age 55-64 with More than 10,15, and 20
Years of Tenure, 1983 & 2004
70%
6 2%
6 0%
1983
54%
2004
47%
50%
40%
40%
35%
29 %
30%
20%
10%
0%
Tenure: 10 or more
years
Tenure: 15 or more
years
Tenure: 20 or more
years
Source: Authors’ calculations of the U.S. Bureau of Labor Statistics. 1984-2005. Current Population Survey.
7
The Displaced Workers Survey (DWS)
provides 20 years of displacement data.
Percentage of Workers Displaced by Reason for Displacement, 1984-2004
16 %
Other *
14%
Self-operated
business failed
Seasonal job
com pleted
Position/ shift
abolished
Insufficient
work
Com pany
closed/ m oved
12%
10 %
8%
6%
4%
2%
0%
19 84
19 88
19 9 2
19 9 6
20 0 0
20 0 4
*Note: Adjusted as suggested in Farber (2003).
Source: Authors’ calculations of the U.S. Bureau of Labor Statistics. 1984-2004. Current Population Survey and Displaced Workers
Survey.
8
Raw DWS data suggest that older worker
displacement rates remain below those for
younger workers.
Displacement Rates, by Age, 1984-2004
14%
12%
10%
Ages 20-49
Ages 50-6 4
8%
6%
4%
2%
0%
4 86 88 9 0 9 2 9 4 9 6 9 8 0 0 0 2 0 4
8
19 19 19 19 19 19 19 19 20 20 20
Year
Source: Authors’ calculations of the U.S. Bureau of Labor Statistics. 1984-2004. Current Population Survey and Displaced Workers
Survey.
9
Regression results also show older workers with
lower probability of displacement.
Probability of Displacement for Workers Age 50-64 Compared
to Workers Age 20-49, 1984-2004
19 84
19 88
19 9 2
19 9 6
2000
2004
2%
0%
-2%
-4%
-6 %
-8%
-10%
Source: Authors’ calculations of the U.S. Bureau of Labor Statistics. 1984-2004. Current Population Survey and Displaced Workers
Survey.
10
However, further DWS analysis indicates that
job tenure – not age – drives the results.
Probability of Displacement for Older Workers by Tenure and Age, 2004
Tenure: 10 or more years
Tenure: 5-9 years
Tenure: 1-4 years
Age: 60-64
Age: 55-59
Age: 50-54
-15%
-10 %
-5%
0%
5%
10 %
15%
Source: Authors’ calculations of the U.S. Bureau of Labor Statistics. 2004. Current Population Survey and Displaced Workers Survey.
11
The declining impact of education in DWS is
also interesting.
Impact of College on Probability of Displacement, 1984-2004
19 84
19 88
19 9 2
19 9 6
20 0 0
20 0 4
1%
0%
-1%
-2%
Not statistically
significant
Statistically
significant
-3%
-4%
-5%
Source: Authors’ calculations of the U.S. Bureau of Labor Statistics. 1984-2004. Current Population Survey and Displaced Workers
Survey.
12
Using the HRS also shows that tenure
matters, not age.
Probability of Displacement for Older Workers by Tenure and Age, HRS 1994-2004
Tenure: 10 or more years
Tenure: 5-9 years
Not statistically
significant
Tenure: 1-4 years
Statistically
significant
Age: 60-64
Age: 55-59
Age: 50-54
-15%
-10%
-5%
0%
5%
10%
15%
Source: Authors’ calculations of the University of Michigan. 1994-2004. Health and Retirement Study.
13
HRS also reveals that pensions have a modest
negative effect on displacement.
Probability of Displacement by Type of Pension Plan, HRS 1994-2004
Defined
benefit
Not statistically
significant
Defined
contribution
Statistically
significant
Both
-15%
-10 %
-5%
0%
5%
10 %
15%
Percent
Source: Authors’ calculations of the University of Michigan. 1994-2004. Health and Retirement Study.
14
HRS also shows displacement has permanent
effects on work.
Probability of Working, HRS 1994-2004
Years since
laid off
Years since
displacem ent
-21%
Laid off
Business closing
-15%
-10%
-5%
0%
5%
10%
15%
Percent
Source: Authors’ calculations of the University of Michigan. 1994-2004. Health and Retirement Study.
15
DWS also shows that finding a new job is
more difficult for older workers.
Probability of Re-employment for Displaced Workers Age 50-64
Compared to Workers Age 20-49, 1984-2004
19 84
19 88
19 9 2
19 9 6
2000
2004
5%
0%
-5%
-10%
-15%
-20%
-25%
Source: Authors’ calculations of the U.S. Bureau of Labor Statistics. 1984-2004. Current Population Survey and Displaced Workers
Survey.
16
However, DWS suggests that age is not a
significant factor in size of wage loss.
Percentage Change in Real Weekly Earnings for Reemployed Workers Age 5064 Compared to Workers Age 20-49, 1984-2004
19 84
19 88
19 9 2
19 9 6
20 0 0
20 0 4
5%
0%
-5%
-10 %
Not statistically
significant
Statistically
significant
-15%
-20 %
-25%
Source: Authors’ calculations of the U.S. Bureau of Labor Statistics. 1984-2004. Current Population Survey and Displaced Workers
Survey.
17
Conclusion
•Workers need to work longer.
•Job displacement of older workers has lasting effects.
•Displacement has not increased in two decades.
•But job tenure, not age, drives displacement trends.
•And declining job tenure suggests older workers could be
imore vulnerable in the future.
18