Economic Report President

earlier retirement, by increasing lifetime wealth for the early cohortsin the Social Security system and by providing income in old age. Eventhough earnings were rising from generation to generation, manyindividuals might not have saved enough to retire without thesesources of income. For these reasons the average length of retirementhas risen faster than the average male life expectancy at age 55;hence, the average male retirement age has fallen.RECENT CHANGES IN THE LABOR FORCE PARTICIPATIONOF OLDER MENThere are signs that this long-term trend toward earlier retirementmay have abated. Since the mid-1980s the decline in labor forceparticipation rates for men in the older age groups has leveled off(Charts 4-4 and 4-6). Other evidence indicates that an increasingproportion of male pension recipients are continuing to work. Forexample, in March 1984, 37 percent of men aged 55-61 who hadreceived pension income in the previous year were working. By March1993 this number had climbed to 49 percent.Rather than withdrawing from the labor force completely, many oldermen are leaving long-term career jobs but continuing to work, often parttime or part year. Many are becoming self-employed. Chart 4-7 shows, forexample, that between 1985 and 1997 the fraction of men aged 60-61 whoworked full time, year round declined from 55.1 percent to 51.8 percent,while the fraction working part time increased from 5.7 percent to 10.4percent. Increases in part-time work also occurred among men in otherage groups. In 1997, 16 percent of employed men aged 55-64 and 30percent of those 65 and over were self-employed.The use of “bridge jobs” between a full-time career and completeretirement is not a new phenomenon. Evidence from the 1970s indicatesthat even then about a quarter of older workers took such transitionaljobs. More recent evidence suggests that a somewhat higherpercentage may be taking such jobs since 1985.What accounts for the apparent stalling of the decline in male laborforce participation at older ages? It is not yet clear whether the levelingoff since the mid-1980s is a short-term, cyclical phenomenon or anew long-term pattern. And in any case, older men’s hours of work arestill falling, even if the percentage of older men working is not, becauseof the shift from full-time to part-time work seen in Chart 4-7.The recent increase in work by pensioners may stem from a need forincome by those who were displaced during the recession of 1990-91.Some elderly persons cannot afford full-time leisure, but can financepart-time leisure by working part time. Pension recipients’ need forincome may also have grown in recent years because of rising health carecosts. Not only have these costs risen in general, but many employershave stopped providing health insurance to their retirees or have reducedtheir benefits, as discussed below. The increase in early retirement139