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Discussion of Understanding Earnings, Labor Supply and Retirement Decisions

This research discusses the policy implications of understanding the relationship between earnings, labor supply, and retirement decisions. It highlights the impact of investing in human capital, the effects of increasing the retirement age, age discrimination, and the challenges faced by older women. The paper concludes by questioning the effectiveness of delayed retirement as a solution to the retirement savings crisis.

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Discussion of Understanding Earnings, Labor Supply and Retirement Decisions

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  1. Anthony Webb Research Director, Retirement Equity Lab (ReLab) The New School Discussion ofUnderstanding Earnings, Labor Supply and Retirement Decisions Retirement Research Consortium Meeting Washington DC August 3-4 2017

  2. My Instructions Were to Focus on the Policy Implications. But… • Excellent paper • Great dataset • Sound methodology • Recommend you read it!

  3. Key Contribution • Unlike previous models of the retirement decision, workers in this model choose how much to invest in their human capital. • Workers will respond to incentives to delay retirement by investing more in their human capital. • This investment will increase their wages and make work at older ages more attractive. • Previous research underestimates the impact on wages and labor supply of policies to encourage work at older ages.

  4. Are the Differences in Predicted Responses Economically Significant? • Paper simulates the effect of changes in the Social Security program. • Some are quite radical, so I will focus on the impact of increasing the Normal Retirement Age from 65 to 67.

  5. Model is Plausible for Those With Advanced Degrees • Ph.D Economists Invest in their human capital by: • Reading important new papers. • Attending conference presentations by top speakers. • Learning new datasets.  • But the model is estimated on high-school educated white males.

  6. The Model: Assumptions vs. Reality • The model assumes a perfectly competitive labor market in which workers pay for investment in human capital through lower wages. • In reality: • Who pays for the investment – the employer or the employee? • How much choice does the employee have over the level of investment? • How much investment in the human capital of high-school educated older workers takes place?

  7. Top 10 Jobs for High-School Educated White Males Ages 55-64 These don’t look like jobs requiring much on-going investment.

  8. The Role of Age Discrimination Why are older workers not receiving training? Is it... • An optimizing choice by workers nearing retirement? • The result of age discrimination by employers? • Dedrickand Dobbins (1991), Ghilarducci and Saad-Lessler (2012), Greller (1999), Rosen and Jerdee (1976), Van Vianen and de Pater (2011) point to age discrimination.

  9. More Generally, Age Discrimination, Not Lack of Human Capital Forces Older Women Into Lower Paying Jobs • Research shows that educated older women -- compared to young women have distinct disadvantage at hiring. • Women's value in a culture of patriarchy -- of the "male gaze" -- depreciate women faster. Young women have complex value when working with men, part partner, colleague and object. That value diminishes over time. • Statistical discrimination means that once a woman ages she is assumed to inhabit the average characteristics of older women -- frailty and self- abnegation.

  10. Conclusion • In theory, policies to encourage work at older ages will create a virtuous circle of higher labor force participation and higher wages. • But the effects appear to be small and not economically significant. • Relying on delayed retirement as a solution to the retirement savings crisis may condemn older Americans to life in the precariat.

  11. Thank you

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