On April 27, the Senate Special Committee on Aging held a hearing to examine the participation of older workers in the workforce. Ranking Member Herb Kohl (D-WI) opened the hearing saying, “Today, older Americans are healthier and more active, and many are willing and able to continue to make a contribution to the workplace and to our economy. We must incorporate this new mindset into our national culture, and develop policies that reflect this reality. Our seniors deserve it and our economic future may well depend on it.” Chair Gordon Smith (R-OR) followed, noting that many businesses are responding to this trend: “For example, many employers offer elder care benefits and provide flexible work arrangements. One retail employer allows employees to work at their Florida stores during the winter and their stores in other areas of the country during the summer.”
Director of Education, Workforce, and Income Security at the Government Accountability Office (GAO) Barbara Bovbjerg detailed the results of a recent GAO study examining demographic and labor trends and the need to increase labor force participation among older workers. Noting that the aging of the baby boom generation, increased life expectancy, and decreasing fertility rates are impacting the United States’ economy, Ms. Bovbjerg said, “The average life expectancy at age 65 for men has increased from just over 13 years in 1970 to 16 years in 2005, and is projected to increase to 17 years by 2020. Women have experienced a similar rise—from 17 years in 1970 to over 19 years in 2005. Women’s life expectancy at age 65 is projected to be 20 years by 2020.” Additionally, the decline in the fertility rate, “is a major factor in the slowing growth of the labor force over the last decade, a trend that is expected to continue. By 2025 labor force growth is expected to be less than a fifth of what it is today.”
Ms. Bovbjerg also pointed out that the labor participation rates of older Americans have been increasing in recent years; in 2002, 69 percent of men and 56 percent of women over the age of 55 were working. For women, that rate is expected to grow to over 60 percent by 2012. “These recent increases in labor force participation by older workers are encouraging. If Americans increase the number of years they work it could ease pressure on government retirement programs by increasing revenues to the Social Security and Medicare trust funds.”
The GAO report also found a number of factors that influence workers’ retirement and employment decisions, including the eligibility rules of both employer pension plans and Social Security; an individual’s health status; the need for health insurance; personal preference; the employment status of a spouse; and the availability of suitable employment, including part-time work or flexible work arrangements.
The committee heard from Kathlyn Peterson of Madison, Wisconsin, who explained why, at the age of 65, she continues to work as a medical transcriptionist at St. Mary’s Hospital Medical Center. “I know that there are other things that I could be doing at my age: I could volunteer, do things at home, act more ‘retired.’ But working part-time keeps me active and healthy. And I get to continue working in the job that I love.” Additionally, she is able to work part-time and still receive her pension, and she receives full health benefits.
Laurie Barr, assistant director of human resources for Oregon Health & Science University (OSHU) highlighted three best practices undertaken by the university to retain older workers: flexible work arrangements, a generous retirement plan, and shared knowledge of older workers. “It is critical that we retain our healthcare workers. Many health care jobs are very physically demanding, which for an older worker can be problematic. At OSHU, there are other options in those situations. An older nurse, for example, who may not be able to continue to keep up with the physical demands of inpatient nursing may have other full or part time opportunities at OSHU to continue using his or her nursing skills. That could mean moving to a slightly less demanding outpatient nursing position or something in nursing education, telephone triage, case management or quality review, for example,” she said. Additionally, once OSHU workers reach the age of 50, they become 100 percent vested in the university’s defined contribution plan regardless of their length of service.
Testifying in support of phased retirement, Douglas Holbrook of AARP said that “phased retirement programs could ease the projected labor shortage and boost the economy through longer workforce participation by experienced employees. This approach could also expand work options for older workers, as well as allow them to ease into retirement before completely exiting the workforce.” The AARP Best Employers for Workers Over 50 Program annually honors companies and organizations addressing the needs of an aging workforce. The criteria for making the list includes placing an emphasis on the attraction and retention of their workforce; offering programs to support the maturing workforce; showing appreciation for longer service, recognizing mature worker issues, and supporting family care needs; sponsoring formal or informal arrangements allowing long-tenured and older employees to reduce work hours without jeopardizing their benefits; and emphasizing career-long training.
Saying that current phased retirement programs have largely been driven by employees, Valerie Paganelli of Watson Wyatt Worldwide said, “Despite clear interest in phased retirement by both employers and employees, sizable gaps exist between the types of programs workers want in order to phase into retirement with their career employer and what employers currently allow in terms of such opportunities.” Ms. Paganelli highlighted a variety of incentives to keep older workers in the workforce. “From a financial perspective, phasing can provide more income than full retirement at the same age and enables retirees to stretch savings over a life that is expected to be longer than that of earlier generations,” she said, continuing, “In particular, women are shown to extend their careers by up to 21 months when phased retirement arrangements are available and men are show to extend their careers by eight months when eldercare services are available.” Ms. Paganelli cited a “variety of federal rules that generally preclude the use of qualified retirement plans, especially pension plans, to partially fund a phased retirement program” as obstacles to implementing such programs. She recommended better federal coordination to “facilitate the changing landscape of retirement in the United States,” the provision of phased retirement distributions from qualified defined benefit plans, and the establishment of a framework for “Americans to understand and practice key components of successful retirement income planning.”
