Archived Content

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.

Highlights Highlights Main menu Editor's corner More news Contact us Survey information Back issues Statistics Canada home page In depth Français
 
Statistics Canada logo

75-001-XIE

system menu - text links at bottom of page
mast-head for "Perspectives on Labour and Income"
sub-heading "The online edition"

September 2002     Vol. 3, no. 9

Approaching retirement

Wendy Pyper and Philip Giles

When will I retire? Will I have enough money to live and do the things I want?
How will I spend my time? Will I travel? Take up new hobbies? Will I be content not working?
Should I find a part-time job to help pass the time—or to help pay the bills?

As the baby boom generation approaches retirement, more and more older workers will be making decisions that will affect the labour market now and for many years to come. Today's younger workers will soon be forced to deal with the effects of these decisions. If the majority of older workers stop working abruptly (the traditional retirement route), labour demand will jump sharply to replace them. If they delay retirement and continue to work, jobs or career advancement may be less available for younger workers. Are there other possibilities? Could workers approaching retirement slow down—continuing to work but cutting back on their hours? Could they start their own business and take advantage of a more flexible work schedule? What could employers offer to entice their experienced employees to remain, sharing their knowledge with younger employees?

Using the longitudinal Survey of Labour and Income Dynamics (SLID), this article looks at the transitions of older Canadian workers by several characteristics including age, sex, and class of worker. It also examines the voluntary and involuntary nature of job loss.

The aging population and labour force

The oldest baby boomers are now in their early 50s. The proportion of the population in the 50 to 69 age group remained fairly steady from the mid-1970s to the mid-1990s, but since then, it has increased to roughly 20% (Chart A). In fact, the proportions for each age group over 35 have increased, while both groups below 35 have declined.

The participation of older men in the labour market fell from the mid-1970s to the mid-1990s. However, by the late 1990s, the trend had levelled off or reversed slightly (Chart B). The pattern can be attributed partially to economic conditions (Sunter 2001). Women in their 50s saw increased participation rates over the period, reflecting the increased participation of younger women in the labour market starting in the 1970s. As these women entered the older age groups (replacing the older cohort), the participation rates increased.

While these measures are important for understanding the labour market situation of older workers, they do not tell how much time older workers spend in the labour market. One clue is provided by the ratio of part-time employment to total employment (Chart C). For both men and women, older age groups have higher incidences of part-time work, and these have increased for each age group since 1976. The rate is consistently higher for women than for men. However, these overall trends do not shed light on how individuals move into or out of the labour market. For this, longitudinal data must be used.

Transitions of older Canadian workers

This study uses SLID data from 1993 to 1999 (see Data source and definitions). The population chosen comprised persons aged 50 to 67 with a full-time career job (one held for at least eight years) that ended within the five-year period 1993 to 1997. These persons were studied for 24 months following the end of a career job for re-entry into employment.

Ending a career job is not always complete retirement

Just over half of older workers who ended a full-time career job were not working 24 months later, while almost one-third had begun a new full-time job (Table 1). A smaller, but still significant portion began a part-time job (10%). The remainder consisted of various types of non-response.

Partly, these patterns may arise because of the age of the workers in this study—50 to 67—so perhaps the results are influenced by the younger portion of this population. To some extent, this is true. For the youngest age group (50 to 54), the majority of those ending a full-time career job began a new full-time job within two years (58%). These changes may have been part of their career progression. However, another substantial proportion (26%) still had no job.

For those aged 55 to 59, less than a third left a career job to begin another full-time job. Most of them (54%) did not work again within the two years, suggesting that they could be early retirees. For both age groups under 60, around 11% switched from a full-time career job to a part-time job. It appears that these workers are phasing out of employment more gradually.

Women were more likely than men to remain without a job—almost 60%. Almost half of the men remained jobless, while one-third began a new full-time job. Around 10% of both men and women switched to part-time work, suggesting that easing into retirement is a real phenomenon. note 2 

Transition patterns differed between employees and the self-employed. Over half (55%) of those ending full-time paid jobs remained without a job for two years, compared with 37% of those ending a full-time self-employed job. This suggests a stronger attachment to employment for the self-employed (which may be due partly to their ability to have more control over their hours of work). Many (47%) of those ending a self-employed job began a new full-time job. note 3 

What role does choice play?

SLID asks the reason a job ended, thereby allowing a distinction to be made between voluntary and involuntary job loss. The majority of career jobs ended voluntarily, ranging from almost 60% for those aged 50 to 54 to over 80% for those 55 and older (Chart D). Retirement was given as the reason for ending the majority of jobs, with higher proportions in the older age groups. Even for the 50 to 54 age group, one-third of career jobs ended in retirement. Although the majority of this youngest group started a new full-time job within two years, a substantial portion claimed to have retired.

The majority (62%) of workers who ended a career job voluntarily did not work again during the following two years, while 21% started a new full-time job (Table 2). For those who left involuntarily, the figures were 21% and 61% respectively. This indicates that choice plays a role in transitions.

For those who ended their job voluntarily, different patterns exist across age groups. Of those 50 to 54, almost 40% did not have a job after two years; however, the majority found other employment. This contrasts with older age groups where most who left voluntarily remained without a job. While the vast majority of older workers who listed retirement as the reason for ending their career job remained without a job for two years, almost one-third returned to employment. This illustrates that 'retirement' and 'not working' are not considered synonymous.

How long before people started a new job?

Although the transition tables show how many people began a new job following the end of a career job, they do not indicate how much time elapsed between jobs. The date information provided by SLID shows how long workers spent without a job according to their transition. One in 10 workers (11%) who ended a full-time career job began a new full-time job within one month-a very temporary jobless situation (Table 3). In fact, these people may not have been without a job at all, moving directly from one job to the next. Of those not working after one month, 1 in 5 began a new full-time job within 1 to 12 months, while 1 in 17 (6%) began part-time work. Among those not employed after 12 months, the vast majority remained without work; only 1 in 20 began a new full-time job.

One-third of those who started another job within 24 months of ending a full-time career job spent less than a month without a job (Chart E). More men spent less time between jobs, suggesting that they have a stronger attachment to work. Since the population in this study includes people as young as 50, the short duration without a job could partly be explained by job-switching, which is common with younger workers. In fact, 32% of those aged 50 to 54 who went from a full-time career job to another job spent less than one month without a job, compared with 40% of those aged 55 to 59. For the younger age group, the difference may partly reflect the voluntary or involuntary ending of the job.

Older workers who leave their job involuntarily will likely find it more difficult—and may therefore take longer—to find a new job. It is also possible that older workers who leave their job voluntarily may not be quick to find a new job either, since their original intention may have been to withdraw from the labour market completely. In fact, of those who left their job voluntarily, 37% returned to work within a month, compared with 28% of those who left involuntarily (Chart F). More of those whose job ended involuntarily took longer before starting a new job.

Oldest workers spent more time without a job

Another way to look at jobless duration is the average length of time spent without a job. For workers who found a new job within 24 months, the average jobless period was 5.6 months (Chart G). The amount of time increased with age, ranging from 5 months for those 50 to 54 to almost 7 months for those 60 to 64. On average, the self-employed spent less time without a job than their salaried counterparts. The average number of months without a job was twice as high for employees as for the self-employed (6.3 months compared with 3 months). For those who stated retirement as the reason their job ended, the average jobless period was 7 months, compared with 4 months for those stating other voluntary reasons. Those who retired and began a new job took on average more time between jobs than those leaving for any other reason.

Conclusion

As baby boomers approach the traditional retirement age and begin the retirement process, it is important to understand the paths they are taking. The face of the future labour market will depend partly on what older workers do in their final years at work. With their departure could go their knowledge, so it is important to ensure a transfer to the next generation. Many studies have shown that retirement does not necessarily mean an abrupt end to employment—the transition from work to full retirement can be interspersed with periods of employment. If older workers were to keep working, even at a reduced level, younger workers would have the opportunity to acquire their skills and knowledge. To this end, employers may consider implementing flexible work schedules in the form of reduced hours, part-year employment, or job-sharing with their replacements.

Almost half of older workers who ended a full-time career job between 1993 and 1997 began a new job within two years. The majority of these found a new full-time job, and a smaller but significant portion (10%) switched to part-time employment, suggesting that easing into retirement is a real phenomenon. Differences exist between age groups, but a significant number of the youngest group did not work again, and a significant number in the older groups returned to work. More self-employed returned to work, and returned sooner than salaried workers. Those who left their job involuntarily were more likely than those who left voluntarily to start a new full-time job, but a substantial proportion of those who claimed to have retired began to work again, suggesting that retirement and not working are not synonymous.

As more years of longitudinal data become available, they will provide more detail on what is happening in Canada. As the aging workforce changes the nature of the labour market, workplace policies may be modified to allow more flexibility for older people to work.

 

Data source and definitions

The Survey of Labour and Income Dynamics (SLID) is a longitudinal household survey that began in 1993. Every three years, a new panel of approximately 15,000 households enters the survey and is surveyed for six years.

This study examined all main jobs held by persons aged 50 to 67 note 1  that ended between 1993 and 1997. Some jobs had invalid date information, which prohibited assignment of a job duration. These records were dropped. Job duration was determined, and all jobs held for less than eight years were dropped. Jobs held for eight years or longer were classified as career jobs. All jobs held full time at the time of the job loss were selected as the population under study and observed for a period of 24 months following the end of the career job. The first job obtained during these 24 months was categorized as the next job held.

Each year, between 2.4 and 2.9 million jobs were held as main jobs by workers aged 50 to 67, and of these jobs roughly 40% had been held for less than eight years. The remaining 1.4 to 1.7 million had been held for eight years or more, and roughly 10% (between 121,000 to 202,000) of these ended each year. Once pooled, this represents 763,000 jobs that ended between 1993 and 1997, of which 656,000 were full-time at the time of the job loss. These are the jobs used in this study—full-time career jobs that ended within the five-year period from 1993 to 1997.

Since this study examines labour market transitions of older workers, the population selected included those as young as 50. Although too young for 'traditional' retirement, it is important to examine what people this age are doing. Gower (1997) found that 10% of those who retired between 1991 and 1995 were between 50 and 54. While the term 'retired' does not necessarily mean the end of work, it does imply that these workers are making some changes to their employment situation that are generally associated with older workers.

Main job: the job with the most scheduled hours (usual hours) in the month.

 

The American experience

Quinn, Burkhauser and Myers (1990) examined the exit patterns of older Americans from career jobs using the Retirement History Study. This longitudinal survey followed 58 to 63 year-olds over a 10-year period. The sample consisted of nearly 2,100 respondents in 1969 who ended a career job (at least 35 hours per week and held for 10 years or more). The authors chose to examine exits from career jobs because of the importance of jobs with long durations (nearly 80% of respondents had at least 10 years experience in their longest job).

They found that 27% of the men returned to the labour market within the following four years. These workers either found a new full-time (12%) or part-time (10%) job, or reduced the hours worked at their career job to below 20 per week (5%). A similar pattern existed for non-married women, except that more women reduced their hours at their career job.

Exit patterns for self-employed men were very different, with half of them remaining employed. Of those who continued to work, 25% reduced the hours in their career job—the most common kind of transition. The remainder were evenly split between beginning a new full- or part-time job. Many characteristics were found to be related to the transition process. Health and age of the worker played important roles, as did industry, occupation, pension eligibility, and wage rate of the career job.

 

Deserving further study

This paper gives only a first glimpse at labour market transitions made by older workers. Unfortunately, the sample size of older workers in SLID does not support the desired depth of analysis. It would also be interesting to look at the job search activities of older workers. To do this, transitions between the three categories of labour force status (employed, unemployed, and not in the labour force) could be examined. Ideally, further breakdowns would be made, looking at transitions into self-employed versus paid jobs and examining the flexibility found in self-employment. The provision of benefits such as private health care coverage could be examined to see if workers with benefits are less likely to end their career job. Pension coverage could be looked at as well to determine if workers are supplementing their pensions with additional income. Changes in the number of hours worked could be examined to observe possible shifts to fewer hours of work in the career job. How does marital situation affect workers—do couples make joint decisions regarding labour market transitions? What role does health play—are older workers switching to new jobs because the physical demands of their career job are too great? These are just some of the areas of interest that unfortunately cannot yet be examined.

 

Defining retirement

'Retirement' is a commonly used term that has many meanings (see Quinn, Burkhauser, and Myers, 1990, for an extensive review of the literature). Retirement could be indicated by the receipt of a public or private pension (Herz, 1995; Purcell, 2000). It could also be signalled by a reduction in work hours below a certain level, either an absolute number or a percentage of previously worked hours (Honig and Hanoch, 1985; Reimers and Honig, 1989). In some cases, it could be a self-determined condition, as in a response to a survey question (Gustman and Steinmeier, 1983). As well, it might mean a complete withdrawal from the labour market.

Many studies have found that retirement is not always a well-defined event, but instead a process. Some workers may retire from their job, begin to draw their pension, and yet work part time—either to supplement their pension or to pass the time. Some may retire and start their own business, taking advantage of the flexibility in work arrangements that comes with some businesses. Some may return to the labour market after a period of retirement. And there are also those who continue working, simply moving to a new full-time job. (Although this type of movement is not a retirement per se, it is nonetheless a transition and is included in discussions of retirement in many studies.)

Notes

  1. Labour information for a period of two years following the job end is required to determine the transition, and since SLID does not ask the labour questions to those aged 70 or older, workers aged 68 and older must be excluded.
  2. It would be interesting to look at changes in the hours of work of a career job to examine if workers are decreasing their hours of work within the career job. This may not be possible due to sample size.
  3. Due to sample size, breakdown of the new job by class of worker was not possible.

References

  • Gower, Dave. 1997. "Measuring the age of retirement." Perspectives on Labour and Income (Statistics Canada, Catalogue no. 75-001-XPE) 9 no. 2 (Summer): 11-17.
  • Gustman, Alan L. and Thomas L. Steinmeier. 1984. "Partial retirement and the analysis of retirement behavior." Industrial and Labor Relations Review 37, no. 3 (April): 403-415.
  • Herz, Diane E. 1995. "Work after early retirement: an increasing trend among men." Monthly Labor Review (April): 13-20.
  • Honig, Marjorie and Giora Hanoch. 1985. "Partial retirement as a separate mode of retirement behavior." The Journal of Human Resources 20, no. 1 (Winter): 21-46.
  • Purcell, Patrick J. 2000. "Older workers: employment and retirement trends." Monthly Labor Review (October): 19-30.
  • Quinn, Joseph F., Richard V. Burkhauser and Daniel A. Myers. 1990. Passing the torch: The influence of economic incentives on work and retirement. Kalamazoo: W. E. Upjohn Institute for Employment Research.
  • Sunter, Deborah. 2001. "Demography and the labour market." Perspectives on Labour and Income (Statistics Canada, Catalogue no. 75-001-XPE) 13, no. 1 (Spring): 28-39.

Author

Wendy Pyper is with Labour and Household Surveys Analysis Division. She can be reached at (613) 951-0381 or perspectives@statcan.gc.ca.

Philip Giles is with the Income Statistics Division. He can be reached at (613) 951-2891 or perspectives@statcan.gc.ca.

Statistics Canada FIP identifier Government of Canada wordmark
Highlights ]
Main menu | Editor's corner | More news | Contact us | Survey information | Back issues ]
Statistics Canada home page | In depth | Français ]

© Statistics Canada - Conditions of  use Published: 2002 09 26