Physical Job Demand and Early Retirement
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Transcript of Physical Job Demand and Early Retirement
Physical Job Demand and Early Retirement
Sepideh Modrek & Mark Cullen
14th Annual Joint Conference of the Retirement Research Consortium
August 2, 2012
Motivation
• New policy initiatives recommend raising the full retirement age (FRA) from 67 to 69*
• Longevity differentials by SES & occupational class may make such proposals regressive – One particular difference across occupational classes is
physical job demand– France raised the FRA from 60 to 62, but included
exemptions for physically demanding jobs• Previous studies on physical job demand have
some measurement limitations
* For example, this was a key recommendation of Obama’s federal-deficit commission (12/1/2010)
Study setting
• Ongoing collaboration with a large US aluminum manufacturer, Alcoa
• Multiple sources of administrative data resolves issues of self-report– External report of retirement date, health, wages,
defined benefits pension eligibility and payouts, 401K accumulation, hospitalization/injuries
• Externally rated physical job demand• Higher variation in physical job demand than
general public
Comparison of self-reported vs. expert-reported job demand
0
20
40
percent
Spearman r = 0.22
Selection into physically demanding jobs
• Attraction-selection-attrition cycle– Those who choose to work in high demand jobs
are paid more and may have a higher marginal utility for work
– Those who choose to work in high demand jobs are healthier and are selected on physical ability
Research questions
• Does physical job demand predict earlier retirement once we account for health and wages?
• Is pension eligibility more important for those with higher job demand?
• Does a health shock induce retirement, especially by job demand?
Study sample (58+)
• Reason for leaving Alcoa was only coded between the years 2001-2007
• Male hourly workers born between 1941-1948 working on Jan 1, 1996 at 9 union plants
• Must retire after reaching age 58• Analytic sample has 1500-1700 individuals
Analytic methods
• Discrete time analysis• Duration analysis– Descriptive Kaplan-Meier plots– Cox proportional hazards models– Time-varying Cox proportional hazards models• At each birthday a worker’s eligibility for defined
benefits pension evaluated• If eligible, pension pay out is calculated (based on job
grade, tenure)
Sample characteristics Mean SD Mean
Age of sample at entry 58 MarriedAge at retirement 61.48 1.71 Ever Married 90%Job Demand Race Sedentary/ Light 17% White 89% Medium 53% Health Heavy/Very Heavy 30% Health Score 2000 Q1 19%Job Demand Change Health Score 2000 Q2 21% Transition to lower demand job 8% Health Score 2000 Q3 21%Tenure at entry Health Score 2000 Q4 21%
0-15 years 7% Health Score 2000 Q5 18% 15-20 3% Injury
20-25 13% Injured within 2 years of retirement 9%
25-30 19% Defined Benefits Pension
30-35 32% Eligibility at time of entry 58%
35-40 26% Defined Contributions Pension Accumulation
Wage 401K Participation 86%Final Hourly Wage 18.47 2.00
N=1660
Kaplan-Meier curves
Analysis time =0 is at age 58 and data is right censored at 1/1/2001. For those without a retirement date data is left censored at 1/1/2008.
– Heavy – Medium – Light
– All
Cox models
Research questions
• Does job demand predict earlier retirement once we account for health and wealth?
• Is pension eligibility more important for those with higher job demand?
• How does a health shock induce retirement, especially by job demand?
Time to Retirement (after 1/1/2001) Hazard Ratio (95 % Confidence Interval)
1 2 3 4 5 6Job Demand (omitted JD=3, Medium) Sedentary/Light (JD=1 or 2) 0.833* 0.787** 0.829** 0.818** 0.8 0.461***
(0.690 - 1.004) (0.645 - 0.960) (0.687 - 1.000) (0.678 - 0.988) (0.470 - 1.362) (0.295 - 0.720) Heavy/Very Heavy (JD=4 or 5) 1.168* 1.168* 1.169* 1.156* 1.208 0.864
(0.985 - 1.387) (0.976 - 1.398) (0.985 - 1.388) (0.973 - 1.372) (0.829 - 1.760) (0.590 - 1.267)Changed to lower demand job after 1/1/96 Transitioned to lower demand 0.580*** 0.579*** 0.585*** 0.586*** 0.585*** 0.583***
(0.444 - 0.758) (0.443 - 0.756) (0.448 - 0.764) (0.448 - 0.765) (0.447 - 0.764) (0.446 - 0.762)Hospitalization (time-varying)Hospitalization 1.066 0.968 1.078 1.085 1.084 1.098
(0.872 - 1.303) (0.722 - 1.297) (0.882 - 1.317) (0.888 - 1.326) (0.887 - 1.325) (0.898 - 1.342)Hospitalization*Low JD
1.628*Hospitalization* High JD (0.967 - 2.740)
1.015Pension (time-varying) (0.638 - 1.616) Defined Benefits Pension Pension Eligible 1.532*** 1.551*** 1.569*** 1.566***
(1.169 - 2.008) (1.185 - 2.031) (1.150 - 2.141) (1.195 - 2.052) Eligible*Low JD 1.025
(0.586 - 1.791) Eligible* High JD 0.948
(0.634 - 1.420) Defined Contributions 401K Participation 0.714*** 0.713*** 0.557***
(0.590 - 0.864) (0.589 - 0.864) (0.430 - 0.723)Participation*Low JD 1.974***
(1.226 - 3.181)Participation* High JD 1.405*
(0.942 - 2.095)Observations 5189 5189 5189 5189 5189 5189Unique Workers 1488 1488 1488 1488 1488 1488Birth Cohort FE YES YES YES YES YES YESLocation FE YES YES YES YES YES YESTenure FE YES YES YES YES YES YES Controls for final wage, injury history, race, health risk score in 2000, and ever-married
Time-varying Cox modelsTime to Retirement (after 1/1/2001) Hazard Ratio (95 % Confidence Interval) 1 2 3 4Job Demand (omitted JD=3, Medium) Sedentary/Light (JD=1 or 2) 0.872 0.631 0.88 0.806
(0.713 - 1.066) (0.182 - 2.187) (0.719 - 1.078) (0.592 - 1.096) Heavy/Very Heavy (JD=4 or 5) 1.077 0.591 1.221** 1.024
(0.890 - 1.303) (0.207 - 1.686) (1.012 - 1.473) (0.762 - 1.375)Changed to lower demand job after 1/1/96 Transitioned to lower demand 0.695** 0.697** 0.568*** 0.566***
(0.518 - 0.932) (0.519 - 0.936) (0.427 - 0.756) (0.425 - 0.753)Hospitalization (time-varying)Hospitalization 1.181 1.183 1.051 1.047
(0.952 - 1.464) (0.954 - 1.467) (0.842 - 1.312) (0.838 - 1.308)Pension (time-varying) Defined Benefits Pension Pension Benefits (100$/month) 1.516*** 1.495***
(1.417 - 1.623) (1.391 - 1.607)Benefit*Low JD 1.02
(0.945 - 1.100) Benefit* High JD 1.036
(0.975 - 1.101) Defined Contributions Annuitized Monthly Values (100$) (3% rate of return for 25 yrs)
1.041*** 1.026*
(1.018 - 1.064) (0.995 - 1.057)Annuity*Low JD 1.018
(0.964 - 1.075)Annuity*High JD 1.037
(0.990 - 1.086)Observations 3780 3780 4586 4586Unique Workers 1211 1211 1293 1293Birth Cohort FE YES YES YES YESLocation FE YES YES YES YESTenure FE YES YES YES YES Controls for final wage, injury history, race, health risk score in 2000, and ever-married
Summary of findings
• Workers in higher demand jobs do retire earlier, once we account for wage differentials– The estimated difference is about 6 months
• Pension eligibility and pay-outs do not seem to be more important for those with higher job demand
• Hospitalizations/injuries do induce retirement, but limited evidence of difference by job demand
Next steps
• Refine our models to ensure robustness by adding more time-varying variables (wage)
• Examine relationship between physical job demand and disability retirement at a younger age groups (<58)
Policy implications• Depends on policy goal– Macroeconomic goal to increase retirement ages
for all and without increasing disability claims• Inform and icentivize employers to support the
transition to lower demand jobs while acknowledging the wage incentives for workers to stay in high demand jobs
Policy implications• Depends on policy goal– Goal to reduce or compensate for social disparities
Survival by employee type
Policy implications• Depends on policy goal– Goal to reduce or compensate for social disparities• SSA could consider exemptions for those in high
demand fields as it raises FRA to compensate for higher risk endured• Small selected group of workers who are compensated
for higher risk, so no social security exemptions required • Depends on whether we believe wages fully
compensate for risk
Thank you!