The Effect of Labor Market Rigidities on the Labor Force Behavior of Older Workers

Most older workers retire completely from full-time work with no intervening spell of part-time work. This is incompatible with a model of retirement in which tastes for work gradually shift with age toward leisure and hours may be freely chosen. A survey of institutional arrangements such as pensions and Social Security and of normal business practices resulting from fixed costs of employment and team production leads to the conclusion that most workers face rather limited choices consisting of a high-paying year-round job and low-paying part-time work. Therefore, someone approaching retirement who wants to retire gradually from a career type job will have to change jobs, losing job-related skills, and to compete for low-paying, easy entry jobs. Faced with that option most retire completely.