Study Links Retirement Income Differences and Variations in Older Worker Labor Participation Rates

Alicia H. Munnell, Director of the Center for Retirement Research at Boston College (CRR) and Mauricio Soto and Natalia A. Zhivan, both from CRR, have published a paper exploring the relationship between retirement benefits and labor force participation rates across states. In "Why Do More Older Men Work in Some States?", the first of a two-part study, the authors conclude that, based on aggregate data from the U.S. Census, variation in retirement income does explain some of the interstate variation in labor force activity, even after controlling for differences in the health of the economy, the nature of employment, and the characteristics of the workforce.

Thus, while the availability of benefits will continue to be an important determinant of retirement, these results imply that older workers may be willing to work longer in response to the coming decline in replacement rates — as Social Security contracts and small 401(k) balances produce meager streams of retirement income.

Source: Boston College Center for Retirement Research Issues in Brief No. 8-6 (April 2008)