Job Demand and Early Retirement

Sepideh Modrek Mark R. Cullen

WP#2012-19

Abstract

Policy initiatives such as increases in the full retirement age implicitly reduce benefits for early retirement. Yet research suggests that those in physically demanding jobs may be particularly adversely affected by such policies. We examine to what extent physical job demand relates to early retirement decisions in a population of aging manufacturing workers. We follow a cohort of approximately 1,500 stably employed male Alcoa employees aged 51-58 in 2001 followed forward to 2008.  We use a variety of models to examine whether externally rated physical job demand at middle age is related to early retirement. We also examine whether pension eligibility and payouts induce earlier retirement, especially for those with more physically demanding jobs, while accounting for wage differentials, injury history, and underlying health. Our results suggest that workers whose jobs have high physical demand retire earlier after accounting for the wage differential and health. We also find that the minority of workers who transition to lower demand jobs, due to previous injury or health issues, are less likely to retire early.  Finally, while we find evidence that pension eligibility and wealth accumulation induce earlier retirement, there was limited evidence of a difference by job demand.