Elderly Labor Supply: Work or Play?

Abstract

Approximately 15 percent of individuals over the age of 65 are employed. Due to the apparent reversal in the trend toward early retirement and the aging of the U.S. population, these individuals are becoming an increasingly important part of the labor force. However, very little research has examined labor market behavior in this population. In this paper, we examine a series of questions in an attempt to better understand why the elderly continue to work. Our results indicate that labor supply is concentrated among the most educated, wealthiest, and healthiest elderly. Despite this, we find that the wages of the elderly are low both relative to younger populations and relative to the wages they earned when they themselves were young. Among individuals over the age of 70, we find that changes in health status dominate labor market transitions. Overall, our findings suggest that non-pecuniary considerations play an important role in determining elderly labor supply decisions.