The Impact of High-Pressure Labor Markets on Retirement Security
This paper explores whether exposure to tight labor markets at working ages is linked to improved financial wellbeing at older ages especially for groups traditionally disadvantaged in the labor market, including people with low income, those without college degrees, and people of color. We also examine what role the timing of exposure to tight labor markets may play with respect to the outcomes of interest.
The paper found that:
- Higher exposure to stronger-than-average labor markets at working ages (41-61, as well as 31-61) is significantly correlated with a lower likelihood of being poor and with higher household income at retirement ages (63-67).
- The magnitude of the estimated coefficients is larger for marginalized workers, including those who start out with lower incomes, those without college degrees, and people of color.
- Statistically significant results are observed almost exclusively for exposure before age 50).
The policy implications of the findings are:
- Tight labor markets can help protect the long-term financial wellbeing of older people.
- Those who stand to benefit more are from various groups traditionally disadvantaged in the labor market, including people with low incomes, those without college degrees, and people of color.
- Earlier exposure is associated with more favorable financial outcomes at retirement ages, arguably suggesting that interventions designed to support labor force attachment and/or improve pay and benefits early in the career may yield overall better returns than the same size interventions later in life.