How Do Local Labor Markets Affect Retirement?

20 Pages Posted: 6 Jul 2017 Last revised: 17 Jul 2019

See all articles by Leora Friedberg

Leora Friedberg

University of Virginia - Department of Economics; National Bureau of Economic Research (NBER)

Michael Owyang

Federal Reserve Bank of St. Louis - Research Division

Wei Sun

Renmin University of China - Hanqing Advanced Institute of Economics and Finance and School of Finance

Anthony Webb

Boston College - Center for Retirement Research

Date Written: 2017

Abstract

Compared with prime-age workers, older workers face an easier path out of the labor force if they lose their jobs during a recession. However, premature job exits or earnings losses in the years leading up to retirement may be particularly devastating to retirement savings. The authors analyze the impact of recent business cycles on retirement using multifaceted job transitions of older workers. They focus on local labor markets because older workers are particularly unlikely to move for work. Surprisingly, the biggest effect of a higher local unemployment rate on older workers is to raise the propensity to stay in one’s current job. Older workers have fewer voluntary transitions to new jobs when the unemployment rate rises, but they especially have fewer voluntary transitions out of the labor force. Thus, the direct effect of job loss in inducing earlier retirement during recessions is outweighed by retirement delays among those with jobs.

JEL Classification: J23, J26, J62

Suggested Citation

Friedberg, Leora and Owyang, Michael T. and Sun, Wei and Webb, Anthony, How Do Local Labor Markets Affect Retirement? (2017). Review, Vol. 99, Issue 3, pp. 259-78, 2017. Available at SSRN: https://ssrn.com/abstract=2997940 or http://dx.doi.org/10.20955/r.2017.259-78

Leora Friedberg (Contact Author)

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States
804-924-3225 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael T. Owyang

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

Wei Sun

Renmin University of China - Hanqing Advanced Institute of Economics and Finance and School of Finance ( email )

59 Zhongguancun Street
Beijing, Beijing 100872
China

Anthony Webb

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

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