The Changing Nature of Work, Old-Age Labor Supply, and Social Security

The labor force participation of older Americans has been increasing since the 1990s. The tasks and characteristics of American work have also been changing in the past few decades, moving away from the routine and physical and towards the social and cognitive. If these shifts in the nature of work make working less unpleasant, then they may have contributed to the observed old-age labor supply increase. I measure the contribution of the changing nature of American work to the increase in older labor force participation, its impacts on the distribution of welfare at older ages, and implications for Social Security policy. Using the relationship in the Health and Retirement Study between occupation in one’s early 50s and later labor force participation, I find that 10–16% of the increase from 1990 to 2010 in the labor force participation of 60-to-69-year-old men can be explained by changes in occupation characteristics, while this amount is 5.8–9% for women. Exploiting differential changes in occupation characteristics across commuting zones and using the commuting zone’s predicted routineness in 1950 as an instrument, I confirm there is a causal relationship between occupation characteristics and old-age labor force participation. Estimating a structural model of male old-age labor supply with occupation differences, I find that the observed shifts in occupation characteristics led to welfare increases at all but the bottom quartile of lifetime income. Finally, I compare a policy that increases the Full Retirement Age to one that achieves similar savings but concentrates benefit reductions among higher earners. The former policy leads to large participation increases among men in the most physical occupations, while the latter does not. In my model, raising the retirement age is especially harmful for low-income workers because it induces workers in the most physical jobs to continue working.