Abstract
ABSTRACTWe find and estimate probability mass functions for labor force related random variables. Complete life expectancy (by age, gender, and two years of labor force history) is decomposed into expected years of future labor force activity and inactivity as well as into expected years until final separation from the labor force and expected years in retirement. We also calculate expected age at retirement and expected years in retirement for people who actually retire. Two consecutive years of inactivity, especially in middle age, is a key indicator for both men and women when accounting for future labor force participation and retirement. For example, women (men) who are out of the labor force at age 49 and again out of the labor force at age 50, can expect to be in the labor force seven (eight) fewer years in the future than their counterparts who were in the labor force at ages 49 and 50. In addition, they have expected retirement ages 4.5–5.5 years younger than their active counterparts.
Highlights
There has been a long-term secular decline in the U.S male labor force participation rate from approximately 86% in 1950 to 69% in 2016
We do not use participation rates in this article, we report them in order to show that Survey of Income and Program Participation (SIPP) data yield participation rates that are quite similar to participation rates computed from Bureau of Labor Statistics (BLS) participation rates for the U.S economy
Separate probability mass functions were estimated for all random variables at ages 30, 40, 50, and 60 for states aa, ia, ai, and ii for men and women
Summary
There has been a long-term secular decline in the U.S male labor force participation rate from approximately 86% in 1950 to 69% in 2016. We provide estimates of expected future years of activity, expected years of inactivity, expected years in retirement, and expected age at retirement, given a person’s age, gender, and labor force history, while recognizing that people can enter and leave the labor force multiple times throughout life. As with a life table, there is no claim that expectations predict the future but only that they provide estimates of the future if current age-specific transition probabilities remain unchanged Beyond this point, the analogy to life tables breaks down because life tables contain only one-way transitions from living to dead, whereas transitions between labor market activity and inactivity may occur several times within a person’s life with death being the only absorbing state.
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