Financial Factors and Labour Market Transitions of Older Workers in Canada

Abstract

This paper looks at the influence of financial factors on the labour market transitions of Canadian older workers. Also, in contrast to previous studies, the analysis focuses on transitions between full-time work, part-time work, and retirement. Sequential annual observations of employment and retirement choices are examined for samples of full-time and part-time workers, drawn from the Survey of Labour and Income Dynamics (SLID), 2001–2006. Measures of potential pension wealth and one-year and peak pension accruals are imputed using data from the Survey of Consumer Finances, 1973–1997, and the SLID, 1997–2006. Regression results indicate that financial factors influence workers to move from full-time to part-time jobs and support the evidence found in previous studies that retirement is usually a process, not a single event. Also, an increase in pension accruals increases the probability of working full-time for lower-income earners only. Among nonfinancial factors, a negative health shock increases the probability of working part-time or retiring for full-time workers but has little effect on the labour market transitions of part-time workers. Finally, these results suggest that policies to encourage phased retirement are unlikely to have a significant labour market effect since bridge employment is already a common transition process among older workers.