Why have Labor Force Participation Rates of Older Men Increased since the Mid-1990's?

1. Kelly McCrudden Jessica Crawford George Findlay Pamela Ho Why have Labor Force Participation Rates of Older Men Increased since the Mid-1990's? Schirle, T. 2008 Journal of Labor Economics, Vol. 26, No. 4 (October 2008), pp. 549-594

2. Goal of the Study • To explain the increases in older men’s participation rates since the mid-1990s • specifically looking at the United States, Canada and the United Kingdom • Do the wives increases in labor force participation decisions effect their husbands labor force participation decision?

3. Background to the Problem • Study focuses on older men, aged 55-64 • Participation rates of these men has been progressively decreasing throughout the 20th century (in OECD countries) • During mid-1990s participation rates of older men increased a significant amount • Older women’s participation rates has also been increasing

4. Participation Rates of Individuals Aged 55–64, By Sex, 1976

5. Participation Rates of Individuals Aged 55–64, By Sex

6. What We Can Expect • Income Effect • Husbands can enjoy extra leisure time due to the increase in income with his wife working • Shared Leisure Effect • Couples enjoy leisure time together • Husbands may not like as much leisure time if their wife is working and they’re spend the time alone • this would delay their retirement, and increase their labor force participation

7. Labor Supply Decision of Husbands and Wives • Husband utility: depends on his consumption and labor force participation wives utility: Estimate Model:

8. Effect of Wives’ Participation • Probit models are used • Baseline estimates include: • Husbands education • Age • Number of children in household • Results similar to estimated model • May be smaller do to assortative matching

9. Continued • Husbands of highly educated wives less likely to participate, therefore wives with high levels of education more likely to participate • Cohort effects largest among more educated women • Couples that both have high levels of education more likely to participate in the labour market than couples without the same level of education

10. Robustness Checks and Other Factors To Consider • Health • Defined-benefit pension plans • Unlikely that changes in pension coverage can explain the increase in participation • US stock market

11. Continued • Age difference between husbands and wives • Wife’s wage income • Different effects for different age groups • Younger married menvs. older married men

12. Decomposition of U.S. Participation Rates

13. DiNardo-Fortin-Lemieux Decomposition of Changes in Participation • Decomposition is sequential • Two stages of decomposition • Hypothetical probability created • Counterfactual probability created • Reverse order decomposition

14. DiNardo-Fortin-Lemieux Decomposition Results • Output uses 2 models for decomposition estimates: • Probit Model • Bivariate Probit Model • Varied results for United States, Canada, and the United Kingdom

15. Additional Evidence • Effect of changes in wives’ labour force participation • Effect of changes in men’s characteristics • Relax assumption of fixed husband’s participation decision

16. Historical Evidence • Hold age structure and educational attainment constant since 1980 • Participation Rates

17. Future Trends • Age and educational attainment work in opposite directions on the participation rate • Wives’ participation rate will work to increase the participation rate of their husbands • Overall, we can expect that participation will increase between 1.5% – 3%

18. Key Results • Participation rates increase as a result of: • the increases in the participation rates of wives • Increases in educational attainment • Changes in the age structure

19. Results relevant for Public Policy CPP: EC306 handout #3