Seniors in The Workforce and Retirement

Meet Tammy.

Tammy is 56 year-old professional who runs her own executive staffing company. She and her husband, a disabled contractor, own their own home, which has a mortgage, which they recently had to refinance as they needed some extra money to help out one of their children. It seems they are always trying to catch up financially. They have only made minimal contributions to their RRSPs or their savings to set aside a little nest egg for their retirement, whenever that is. Tammy can’t imagine what it’s going to be like not having a job, and has always planned to continue working well into her senior years.

That is until Tammy was rear-ended while waiting at a stoplight.

It didn’t seem too bad at first, but the injury left Tammy suffering from fibromyalgia and post-traumatic stress and forced her into early retirement. Tammy hired a lawyer to try and recover the losses she suffered in the accident and her case is all set to go to mediation, but she can’t figure out why the other side keeps talking about ‘normal retirement’ or the fact that the average Canadian woman retires at age 60.

Tammy just can’t see why she shouldn’t be able to recover losses beyond age 65 just because some other people choose to retire early.

A recent study by Statistics Canada has shed some light in this area. This article summarizes and expands on the work done therein.

Indicators of Labour Force Participation in Older Workers

Among factors that can be expected to be associated with seniors’ employment, four may be of particular significance. They are, loosely, financial status, educational attainment, health status, and current financial obligations.

Financial Status

The Statistics Canada study looked at ‘Other Family Income’, which consists of: i) Public Pension (CPP, OAS, other government transfers), ii) Private Income (Private Pension, RRSPs, investment income), and iii) employment income of other family members. The results demonstrated that those individuals with the lowest and highest Other Family Income were the likeliest to continue working after age 65. In 2006, 18.7% of men in the first quintile and 18.3% of those in the fifth quintile were employed. Similar results were evident for women.

The employment decision for high-income earners appears to be driven by work decisions of other family members mostly the spouse), whereas low-income earners tend to base their decision to continue working on the inadequacy of their income from public sources and their own private savings.

 

Education

Higher education has also been linked to increased workforce participation for older workers. In 2006, men with at least a university degree were more than twice as likely to be employed compared to their counterparts who hadn’t received a high school diploma. The rate among women was even more pronounced; approximately 14.4% of women with a university degree were employed compared with only 3.4% of those without a high school diploma. Employment rates for intermediate levels of education generally rose steadily between these two extremes.

The graph on the left clearly demonstrates the progression of labour force participation for seniors as their level of education increases.

 

Health Status

Rather than look at medical records, Statistics Canada separated seniors based on how often they described themselves as being ‘limited’ in their daily activities. Not surprisingly, the prevalence of activity limitations was a direct indicator of earlier retirement and a reduced probability of remaining in the workforce into one’s senior years.

Activity limitations make it more difficult to engage in the physical forms of labour that seniors often find themselves in, whether it’s standing on their feet as a salesperson or the more physically demanding role of a farmer.

Current Financial Obligations

Finally, seniors carrying debt might be constrained to stay in the labour market to meet their financial obligations. Rather than attempt to examine debt in all its various forms, Statistics Canada looked at what is usually the largest financial obligation facing Canadians: their mortgages. On the basis of this measure, 22.1% of men and 9.9% of women who had a mortgage were still active in the labour market. Seniors without a mortgage, whether renters or mortgage-free owners, were less likely to work.

A mortgage can be a good indicator of total household debt. Individuals with mortgages even into their senior years are more likely to be lower income earners too, and may need to continue working in order to pay off their debts.

Some Overall Trends

Among working senior men, the top occupation was farmer and farm manager, with 11.5% of seniors, or about 1 in 9 men aged 65 and over, employed in this group in 2006. This compared to a paltry 1.6% of men aged 25 to 64 employed in the same line of work. The next most common occupation for senior men was retail salesperson and sales clerk, accounting for only 3.8% of the over-65 labour force.

For senior women, no single occupation represents so much of the workforce. The top three professions were found to be retail salespersons and sales clerks (6.6%) secretaries (except legal and medical) (6.5%) and farmers and farm managers (6.1%).

 

 

On a more general note, the concentration of workers in a few select jobs decreased, with older workers now spread out over a more diverse occupation profile. Of particular note is the recent and rapid decrease in the number of older workers working as farmers and farm managers. The percentage of males in this occupation fell from 17.6% to 11.5% from the year 2001 to 2006; the decline for females over this period was found to be 10.1% in 2001 to 6.1% in 2006.

A substantial number of seniors reported working full-year, full-time jobs. Just over 40% of males worked full year, full time in 2005 whereas about 31% of working women also worked on a full-year, full-time basis in 2005. What’s more, the proportion of seniors working full-year, full-time jobs remained steady as workers got older. Among men, those age 65 to 74 were slightly more likely to work full year, full time compared with those 75 and over (41.8% versus 40.4%). This number actually rose among women, where 30.2% of those in the 65 to 74 group worked full year, full time in 2005, compared with 32.2% of working women 75 and over.

Higher income earners were far less likely than their lower income counterparts to remain in the workforce on a full-year, full-time basis.

If we look at Tammy we see that she has significant motivation to continue working, as her husband is no longer able to contribute financially to their household financial needs.  They are still carrying debt and have financial demands from their children.  They have little savings and surviving on Government of Canada Old Age Security and Canada Pension Plan payments does not leave much left over for any type of retirement life.  It is unfortunate but Tammy has the financial motivation and she also has the self-determination being a self-employed individual to continue her work and modify her duties as an owner manager as long as she continues to make a sufficient profit to warrant her continued work. Therefore in assessing whether Tammy would have worked beyond age 60 - the average age of retirement for Canadian women - consideration of the aforementioned statistics will assist in making that determination.

Krofchick Valuations is a firm of experts in damage quantification and assessment who utilize the skills of forensic economics, actuarial science, investigative accounting and business valuations.