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entitled 'Older Workers: Labor Can Help Employers and Employees Plan 
Better for the Future' which was released on December 5, 2005. 

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Report to Congressional Committees: 

United States Government Accountability Office: 

GAO: 

December 2005: 

Older Workers: 

Labor Can Help Employers and Employees Plan Better for the Future: 

GAO-06-80: 

GAO Highlights: 

Highlights of GAO-06-80, a report to congressional committees: 

Why GAO Did This Study: 

Demographic changes pose serious challenges for employers, the economy, 
and older Americans. As the baby boomers near traditional retirement 
ages, the loss of experienced workers could have adverse effects on 
productivity and economic growth. Also, many older Americans face less-
secure retirements due to rising health care costs, pension coverage 
changes, and fiscal pressures on the nation’s retirement programs. Due 
to the growing importance of workers aged 55 or older, GAO examined: 
(1) areas of the labor market affected by the aging of the workforce; 
(2) factors that influence the timing of retirement; and (3) what 
employers are doing to hire and retain older workers. 

What GAO Found: 

All areas of the labor market are likely to be affected by the aging of 
the workforce. Like workers in general, a majority of older workers are 
employed in professional, management, service, office and 
administrative support, and sales occupations. However, employers in 
every occupation face the likelihood that a greater percentage of their 
workforce will be nearing retirement age. Potential skill gaps from 
impending retirements and a slowdown in the growth of the labor supply 
may make older workers a resource of growing importance. 

Focus group participants without a college degree cited health, 
finances, and layoffs most often as factors constraining the timing of 
their retirement and work decisions. Participants without such 
constraints, most often cited lifestyle and work perceptions as the 
factors driving their decisions. Also, despite survey findings showing 
that many older workers wish to gradually reduce their hours, overall, 
focus group participants indicated they either were not aware of 
options for continued work after retirement or that their current or 
former employer did nothing to retain them. Many saw barriers to future 
employment, including their own limited skills and perceived age bias. 

While some employers are making an effort to hire and retain older 
workers, such as offering flexible work arrangements, most have not yet 
made these efforts a priority. We found some examples of programs 
targeted toward older workers, and many employers express a willingness 
to initiate practices to retain older workers. However, most surveyed 
employers do not implement these practices widely. In addition, only 
about one-third of participants in a roundtable discussion of employers 
concerned about the aging workforce indicated that they provided a 
specific plan or program to recruit or retain older workers. Employers 
cite a number of barriers to offering more opportunities, such as 
federal pension regulations. 

Percentage of Workforce Aged 55 and Older, 1970-2000 and Projected 2010-
2050: 

[See PDF for image] 

[End of figure] 

What GAO Recommends: 

GAO recommends that the Secretary of Labor design a comprehensive and 
highly visible public awareness campaign as a way to help employers and 
employees plan better for the future and by so doing, bridge the gap 
between employer and employee needs. The campaign should involve other 
relevant agencies and target employer organizations and groups that 
interact with employees and, ultimately, encourage employers to find 
ways to retain and recruit older workers, and assist older workers in 
finding opportunities for continued work. The Department of Labor 
generally agreed with our findings and recommendation. 

www.gao.gov/cgi-bin/getrpt?GAO-06-80. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Barbara D. Bovbjerg at 
(202) 512-7215 or bovbjergb@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

All Parts of the Labor Market Will Be Affected by the Aging of the 
Workforce: 

Health, Finances, Lay-offs, and Perceptions about Lifestyle and Work 
Are the Primary Factors Influencing the Timing of Older Workers' 
Retirement and Work Decisions: 

While Some Employers Make a Special Effort to Hire and Retain Older 
Workers, Most Do Not: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Department of Labor: 

Appendix III: Occupational Categories: 

Appendix IV: Focus Group Moderator's Guides: 

Appendix V: Employer Participant List for Roundtable Discussion on 
Older Workers: 

Appendix VI: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Stress and Physical Requirements of Work by Occupation, 2002: 

Table 2: Focus Group Participant Statements on the Importance of 
Finances: 

Figures: 

Figure 1: Life Expectancy at Age 65, 1970-2000 and Projected 2001-2020: 

Figure 2: U.S. Labor Force Growth Through 2080: 

Figure 3: U.S. Elderly Dependency Ratio, 1950-2000 and Projected 2005- 
2050: 

Figure 4: Percentage of Workforce Aged 55 and Older, 1970-2000 and 
Projected 2010-2050: 

Figure 5: Older Workers (Aged 55 to 74) as a Share of the Total 
Workforce (Aged 25 to 74) in each Occupational Category (Historical and 
Extrapolated Data): 

Figure 6: Number of Workers Aged 55-74 by Occupation (Historical and 
Extrapolated Data): 

Abbreviations: 

ADEA: Age Discrimination in Employment Act: 

BLS: Bureau of Labor Statistics: 

CPS: Current Population Survey: 

CRS: Congressional Research Service: 

DB: defined benefit: 

DC: defined contribution: 

DROP: Deferred Retirement Option Plan: 

EBSA: Employee Benefits Security Administration: 

ETA: Employment and Training Administration: 

HRS: Health and Retirement Study: 

IRS: Internal Revenue Service: 

OPM: Office of Personnel Management: 

SSA: Social Security Administration: 

United States Government Accountability Office: 

Washington, DC 20548: 

December 5, 2005: 

Congressional Committees: 

In the coming decades, the combination of increasing life expectancy 
and declining birth rates is expected to reduce the number of workers 
per retiree, a trend that will strain the finances of national pension 
and health programs and may affect productivity and economic growth. In 
addition, the impending retirement of the baby boom generation and 
slower labor force growth will result in the loss of many experienced 
workers and possible skill gaps in certain occupations. At the same 
time, many older workers face the possibility of less secure 
retirements. While longer life spans have increased the number of years 
individuals spend in retirement, pension plans have increasingly 
shifted financial and longevity risk to individuals and health care 
costs have risen rapidly. In addition, the increasing ratio of the 
elderly to younger workers will place added pressure on public benefits 
such as Social Security and Medicare, both of which face long-term 
financial problems. Though the oldest baby boomers have not yet reached 
retirement age, new public policies may be necessary to address the 
economic challenges these demographic changes present. 

As we reported previously, these problems could be mitigated with 
policies that remove disincentives to work for older Americans and 
allow those who want to work to continue doing so either by delaying 
retirement or retiring only partially.[Footnote 1] Working later in 
life could help minimize job vacancies and skill losses, increase 
personal retirement savings, and ease fiscal pressures on Social 
Security and Medicare through increased tax revenues. Yet most American 
workers take Social Security retirement benefits at age 62, and little 
has been done to encourage those who can and want to work later in life 
to do so. 

We have prepared this report under the Comptroller General's authority 
to assist Congress in addressing these issues. As it may prove helpful 
in the deliberations of committees with jurisdiction over aging and 
workforce issues, we have addressed this report to each of these 
committees. 

Due to the growing importance of older workers to the labor force, the 
economy, and the future health of U.S. retirement programs, we 
examined: (1) which areas of the labor market will be most affected by 
the aging of the workforce; (2) the factors that most influence the 
timing of older workers' retirement; and (3) what employers are doing 
to hire and retain older workers. 

To find out which areas of the labor market will be most affected by 
the aging of the workforce, we developed a method of analyzing Current 
Population Survey data from the Bureau of Labor Statistics (BLS) that 
allowed us to perform a 10-year extrapolation of employment by age and 
occupation. To identify the factors that most influence the timing of 
older workers' retirement, we conducted 16 focus groups in four cities 
across the country. In each city, we grouped participants, aged 55 to 
70, into four categories according to their education and work status; 
in addition, Washington, D.C., participants were screened to include 
only current and former federal employees. We also analyzed data from 
the Health and Retirement Study (HRS), a national survey of older 
Americans produced by the University of Michigan, to better understand 
their decisions and circumstances regarding work and retirement. To 
identify what employers are doing to hire and retain older workers, we 
reviewed the findings of several surveys of employers, some with 
generalizeable samples and some of selected employers. With the 
assistance of the Department of Labor's Employment and Training 
Administration, we facilitated a roundtable discussion of employers' 
concerns and strategies for their workforces. We conducted our work 
between October 2004 and October 2005 according to generally accepted 
government auditing standards. For additional information on our 
methodology, see appendix I. 

Results in Brief: 

All areas of the labor market employ workers nearing traditional 
retirement age and are likely to be affected by the aging of the 
workforce. Almost 80 percent of older workers, those between the ages 
of 55 and 74, are employed in professional, management, service, office 
and administrative support, and sales occupations; these occupations 
make up approximately 76 percent of the total workforce aged 25 to 74. 
By 2014, the number of older workers in each of these occupations is 
projected to grow considerably--some, such as professional occupations, 
may grow by as much as 41 percent. Employers in every occupation face 
the likelihood that a greater percentage of their workforce will be 
nearing retirement age, and that impending retirements will result in 
the loss of a significant number of experienced workers in a short 
period of time. Given these potential skill gaps and a slowdown in the 
growth of the labor supply, older workers may become a resource of 
growing importance to employers. 

Based on focus group discussions, participants without a college degree 
most often cited health, finances, and lay-offs as the most important 
factors constraining the timing of their retirement and work decisions. 
Some of these older workers indicated they were forced to retire either 
due to health problems or because they were laid off. Others stated 
they have no choice about when to work and retire because their 
finances dictate that they remain employed. For participants with a 
choice about work and retirement decisions, work and lifestyle 
perceptions were the most often cited factors that motivated the timing 
of their work and retirement choices. For example, both college 
graduates and non-college graduates who were satisfied with their 
workplaces were more likely to say they will work indefinitely, while 
those who said that they are not valued were more likely to say they 
would retire. Also, lifestyle considerations were important to many 
older workers with a college degree. For example, some older workers 
said that the desire to have flexibility and control over their time 
influenced their retirement decisions. Similarly, the HRS national 
survey data indicate that just over 60 percent of full-time workers age 
55 or older express a desire to gradually reduce their hours at their 
current jobs. However, individuals in our focus groups generally did 
not see opportunities to do that with their current employers, and they 
did not perceive that their current or former employers sought to 
retain them. In addition, many saw general barriers to future 
employment such as outdated or limited skills on their part, age 
discrimination by employers, and employment opportunities limited to 
lower skilled, lower paid jobs. 

While some employers are making an effort to hire and retain older 
workers, most have not yet made targeting older workers a priority. 
Certain employers have special programs in which they recruit older 
workers. For example, the Home Depot has a partnership with AARP to 
actively recruit older workers for full-time, part-time, and seasonal 
work. We also found examples of employers who were making an effort to 
retain certain older workers already on staff. Employers participating 
in a roundtable discussion on the aging workforce reported using a 
number of practices to hire and retain older workers, such as flexible 
or reduced hours, mentoring, and training. Some studies have found 
that, while a fairly large number of employers think that phased or 
partial retirement is important, a much smaller number have actually 
implemented such policies. Nonetheless, surveyed employers indicated a 
willingness to initiate practices to retain certain older workers. 
About 73 percent of employers in a study by Cornell University said 
they would allow partial retirement, though they had no written policy 
for doing so. In addition, only about one-third of the 16 employer 
roundtable participants indicated that they provided a specific plan or 
program to recruit or retain older workers, despite agreeing that the 
aging workforce was an important issue for the future. Employers cite a 
number of factors for not offering more opportunities, such as the 
constraints of federal pension regulations. 

This report contains a recommendation to the Secretary of Labor to 
design a comprehensive and highly visible public awareness campaign as 
a way to help employers and employees plan better for the future and by 
so doing, bridge the gap between employer and employee needs. In 
designing the campaign, the Department of Labor (Labor) should involve 
other relevant agencies with regulatory jurisdiction or a clear policy 
interest. We provided a draft of this report to the Department of 
Labor, the Internal Revenue Service (IRS), the Office of Personnel 
Management (OPM), and the Social Security Administration (SSA) for 
comment. Officials from the Department of Labor provided written 
comments (see app. II), and generally agreed with our findings and the 
recommendation. In response to their comments, which highlighted 
actions that the Department has already taken, we clarified our 
recommendation to include other federal agencies in the development of 
a public awareness campaign. OPM and SSA provided no written comments 
on the draft, while Labor and the IRS provided us with technical 
comments, which we have incorporated into the report as appropriate. 

Background: 

Significant demographic changes in the United States, such as the aging 
of the baby boom generation (those born between 1946 and 1964), 
increased life expectancy, and falling fertility rates pose serious 
challenges for individuals, employers, and the economy. As the baby 
boom generation retires, employers face the loss of experienced workers 
and their skills and an expected slowdown in the growth of the labor 
supply, which could have adverse effects on productivity and economic 
growth. At the same time, many older Americans face a less secure 
retirement as the increasing number of elderly relative to younger 
workers will place added pressure on Social Security and Medicare, both 
of which face long-term financial problems. 

Demographic changes: 

In the 21st century, older Americans are expected to make up a larger 
share of the U.S. population, live longer, and spend more years in 
retirement than previous generations. The baby boom generation is fast 
approaching retirement age. The oldest baby boomers will start to turn 
age 65 in 2011, just 6 years from now, and in just 3 years, they will 
become eligible for Social Security benefits.[Footnote 2] The share of 
the U.S. population age 65 and older is projected to increase from 15.6 
percent in 2000 to almost 24.2 percent in 2030. In addition, life 
expectancy is increasing. The average number of years that men who 
reach age 65 are expected to live has increased from just over 13 in 
1970 to 16 in 2005, and is projected to increase to 17 by 2020. Women 
have experienced a similar rise--from 17 years in 1970 to over 19 years 
in 2005. By 2020, women who reach age 65 will be expected to live 
another 20 years. (See fig. 1.) 

Figure 1: Life Expectancy at Age 65, 1970-2000 and Projected 2001-2020: 

[See PDF for image] 

[End of figure] 

While life expectancy has increased, labor force participation rates of 
older Americans only began to increase slightly in recent years. As a 
result, individuals are generally spending more years in retirement. 
The average male worker spent 18 years in retirement in 2003, up from 
less than 12 years in 1950. 

In addition to these factors, falling fertility rates are contributing 
to the increasing share of the elderly population and a slowing in the 
growth of the labor force. In the 1960s, the fertility rate was an 
average of three children per woman.[Footnote 3] Since the 1970s, the 
fertility rate has hovered around two children per woman, meaning fewer 
future workers are being born to replace retirees. Also contributing to 
the slowing in the growth of the labor force is the leveling off of 
women's labor force participation rate. While women's share of the 
labor force increased dramatically between 1950 and 2000--from 30 
percent to 47 percent--their share of the labor force is projected to 
remain at around 48 percent over the next 50 years. By 2025 labor force 
growth is expected to be less than a fifth of what it is 
today.[Footnote 4] (See fig. 2.) 

Figure 2: U.S. Labor Force Growth Through 2080: 

[See PDF for image] 

Note: Percentage change is calculated as a centered 5-year moving 
average of projections based on the intermediate assumptions of the 
2005 Trustees Reports. 

[End of figure] 

The aging of the baby boom generation, increased life expectancy, and 
falling fertility rates are expected to significantly increase the 
elderly dependency ratio--the estimated number of people aged 65 and 
over in relation to the number of people of aged 15 to 64. In 1950, 
there was one person over age 65 or over for every eight people aged 15 
to 64. The ratio increased to one to five in 2000 and is projected to 
further increase to one person aged 65 and over for every three people 
aged 15 to 64 by 2050. As a result, there will be fewer younger workers 
to support a growing number of Social Security and Medicare 
beneficiaries. (See fig. 3.) 

Figure 3: U.S. Elderly Dependency Ratio, 1950-2000 and Projected 2005- 
2050: 

[See PDF for image] 

Note: The elderly dependency ratio is the ratio of the population aged 
65 years or over to the population aged 15 to 64. Data for 2005 through 
2050 are projected. 

[End of figure] 

The aging of the population also has potential implications for the 
nation's economy. If labor force growth continues to slow as projected, 
fewer workers will be available to produce goods and services. Without 
a major increase in productivity or higher than projected immigration, 
low labor force growth will lead to slower growth in the economy and 
slower growth of federal revenues. These circumstances in turn will 
accentuate the overall pressure on the federal budget, which will be 
encumbered with increased claims for benefits for seniors such as 
Medicare and Social Security, while relatively fewer workers are paying 
into the benefits systems. 

An additional concern is the possible loss of many experienced workers 
as the baby boomers retire. In the next 10 years, as workers near 
retirement age, those aged 55 and over will make up a larger proportion 
of the workforce. (See fig. 4.) 

Figure 4: Percentage of Workforce Aged 55 and Older, 1970-2000 and 
Projected 2010-2050: 

[See PDF for image] 

[End of figure] 

Some research has indicated that the impending retirements of the baby 
boom generation and the decline in the growth of the labor supply could 
affect certain industries and occupations more than others.[Footnote 5] 
These trends could create gaps in skilled worker and managerial 
occupations, leading to further adverse effects on productivity and 
economic growth. 

These demographic changes and their economic and financial implications 
are not unique to the United States. Other countries are also 
confronting the economic and labor force effects of aging populations. 
In fact, the challenges arising from these demographic shifts will be 
less pronounced in the United States than in several other high-income 
nations, such as Japan, Italy, and Sweden. In prior work, we found that 
Japan, Sweden, and the United Kingdom had enacted retirement policy 
reforms that included incentives for older workers to extend their 
working lives.[Footnote 6] At the same time, these countries were also 
seeking policies that would reduce barriers to employment for older 
workers. 

Changes in Retirement Security: 

As they are expected to live longer and spend more years in retirement, 
older Americans today face several challenges that contribute to the 
growing insecurity of retirement income. First, while more older 
Americans are working, many claim Social Security benefits when they 
first become eligible and many more claim them prior to reaching the 
full retirement age, resulting in lower monthly payments.[Footnote 7] 
Data from the Social Security Administration show that in 2002 a 
majority of people (56.1 percent) elected to start benefits at the 
early retirement age of 62, thus receiving over a 20 percent reduction 
in monthly benefits. 

Second, workers bear greater risk and responsibility for their 
retirement savings than in the past. About half of U.S. workers do not 
have a pension plan through their employer, and those who do are less 
likely than in the past to be covered by defined benefit (DB) plans, 
which pay a specified amount per month. Employers have increasingly 
shifted from traditional DB to defined contribution (DC) plans, such as 
401(k)s, which are based on contributions to and investment returns on 
individuals' accounts. Compared to DB plans, DC plans place greater 
responsibility on workers to make prudent investment decisions and to 
manage longevity risk. According to data from the Employee Benefits 
Security Administration (EBSA), the number of participants in DB plans 
in the United States increased by about 12 percent, while the number of 
participants in DC plans more than tripled from 1978 to 1997.[Footnote 
8] One study found almost 58 percent of families participating in an 
employment-based retirement plan had only a DC retirement plan in 2001, 
up from about 37 percent in 1992.[Footnote 9] 

Furthermore, rising health care costs have made health insurance and 
anticipated medical expenses increasingly important issues for older 
Americans. A long-term decline in the percentage of employers offering 
retiree health coverage has leveled off in recent years, but retirees 
face an increasing share of costs, eligibility restrictions, and 
benefit changes that contribute to an overall erosion in the value and 
availability of coverage.[Footnote 10] A recent study estimated that 
the percentage of after-tax income spent on health care will almost 
double for older married couples and singles by 2030.[Footnote 11] 
People with lower incomes will be the most adversely affected. The 
study projected that by 2030, those in the bottom 20 percent of the 
income distribution would spend more than 50 percent of their after-tax 
income on insurance premiums and health care expenses, an increase of 
30 percentage points from 2000. 

Another implication of the changes in demographics, the shift to more 
employee-driven pension plans, and rising health care costs is that 
retirees may be more dependent upon public benefits such as Social 
Security and Medicare than their predecessors. As older Americans face 
less secure retirements, many may need additional income from continued 
employment. 

Partial Retirement: 

If older Americans remain in the labor force longer at least on a part- 
time basis, it could mitigate some of the economic pressures on Social 
Security as well as supplement individual retirement incomes and help 
finance health care. Researchers have noted that partial or phased 
retirement options could encourage more older workers to stay in the 
workforce longer. "Partial retirement," like "retirement," may mean 
different things to different people. Some people consider themselves 
retired when they are no longer working for pay, while others who 
continue to work may consider themselves retired if they have reduced 
hours, changed jobs, or are collecting some type of retirement benefit. 
For the purposes of this report, we generally consider a person to be 
partially retired if they classified themselves as partially or fully 
retired but were still working for pay on a part-time basis. A partial 
retiree may transition directly from full-to part-time work at either a 
current or a new job, or may return to work after full retirement. 
Phased retirement refers specifically to employees who reduce their 
hours at their existing (previously full-time) job.[Footnote 12] 

According to the Health and Retirement Study (HRS), about 20 percent of 
older Americans who were working full-time in 1992 became partially 
retired at some point by 2002. On average, partial retirees reduced 
their work hours from full-time employment by half, about 22.5 hours a 
week. Most partial retirees report that they have a pension plan from a 
current or previous employer. About 47 percent have a DB pension plan, 
41 percent have a DC plan, 11 percent have a hybrid plan, and 16 
percent have no pension plan. However, almost 62 percent of partial 
retirees do not have employer-provided health insurance from their 
current or previous employer. 

Research indicates that current pension regulations may be a barrier to 
partial retirement. Regulations under the Internal Revenue Code of 1986 
(the Code) currently prohibit "in-service" distributions from DB 
pension plans until the employee attains the plan's normal retirement 
age.[Footnote 13] Older workers who want to partially retire after 
their plan's early retirement age, but before the normal retirement 
age, will not be able to access their pension benefit if they continue 
working for the same employer. However, they may legally access their 
pension benefit if they leave their employer to work part-time with a 
new employer. Some employers report that some employees will officially 
retire and begin receiving pension income and then return to work after 
a certain period of time, but this practice does not appear to be 
widespread.[Footnote 14] 

The IRS proposed regulations in November 2004 to allow for partial in- 
service distributions of DB pensions.[Footnote 15] These proposed 
regulations may alleviate the barriers to partial retirement posed by 
current pension regulations. The new regulations would permit eligible 
older workers who reduce their hours by at least 20 percent to receive 
a pro-rated portion of their pension benefits. The arrangements would 
need to be voluntary and in writing. Employer representatives who 
provided feedback to the IRS at a hearing in March 2005 indicated that 
the proposed regulations are a step in the right direction, though some 
felt that they would be too administratively burdensome. 

Concerns about permitting in-service distributions have been outlined 
by the Congressional Research Service (CRS). They note that the effect 
of in-service distributions on total lifetime work hours is unknown. By 
allowing in-service distributions, some older workers may stay in the 
workforce longer and increase total lifetime work hours. However, other 
older workers may choose to reduce their hours when they would have 
otherwise continued working full-time until reaching their plan's 
normal retirement age, which could reduce their total lifetime work 
hours. In addition, CRS notes that some observers believe permitting in-
service distributions would make the pension benefit become a tax- 
subsidized wage supplement.[Footnote 16] At this writing, the IRS has 
not yet issued final regulations. 

Age discrimination and uncertainty about legal protections against age 
discrimination may also affect older workers' employment opportunities. 
Employees and job applicants aged 40 and over are legally protected 
from age discrimination by the Age Discrimination in Employment Act 
(ADEA). The ADEA applies to the following terms, conditions, or 
privileges of employment: hiring, firing, promotion, lay-off, 
compensation, benefits, job assignments, and training. The breadth and 
impact of the ADEA continues to develop under case law by the courts in 
interpreting key provisions.[Footnote 17] Some experts have noted that, 
because of this, employers are unsure of how the law might apply to 
phased retirement programs and are reluctant to expose themselves to 
such legal uncertainty. 

In our 2001 report that described these demographic and legal 
challenges, we recommended that the Secretary of Labor convene an inter-
agency task force to develop legislative and regulatory proposals 
addressing the issues raised by the aging of the labor force.[Footnote 
18] To date this recommendation has not been implemented.[Footnote 19] 
However, recent legislation introduced in Congress includes a provision 
to create such a task force.[Footnote 20] 

All Parts of the Labor Market Will Be Affected by the Aging of the 
Workforce: 

The aging of the workforce will affect all parts of the labor market. 
Older workers are distributed throughout the economy and employers are 
likely to be affected as their workers near traditional retirement 
ages. By 2014, the number of older workers in each major occupational 
category is expected to increase considerably, especially in white- 
collar and service occupations. As the proportion of older workers 
increases, their employers face the loss of a significant number of 
workers with institutional knowledge and skills to retirement over a 
short period of time. Given the potential loss of skills and the 
expected slower growth in the labor supply, older workers may become an 
increasingly important resource for employers. 

Older Workers Are Distributed Throughout the Workforce and the Number 
of Older Workers Will Grow in Every Occupational Category: 

Like the workforce as a whole, the majority of workers ages 55 to 74 
are employed in white-collar and service occupations.[Footnote 21] Data 
from the BLS indicate that, in 2004, almost 80 percent of older workers 
fell into these categories, which include professional, management, 
service, office and administrative support, and sales occupations; 
these occupations also make up approximately 76 percent of the total 
workforce aged 25 to 74. In particular, professional and related 
occupations, which include lawyers, teachers, and scientists, employ 
the largest number of older workers--4.5 million or 21 percent of older 
workers. Blue-collar occupations employ a smaller number of older 
workers than white-collar occupations.[Footnote 22] Among blue-collar 
occupations, production and transportation and material moving 
occupations employ the most older workers. These occupations each 
employ about 1.3 million older workers. For more information on the 
types of jobs in each major occupational category, see appendix III. 

Based on our extrapolations using data from the BLS, the proportion of 
the workforce represented by older workers is expected to increase in 
every occupational category.[Footnote 23] The share of total employment 
comprised of older workers is expected to be largest in white-collar 
occupations, as shown in figure 5. From 2004 to 2014, the proportion of 
white-collar employment made up of older workers is expected to 
increase from 19 percent to 23 percent. Over the same period, the share 
of employment in service and blue-collar occupations comprised of older 
workers also is expected to increase. Although some occupations may 
have a smaller number of older workers, they may still be significantly 
affected by the aging of the workforce because older workers make up a 
considerable share of their workforce. For example, by 2014, 
approximately 25 percent of farming, fishing, and forestry occupations 
will consist of older workers. 

Figure 5: Older Workers (Aged 55 to 74) as a Share of the Total 
Workforce (Aged 25 to 74) in each Occupational Category (Historical and 
Extrapolated Data): 

[See PDF for image] 

Note: Data for 2014 are based on GAO extrapolations. 

[End of figure] 

Similarly, by 2014, the number of older workers in each major 
occupational category is expected to increase considerably, especially 
in white-collar and service occupations. In earlier work in 2001, our 
employment projections to 2008 also indicated that the largest change 
in the number of older workers is expected to be in white-collar 
occupations.[Footnote 24] Among the different occupations, the number 
of older workers in professional occupations is expected to increase 
the most--from almost 4.5 million in 2004 to more than 6.3 million in 
2014, a growth rate of about 41 percent. See figure 6. 

Figure 6: Number of Workers Aged 55-74 by Occupation (Historical and 
Extrapolated Data): 

[See PDF for image] 

Note: Data for 2014 are based on GAO extrapolations. 

[End of figure] 

Management, business, and financial operations occupations employ the 
second largest number of older workers, and employment in this area is 
expected to grow by 35 percent, to almost 5.3 million in 2014. The 
number of older workers in farming, fishing, and forestry occupations 
is expected to grow the most, almost 68 percent in the 10-year period; 
however, these occupations in aggregate account for less than 1 percent 
of total employment of older workers. 

At the industry level, the public sector, including federal, state, and 
local governments, also employs a relatively large number of older 
workers and faces the possibility of many retirements in the near 
future. According to data from the BLS, almost 21 percent of the 
nation's 3.2 million federal workers were aged 55 or older in 2004. At 
the state and local government level, slightly more than 19 percent of 
workers, out of a workforce of 16.7 million, were aged 55 or older. The 
public sector has a greater share of older workers compared to private 
industries in aggregate, where the share of workers aged 55 and over 
was 14 percent, or about 15.1 million older workers in 2004. 

Employers of Older Workers May Face Skill Losses and Many Job 
Vacancies: 

As the proportion of older workers increases in each occupational 
category, employers face the possibility that the impending retirement 
of the baby boom generation will result in losses of institutional 
knowledge and create many job vacancies over a short time period. For 
example, employers in white-collar management, business, and financial 
operations occupations are expected to have the greatest share of their 
workforce consist of older workers. According to our extrapolations 
using BLS data, by 2014, older workers could make up 26 percent of 
employment in these occupations. Given older workers' skills and the 
fact that there may be relatively fewer younger workers available to 
take their places, older workers may become an increasingly important 
resource for employers. 

With significant numbers of experienced, skilled older workers poised 
to retire and an expected slowdown in the growth of the labor supply, 
employers may need to retain or recruit older workers. This may, 
however, be complicated by the nature of the jobs and older workers' 
preferences. Data from the HRS indicates that while occupations that 
tend to employ the most older workers are less likely to be physically 
demanding, they are more likely to entail considerable stress. (See 
table 1.) According to the HRS, almost 66 percent of workers in 
managerial occupations and 63 percent of workers in professional 
occupations report that their jobs involve much stress all or most of 
the time, which is higher than reported for the other major 
occupational categories. Survey data from the AARP indicate that not 
having too much stress is an important consideration for post- 
retirement work for the vast majority of pre-retirees and working 
retirees.[Footnote 25] The degree of physical effort required by a job 
will also be a consideration for employers as the workforce ages, 
particularly for blue-collar and service occupations that employ a 
large percentage of older workers. While relatively few workers in 
white-collar occupations indicate that their jobs are physically 
demanding, the majority of workers in many blue-collar and service 
occupations report that their jobs often involve considerable physical 
effort. For example, about 52 percent of those employed in service 
occupations said that their job requires much physical effort all or 
most of the time. 

Table 1: Stress and Physical Requirements of Work by Occupation, 2002: 

White-collar: 

Occupation: Managerial; 
Percent reporting that job involves much stress all or most of the 
time: 65.5; 
Percent reporting that job involves much physical effort all or most of 
the time: 12.7. 

Occupation: Professional; 
Percent reporting that job involves much stress all or most of the 
time: 62.9; 
Percent reporting that job involves much physical effort all or most of 
the time: 17.9. 

Occupation: Sales; 
Percent reporting that job involves much stress all or most of the 
time: 54.4; 
Percent reporting that job involves much physical effort all or most of 
the time: 24.5. 

Occupation: Clerical, administrative support; 
Percent reporting that job involves much stress all or most of the 
time: 55.6; 
Percent reporting that job involves much physical effort all or most of 
the time: 15.6. 

Occupation: Services; 
Percent reporting that job involves much stress all or most of the 
time: 43.2; 
Percent reporting that job involves much physical effort all or most of 
the time: 51.6. 

Blue-collar: 

Occupation: Farming, forestry, and fishing; 
Percent reporting that job involves much stress all or most of the 
time: 46.6; 
Percent reporting that job involves much physical effort all or most of 
the time: 63.4. 

Occupation: Mechanics and repair; 
Percent reporting that job involves much stress all or most of the 
time: 55.1; 
Percent reporting that job involves much physical effort all or most of 
the time: 53.4. 

Occupation: Construction and extraction; 
Percent reporting that job involves much stress all or most of the 
time: 42.5; 
Percent reporting that job involves much physical effort all or most of 
the time: 66.2. 

Occupation: Precision production; 
Percent reporting that job involves much stress all or most of the 
time: 47.8; 
Percent reporting that job involves much physical effort all or most of 
the time: 46.9. 

Occupation: Operators; 
Percent reporting that job involves much stress all or most of the 
time: 46.0; 
Percent reporting that job involves much physical effort all or most of 
the time: 51.8. 

Source: GAO analysis of 2002 HRS data. 

Note: Occupational categories in the HRS are not exactly the same as in 
the BLS and Current Population Survey (CPS) data. BLS and CPS 
occupational categories were reclassified in 2003. 

[End of table] 

Health, Finances, Lay-offs, and Perceptions about Lifestyle and Work 
Are the Primary Factors Influencing the Timing of Older Workers' 
Retirement and Work Decisions: 

Focus group participants without a college degree most often indicated 
that the timing of their work and retirement decisions was constrained 
by health, finances, and lay-offs. "Health" was the most often cited 
factor for these participants, who reported that they had no choice but 
to retire or limit work when they did because of health problems, while 
others reported felt they had to continue working to earn more money, 
and still others were laid off. For participants with a choice about 
work and retirement decisions, work and lifestyle perceptions were the 
most often cited factors that motivated the timing of their work and 
retirement choices. For example, both college graduates and non-college 
graduates who were satisfied with their workplaces were more likely to 
say they will work indefinitely, while those who said that their work 
environments have changed or that they are not valued were more likely 
to say they would retire. Also, lifestyle considerations were important 
to many older workers with a college degree. For example, some older 
workers said that the desire to have flexibility and control over their 
time influenced their retirement decisions. Across all the groups, few 
saw opportunities to gradually or partially retire with their current 
or former employer, and few felt that their current employer would 
offer them incentives to continue working later in life. In discussing 
obstacles to working later in life, participants across groups most 
often cited lack of demand for their skills and age discrimination in 
the workplace; many also felt that their employment options were 
limited to lower paid, lower skilled jobs. 

Health, Finances, and Lay-offs May Dictate When Some Older Workers Work 
and Retire: 

Health was the most-often cited constraint on work and retirement 
decisions by participants without college degrees. Participants without 
college degrees cited health as a constraint more often than college- 
educated participants. Among participants in all the focus groups, many 
indicated they had no choice but to retire or limit work when health 
problems made them unable to work. For example, some participants said 
that they would not be able to get a new job because their health 
situation prevented it; others found that they could not stay at their 
current job. 

Relatively few participants in each focus group indicated that they 
were compelled to work to acquire health insurance. The fact that at 
least 95 percent of focus group participants had health insurance may 
be an explanation. The rate of insured participants is similar to that 
of the general population of older Americans. According to the U.S. 
Census Bureau, of all Americans ages 55 to 64, about 87 percent have 
some form of health insurance.[Footnote 26] 

Although few participants stated that health insurance was a major 
factor in their decisions about work or retirement, some participants 
were generally concerned about health care. For example, one 
participant stated, "If you don't have any health insurance it's tough 
out there." Another was concerned that the cost for their health 
insurance would be a barrier for employment. "I'm thinking they let me 
go because of my age, and they don't have to pay extra insurance, 
whatever they have to pay." On the other hand, others stated that they 
were desirable employees to prospective employers because they already 
had health insurance.[Footnote 27] 

As with health insurance, focus group participants also did not often 
cite pension rules as a reason for making retirement and work 
decisions. In fact, much of the discussion on retirement income focused 
on Social Security rather than on employer-provided DB pension plans, 
even though at least 49 of the 152 participants were receiving income 
from DB pension plans. 

Some participants, particularly those in groups without college 
degrees, indicated that they had no choice but to work because they 
needed the income.[Footnote 28] Focus group participants without a 
college degree cited issues related to finances when indicating that 
their choices were constrained more often that those with a college 
degree. Participants overall listed finances second most often as a 
constraint. See table 2. 

Table 2: Focus Group Participant Statements on the Importance of 
Finances: 

The thing that kept me from retiring for a while was that I was worried 
about the financial aspect of it. The thought of having my income go 
down so drastically was very frightening to me…It held me back for 
several years. Now I kick myself that I waited as long as I did. 

I wish I had thought about retirement when I was younger. You know, you 
don't think about it when you are in your 20s and 30s, and you get 
close to your 50s and 60s, and all you've got is your Social Security. 
I have got a 401(k), but I can't retire on that. I can't see me 
retiring for another 5, 6, or 7 years. 

I have no retirement whatsoever. We got married very young, and we were 
always one step ahead of being financially in trouble…We have lived on 
[my husband's] pension, plus my part-time job…as a teaching assistant. 
It's only 30 hours a week; it's not enough. To be honest, the people 
around me now who are starting to retire are making me become pretty 
panic stricken. 

I would like to travel, but I don't know what financial shape we will 
be in. As it looks right now, I don't think I am ever going to retire. 

Source: GAO focus group with retirees and near retirees. 

[End of table] 

A recent national survey of workers by Rutgers University and the 
University of Connecticut reached similar conclusions about the 
importance of finances. Only 16 percent of respondents age 55 and older 
believed they would be able to retire from full-time work by age 
60.[Footnote 29] Twenty-four percent of all workers reported that they 
would be working either full-time or part-time because they need income 
after retirement.[Footnote 30] The study also found that 30 percent of 
those with no more than a high school education plan to either work 
full-time or part-time for needed income, compared with 17 percent of 
college graduates.[Footnote 31] 

Furthermore, some participants in our retiree focus groups said they 
were forced into retirement when they lost their jobs, either by being 
laid off or as several participants stated, "downsized." Participants 
who had no college education and were already retired cited being laid 
off more frequently than did others. 

Workplace and Lifestyle Considerations May Influence Work and 
Retirement Decisions for Some Older Workers: 

Both working and retired focus group participants who reported that 
they had a choice about when to work and retire most often said their 
decisions were influenced by perceptions about their workplace, such as 
satisfaction or dissatisfaction with the management. Workplace 
perceptions were cited often both by participants with a college degree 
and without a college degree. Some participants indicated that they 
continued to work at their job not solely for income, but because they 
perceived that their workplace was enjoyable, 

I am eligible to retire…my boss, she is a lot of fun. As long as she is 
[there] maybe 3, 4 or 5 years as of now…I am in a very good position. 
If I decide to leave, I can leave. If I decide to stay, I would stay. 

On the contrary, others left their jobs because they did not enjoy 
their positions or their relationship with management, rather than 
because of health constraints or other concerns. 

[My reason for retiring] was upper management. We didn't agree, so 
that's really what the big factor was…That's the only reason that I 
left, otherwise, I would have stayed until I was 70. I would have 
worked as long as I could have, as long as my health was good, but they 
were edging me out. 

Similarly, a number of participants indicated that they felt pressure 
from their employer to leave their jobs. One participant said, 

I felt like I was starting to get leaned on….I felt they were pushing 
me out… And one of the reasons was that one of my supervisors was about 
40 and I was 65, and I think he felt more comfortable with a young 
person because he could talk to that person. 

Other participants indicated that they chose to discontinue working or 
work part-time for lifestyle reasons, such as to have more flexibility 
and control over their time. 

The great thing is I also have the free time to do the things that I 
want to do. It really is good if you can reach a point where you can 
afford to work part-time. 

Focus group participants with a college degree more often noted 
lifestyle considerations as a reason to retire or continue working than 
those without a college degree. For example, some college graduates 
indicated that they would like to continue working for enjoyment or to 
retire to volunteer. One participant commented, "I like to keep my hand 
in my field. It keeps me cutting edge. I can take it or leave it." 

A recent national survey of workers conducted by Rutgers University and 
the University of Connecticut supports these findings. The survey found 
that college graduates are more likely to view their retirement as a 
time for volunteering or choosing to work part time, whereas 30 percent 
of those without a college degree believe they will need to continue to 
work for money.[Footnote 32] 

Current and former federal workers in our focus groups most often cited 
perceptions about the workplace as a reason for retiring. Workplace 
perceptions were cited notably more often by federal participants who 
said they had a choice about whether to work or retire than similar non-
federal participants. For example, 

I was a manager…so at that time they had a reorganization. They bring 
new management in and they made some changes, so it was very stressful. 
At one point in time when they organized they want you to do more work 
with less people…They had their own mindset where you didn't count. It 
was very stressful. The opportunity [to retire] presented itself and I 
just took advantage of it. 

Few federal focus group participants indicated that they made work and 
retirement decisions based on financial or health constraints. 
Additionally, none of the federal retirees indicated that they had been 
laid off by the federal government, whereas being laid off was cited 
often by non-federal workers as the reason they stopped working. 

Retirement Decisions May Be Influenced by What Older Workers Think Are 
Viable Options: 

Among all the focus group participants, few saw opportunities to 
gradually or partially retire at their current or former employer. 
Participants in each focus group indicated that they either were not 
aware of opportunities to continue working after retirement or that 
their current or former employer did nothing to retain them as workers; 
differences between groups of college educated and non-college educated 
participants were not significant. For example, in response to the 
question, "What opportunity did your employer offer for phased or 
partial retirement prior to your retirement?" one participant 
responded, "They showed me the door and that was the end of it." Some 
participants indicated that their current or former employers wished 
that they would retire. In response to a question regarding 
opportunities at their current employer for phased or partial 
retirement, one respondent replied, "I think they were glad to get rid 
of me." A few participants said that their current or former employers 
offered them opportunities to gradually or partially retire. For 
example, one person said, "If you are good at what you do, you can be 
hired back on a consultant basis." 

Similarly, recent research has shown that many older workers do not 
follow through on their plans to reduce their hours in transition to 
retirement. One study found that only 35 percent of older Americans who 
wanted to reduce their hours in the next 2 years, prior to full 
retirement, followed through on these plans.[Footnote 33] The reason 
for the difference between these plans and actual behavior is unclear, 
although one author of the study speculated that workers who want to 
reduce their hours often must do so by finding another job, which can 
entail difficulties that may ultimately lead to full retirement. Survey 
data from the HRS indicates that almost 60 percent of full-time workers 
aged 55 and over say they would like to gradually reduce their work 
hours at their current job. But only about 20 percent of HRS 
respondents who were working full-time in 1992 became partially retired 
at some point by 2002 and the majority of partial retirees left their 
full-time employer. 

Focus group participants cited what they perceived as their own limited 
skills and employers' age discrimination most often as barriers to 
continued employment. These barriers were not cited more or less often 
by different groups of participants. When asked what barriers they 
perceived to continuing to work or finding a new job, some felt that 
they lacked technological skills. For example, one participant stated, 
"I could never go anywhere and work with computers." Age discrimination 
was the second most frequently cited obstacle to participants working 
later in life or finding a new job. Many felt that employers preferred 
younger workers. 

When they see your age, they don't even give you the courtesy of an 
answer back. You know what it is, when they see your age they don't 
know how capable you are. They just see the age and say I don't want to 
mess around with you guys. 

Similarly, a national survey found that 40 percent of older workers 
believe that older workers are treated less fairly than younger workers 
in the workplace.[Footnote 34] 

In addition to employment barriers, many focus group participants felt 
they had limited employment options. A number of participants indicated 
that their employment options were limited to mostly lower skilled and 
lower paid jobs. For example, one participant said, "I think there are 
plenty of jobs, but I think you are going to have to work just as hard 
as you did for $25 an hour as you do for $5." 

While Some Employers Make a Special Effort to Hire and Retain Older 
Workers, Most Do Not: 

Some employers have actively attempted to recruit and retain older 
workers. For example, AARP, an advocacy organization for people over 
50, partners with select employers to provide opportunities for older 
workers, and the federal government, one of the country's largest 
employers, also offers some opportunities to retain select older 
workers. Some employers participating in a roundtable discussion on the 
aging workforce reported using special practices like mentoring 
opportunities to recruit or retain some older workers.[Footnote 35] 
However, as we reported in 2001, most employers are not yet engaged in 
these practices.[Footnote 36] Only about one-third of participants in a 
roundtable discussion of employers concerned about the aging workforce 
indicated that their company had established a program designed to 
recruit or retain older workers. The federal government also has not 
made widespread efforts to recruit or retain older employees. Employers 
have cited a number of factors, such as pension regulations, that 
discourage or prevent them from offering more opportunities for older 
workers. 

Some Employers Use Special Practices to Recruit and Retain Older 
Workers: 

Some employers currently offer older workers incentives to work longer, 
such as partial retirement. National survey data from HRS indicates 
this practice is most common in professional and service occupations. 
In 2002, about 20 percent of partial retirees were employed in 
professional occupations and 17 percent in service 
occupations.[Footnote 37] Among service occupations, partial retirees 
were most often employed in food preparation and personal services 
occupations, such as child care workers and home care aides.[Footnote 
38] 

In addition to offering some partial retirement opportunities, certain 
employers have actively attempted to recruit and retain older workers. 
Many employers believe older workers have certain advantages, such as 
reliability, institutional knowledge and experience, and a strong work 
ethic. AARP has established a "Featured Employer" program to encourage 
its partner companies to recruit and retain older workers. Through this 
program AARP collaborates with companies that are actively recruiting 
older workers for full-time, part-time, and seasonal work by providing 
information on employment opportunities. To date, AARP has entered into 
partnerships with 13 large companies, which include firms in retail, 
finance and insurance, health care, and staffing industries. 

Employer representatives participating in a roundtable discussion on 
the aging workforce listed numerous practices they use to recruit or 
retain older workers. Overall, many participants agreed that 
flexibility was the key feature necessary to recruit and retain older 
workers. Specifically, individual employers listed these examples of 
programs and practices offered to their older employees: 

* using older workers as mentors for younger workers; 

* offering workers the opportunity to work at different locations so 
that they might live in different places over the course of a year; 

* recruiting older workers at events geared toward seniors; 

* launching a Web site and newsletter for older workers already 
employed by the company; 

* using training as a retention tool, with the understanding that 
employees who are engaged and invested in their work are more likely to 
remain at their current jobs; and: 

* respecting some older workers' desire for less stressful work by 
allowing former managers to work as staff members. 

The federal government, one of the country's largest employers, offers 
some opportunities to retain select older workers, some of which are 
part of the opportunities for all workers, such as flexible schedules. 
Also, some retirees may draw their pension and return to work on a 
reduced schedule as "re-employed annuitants" or as private 
contractors,[Footnote 39] but these opportunities are not targeted 
broadly at older workers and the usage of these options does not appear 
to be widespread. Similarly, we previously found that state and local 
governments have addressed teacher shortages by implementing programs, 
such as a Deferred Retirement Option Plan (DROP), that provide 
incentives for older employees to remain on the job.[Footnote 40] 

Most Employers Are Not Actively Recruiting or Retaining Older Workers 
despite Indicating a Willingness to Expand Such Practices: 

Although many employers indicate a willingness to recruit or retain 
older workers, most employers are not currently engaged in these 
practices, as we reported 5 years ago.[Footnote 41] National surveys 
show that employers are interested in options to accommodate the desire 
of older workers to reduce their hours or retire partially. One survey 
from Cornell University indicated that 73 percent of organizations 
would allow older workers to reduce their hours before retirement, 
although few have a formal written policy allowing this reduction. In 
fact, only 36 percent of organizations surveyed that would permit 
reduced hours actually had an employee do this in the last 3 
years.[Footnote 42] Some studies have found that, while a fairly large 
number of employers think that phased or partial retirement is 
important, a much smaller number have actually implemented such 
policies.[Footnote 43] Another study that interviewed selected Fortune 
500 company executives found that opportunities are ad hoc.[Footnote 
44] 

Only about one-third of the 13 participants in a roundtable discussion 
of employers concerned about the aging workforce indicated that their 
company or organization had established a program designed to recruit 
or retain older workers, although most indicated a positive view of 
older workers. These companies generally agreed that the aging 
workforce was a serious concern for their organization in terms of 
knowledge loss and job vacancies as older workers retire. Still, some 
felt that it was only recently that their organization had become aware 
of the severity of the challenges facing them in the future. 

Despite employing a large number of older workers, the federal 
government has not made significant, widespread efforts to recruit or 
retain older employees. Although some specific programs and incentives 
exist to recruit and retain select older workers, representatives of an 
association of current and retired federal employees felt that the 
federal government did not wish to keep its older employees in the 
workforce longer but rather planned for them to retire and be replaced 
by younger workers. 

Employers, including federal officials, have cited a number of factors 
that discourage or prevent them from offering more opportunities for 
older workers. Some employers cite certain federal regulations as a 
reason for not offering more opportunities for older workers to reduce 
their hours before retirement, such as regulations prohibiting the 
distribution of DB pension benefits while the employee is still working 
for the company. Employers have also stated that pension regulations 
may force some employees who wish to partially retire to do so at 
another firm, or to retire and be hired back after a break in service. 
Furthermore, one national survey showed that many employers perceive 
that some older workers are resistant to new technology and roundtable 
participants indicated that some older workers are resistant to change. 
With regard to federal employees, some experts believe that the process 
of rehiring retired federal employees is cumbersome and rules that 
calculate retirement annuities based on the highest 3 years of pay 
provide federal workers with a disincentive to reduce hours before 
retirement. Also, some argue that current federal rules encourage 
federal employees to leave the federal government and seek employment 
elsewhere in order to collect their pension without an offset in their 
wages. 

Another barrier to offering opportunities for older workers noted at 
the roundtable was the practice of retiring when eligible for pension, 
Social Security, or Medicare benefits. Some indicated that defined 
benefit plans encourage employees to retire when they maximize their 
pension. However, another participant noted that even a combination of 
DB and DC plans did not encourage workers to remain working later 
because retiring around age 65 is traditional. Many employers at the 
roundtable felt that eligibility for Social Security and Medicare tends 
to drive workers' retirements. In fact, many of the employer 
participants agreed that employees tend to retire in their mid-60s 
because it has become the norm in the United States. One employer noted 
"the entire nation has been preconditioned to expect to retire in the 
mid-60s." Many of the employers agreed that raising the eligibility age 
for Social Security and Medicare would be the kind of large-scale 
change necessary to keep older workers employed later in life. 

Conclusions: 

The impending retirements of millions of older workers pose significant 
challenges for the economy, employers, and workers. With these 
retirements, employers may lose older workers' firm-specific and 
general knowledge and skills, and there may not be enough younger 
workers in the labor market to replace them. At the same time, older 
workers themselves may need additional income from employment because 
they face less secure retirements due in part to rising health care 
costs and more years spent in retirement. 

While many, including GAO, have reported on these trends and their 
likely consequences, little has been done to address them. Despite 
evidence indicating the future importance of older Americans to the 
workforce, few employers have yet implemented widely available programs 
to recruit or retain older workers. In addition, many older Americans 
in our focus groups perceive that employers prefer younger workers and 
prefer to see older workers retire rather than offer them more 
opportunities to stay or find other work. This perception is at odds 
with employers' statements at the roundtable and through surveys 
indicating their readiness to address issues related to the aging 
workforce. The disparities between actions, preferences, and 
communications are a concern as the workforce ages. 

With the first baby boomers becoming eligible for Social Security 
benefits in just 3 years, the time to prepare for these challenges is 
running out. Both employers and employees have a role to play in 
addressing the gap between them. Employers could attract and retain 
older workers by responding to their work and lifestyle preferences. 
For instance, employers could give older workers more control over 
their schedules by making greater use of flexible work arrangements 
such as partial retirement, part-time work, job-sharing, and 
telecommuting. Additionally, employers could respond to older workers' 
perceptions about job stress by adjusting their job responsibilities 
such as by allowing former managers to switch to support or mentor 
roles. Also, employers could help their older employees learn new 
skills by investing more in training, and strengthen internal policies 
to address concerns about age discrimination. These efforts may also 
help older workers feel more valued by their employers. For their part, 
workers who are near traditional retirement age but who need or want to 
continue working will need to position themselves to take advantage of 
employment opportunities. For instance, they could learn new skills 
through either on-or off-the-job training, and adapt to new 
technologies and changes in the workplace. Additionally, older workers 
could utilize available resources, such as those provided by advocacy 
organizations like AARP, and communicate their needs and preferences to 
employers. Workers also need to assess their financial status in 
preparation for retirement, in particular the impact of reduced income 
from earnings, and may need to consider options such as partial or 
phased retirement. 

While employers and employees must take an active role in addressing 
the challenges of an aging population, there is also a role for 
government to help as well. As we recommended previously, we continue 
to believe an inter-agency task force on older workers, led by the 
Department of Labor, would help various agencies better align their 
efforts to remove barriers and create opportunities for older 
workers.[Footnote 45] Continued coordination of issues related to older 
workers by government agencies remains important, but the government 
can and should play a greater role in helping employers and employees 
prepare for these challenges. In addition to removing barriers and 
creating opportunities, the government could help bridge the gap 
between employers and employees. 

Recommendation for Executive Action: 

Enhanced public awareness of demographic trends, their likely 
consequences, and possible solutions that could help promote both 
economic growth and retirement security for individuals, could help 
mitigate the potentially serious implications of the aging of the U.S. 
labor force, avoid possible knowledge and skill gaps in the future, and 
help ensure the financial security of older Americans. The Department 
of Labor has taken sound first steps in this area, including convening 
an intra-agency task force on older workers and working with business 
leaders interested in issues concerning the aging workforce. However, 
these challenges warrant a higher priority and a high-visibility 
campaign involving a wider group of employers as well as employees. 
Specifically, we recommend that the Secretary of Labor design a 
comprehensive and highly visible public awareness campaign as a way to 
help employers and employees plan better for the future and by so 
doing, bridge the gap between employer and employee needs. In designing 
the campaign, the Department of Labor should involve other agencies 
that have either regulatory jurisdiction or a clear policy interest, 
such as the Social Security Administration and the Health and Human 
Services Department's Administration on Aging. The campaign should 
target employer organizations and groups that interact with employees 
and ultimately, would serve to encourage employers to find ways to 
retain and recruit older workers, and assist employees in creating and 
finding opportunities for continued work. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Department of Labor, the 
Internal Revenue Service, the Office of Personnel Management, and the 
Social Security Administration for comment. Officials from the 
Department of Labor provided written comments (see app. II), which 
generally agreed with our findings and the recommendation. Their 
comments also highlighted some actions that the Department of Labor has 
already taken in response to the challenges of an aging workforce. 
Consequently, we clarified our recommendation to the Department of 
Labor to include other federal agencies in the development of a public 
awareness campaign geared to older workers and their current and 
potential employers. The Office of Personnel Management and the Social 
Security Administration provided no written comments on the draft. The 
Department of Labor and the IRS also provided us with technical 
comments, which we have incorporated into the report as appropriate. 

We are sending copies of this report to the Secretary of Labor, the 
Commissioner of Internal Revenue, the Director of the Office of 
Personnel Management, the Commissioner of Social Security, appropriate 
congressional committees, and other interested parties. We will also 
make copies available to others upon request. In addition, the report 
will be available at no charge on GAO's Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7215 or at bovbjergb@gao.gov. Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix VI. 

Signed by: 

Barbara D. Bovbjerg: 
Director, Education, Workforce, and Income Security Issues: 

List of Congressional Committees: 

The Honorable Charles E. Grassley: 
Chairman: 
The Honorable Max Baucus: 
Ranking Minority Member: 
Committee on Finance: 
United States Senate: 

The Honorable Michael B. Enzi: 
Chairman: 
The Honorable Edward M. Kennedy: 
Ranking Minority Member: 
Committee on Health, Education, Labor, and Pensions: 
United States Senate: 

The Honorable Mike Dewine: 
Chairman: 
The Honorable Barbara A. Mikulski: 
Ranking Minority Member: 
Subcommittee on Retirement Security and Aging: 
Committee on Health, Education, Labor, and Pensions: 
United States Senate: 

The Honorable Gordon H. Smith: 
Chairman: 
The Honorable Herb Kohl: 
Ranking Minority Member: 
Special Committee on Aging: 
United States Senate: 

The Honorable George Miller: 
Ranking Minority Member: 
Committee on Education and the Workforce: 
House of Representatives: 

The Honorable William M. Thomas: 
Chairman: 
The Honorable Charles B. Rangel: 
Ranking Minority Member: 
Committee on Ways and Means: 
House of Representatives: 

The Honorable Jim McCrery: 
Chairman: 
The Honorable Sander M. Levin: 
Ranking Minority Member: 
Subcommittee on Social Security: 
Committee on Ways and Means: 
House of Representatives: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

Our objectives were to (1) describe the areas of the labor market that 
will be most affected by the aging workforce, (2) determine the factors 
that most influence the timing of workers' retirement, and (3) examine 
what employers are doing to hire and retain older workers. 

To address the first objective, we extrapolated employment data by 
occupation and age 10 years into the future. To do this, we obtained 
data from the Bureau of Labor and Statistics (BLS) describing the 
number of people employed in different occupations and age groups from 
1985 to 2004 based on data from the Current Population Survey. We 
analyzed these data sets and found each to be reliable for purposes of 
this study. Occupation categories included: management, business, and 
financial operations; professional and related; service; sales and 
related; office and administrative support; farming, fishing, and 
forestry; construction and extraction; installation, maintenance, and 
repair; production; and transportation and material moving occupations. 
Because occupations were categorized differently prior to 2003, we 
applied conversion factors provided by BLS to convert the pre-2003 data 
and ensure consistency. Age groups were divided into the following 
groups: 16-24; 25-34; 35-44; 45-54; 55-64; and 65-74. The number of 
people employed in each age and occupation category was then averaged 
in 10-year groups, 1985-1994 and 1995-2004. We then compared the rate 
of change in employment by cohort between the two time periods for 
those aged 55-64 and 65-74. Based on the assumption that the rate of 
change for the two oldest age groups stays the same for the next 10 
years, we extrapolated the employment levels of older workers, those 
aged 55-64 and 65-74, in each occupation in 2014. We applied BLS's 
projections of overall employment growth for each occupation and then 
calculated the share of workers aged 55-74 as a percentage of the 
workforce aged 25-74 in each occupation in 2014. To better understand 
their decisions and circumstances regarding work and retirement, we 
also analyzed data from the Health and Retirement Study (HRS), a 
national survey of older Americans produced by the University of 
Michigan. We analyzed this data set and found it to be reliable for 
purposes of this study. Using data from the HRS and the RAND 
Corporation supplement to the HRS, we created a definition of partial 
retirement based on the hours or weeks worked per year and self- 
reported labor force status. In order to be classified as partially 
retired, a respondent must report the following: working for pay, 
working part-time (defined as working fewer than 35 hours a week or 
fewer than 36 weeks a year), and being either partially or fully 
retired on the subjective retirement status or employment status 
questions. Using this definition of partial retirement, we analyzed 
characteristics of partial retirees, such as whether or not they 
changed jobs to partially retire, their average reduction in work 
hours, and pension and health insurance coverage. We also examined 
partial retirement by occupation and self-employment status. In 
addition, we analyzed data about older workers' desire to gradually 
reduce their hours in transition to retirement and the degree of self- 
reported mental stress and physical activity required by occupation. 

To address the second objective, we gathered information from 16 focus 
groups in four cities across the country: Chicago, Illinois; Phoenix, 
Arizona; New York, New York; and Washington, D.C. We selected four 
cities in which to hold focus groups based on geographic diversity and 
potential for occupational diversity. To gather information from the 
focus groups, we hired a contractor, IQ Solutions, to screen 
participants, select sites for the groups, and moderate the groups. In 
each city, participants were grouped into four categories: (1) retirees 
with a college degree; (2) retirees with no college degree; (3) older 
workers with a college degree; and (4) older workers with no college 
degree. In addition, Washington, D.C., participants were screened to 
include only current and former federal employees. Each group was 
comprised of 8 to 10 participants who were age 55 to 70. We prepared a 
series of questions that the moderator asked about the participants' 
decisions regarding work and retirement. Participant responses were 
recorded on audio tape and transcribed to text by IQ Solutions. To 
analyze the transcripts, we developed a coding scheme to identify 
common themes and patterns observed and responses were coded using 
GAO's self-developed, internet-based Questionnaire Programming Language 
software. Each code was reviewed and agreed upon by two analysts to 
check for coding reliability. Code frequencies were downloaded and 
analyzed using SAS software. 

To address the third objective, we conducted interviews with several 
experts and reviewed the findings of several surveys of employers 
conducted by research organizations whose inquiries ranged from broad 
human capital issues to specific questions about provisions for older 
workers. We also participated in a roundtable discussion with 
employers. The roundtable discussion was assembled by the Department of 
Labor's Employment and Training Administration (ETA). The 16 
participants represented several of ETA's national business partners as 
well as other businesses and organizations that the Business Relations 
Group within ETA works with on workforce development issues, 
particularly those that have expressed an interest in recruiting and 
retaining older workers. A GAO moderator asked a series of questions 
that we developed regarding perceptions, challenges, and actions toward 
older workers. (See app. V for a list of participants.) 

We conducted our work between October 2004 and October 2005 in 
accordance with generally accepted government auditing standards. 

[End of section] 

Appendix II: Comments from the Department of Labor: 

U.S. Department of Labor: 
Assistant Secretary for Employment and Training: 
Washington, D.C. 20210: 

NOV 16 2005: 

Ms. Barbara D. Bovbjerg: 
Director: 
Education, Workforce, and Income Security Issues: 
Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Ms. Bovbjerg: 

The Department of Labor's Employment and Training Administration (ETA) 
is in receipt of the draft Government Accountability Office (GAO) 
report entitled, "Older Workers: Labor Can Help Employers and Employees 
Plan Better for the Future" (GAO 06-80). 

We agree with GAO about the need for public awareness of the 
implications of the aging of the American workforce so that employers 
and employees can better plan for the future. We also agree that there 
is a need to help employers develop ways to retain and recruit older 
employees and assist them in finding opportunities for continued work. 
As GAO points out, the Department of Labor has taken steps to address 
this issue, such as convening an intra-agency taskforce on older 
workers and working with business leaders on issues concerning the 
aging workforce. 

In addition to these steps, ETA has initiated an outreach campaign to 
inform employers about the benefits of hiring and retaining older 
workers. This campaign also targets older workers to encourage them to 
remain in or re-enter the workforce. The campaign materials - such as 
an employer outreach kit, a Public Service Announcement, posters, and 
brochures - are available to all workforce investment system 
professionals, employers, and the public at-large. The message of the 
campaign revolves around the theme, "Strength in Numbers," in 
recognition of the important role that the baby boom generation will 
play in the U.S. workforce over the next 25 years. 

The campaign supplements National Employ Older Workers Week, an annual 
week-long event that is intended to raise the awareness of employers 
about the benefits of utilizing older workers. To commemorate this 
event, most recently held on September 18-24, 2005, employment and 
training providers across the country sponsored local events, including 
job fairs, award ceremonies and conferences; issued press releases and 
government proclamations; and launched websites to further promote and 
raise awareness. 

ETA has undertaken other efforts to provide information and assistance 
to the workforce investment system and employers related to the 
workforce implications of an aging American population including: 

* In January 2005, ETA released a Protocol for Serving Older Workers to 
the workforce investment system. The goal of this protocol is to 
enhance the services provided to older workers, and to inspire the 
workforce investment system to pursue innovative strategies for tapping 
into this labor pool. The protocol outlines a set of action steps that 
key stakeholders such as State and Local Workforce Investment Boards, 
One-Stop Career Centers, mature worker intermediaries, service 
providers and business and industry representatives can take to achieve 
the goal of connecting employers with older workers. 

* At ETA's Workforce Innovations conference in July 2005, a special 
emphasis was placed on older worker issues, among other important 
topics. Conference workshops focused on solutions to the challenges 
employers face in recruiting and retaining older workers, effective 
strategies for providing employment and training services to older 
individuals, and skill assessment and training techniques for this 
population. 

* Through ETA's Business Relations Group, we have sponsored a number of 
educational forums intended to inform employers about the benefits of 
employing older workers. 

While we consider these and other actions taken to be significant, we 
recognize that more must be done. Therefore, the Department will 
convene an interagency taskforce on the aging of the American 
workforce. The taskforce will bring together agencies from across the 
Federal government to work collectively to address the workforce 
challenges posed by an aging population. This effort will build on the 
earlier work of the Department's internal older worker taskforce. The 
GAO study will be a valuable resource for the taskforce and the 
Department as we consider additional steps to address this important 
issue. 

Enclosed are ETA's technical comments on the draft report. If you would 
like additional information, please do not hesitate to call me at (202) 
693-2700. 

Sincerely, 

Signed by: 

Emily Stover DeRocco: 

Enclosure: 

[End of section] 

Appendix III: Occupational Categories: 

Major occupational categories: Professional and related; 
Selected Sub-categories: Computer and mathematical Architecture and 
engineering Life, physical, and social science Community and social 
services Legal Education, training, and library Arts, design, 
entertainment, sports, and media Healthcare practitioner and technical. 

Major occupational categories: Service; 
Selected Sub-categories: Healthcare support Protective service Food 
preparation and serving related Building and grounds clearing and 
maintenance Personal care and service. 

Major occupational categories: Management, business, and financial 
operations; 
Selected Sub-categories: Advertising, marketing, promotions, public 
relations, and sales managers Computer and information system managers 
Construction managers Education administrators Food service managers 
Top executives Accountants and auditors Financial analysts and personal 
financial advisors Loan counselors and officers. 

Major occupational categories: Sales and related; 
Selected Sub-categories: Cashiers Counter and rental clerks Insurance 
sales agents Real estate brokers and sales agents Retail salespersons 
Sales representatives, wholesale, and manufacturing Securities, 
commodities, and financial services sales agents Travel agents. 

Major occupational categories: Office and administrative support; 
Selected Sub-categories: Communications equipment operators Computer 
operators Customer service representatives Data entry and information 
processing workers Financial clerks Office and administrative support 
worker supervisors and managers Office clerks, general Postal Service 
workers Secretaries and administrative assistants. 

Major occupational categories: Farming, fishing, and forestry; 
Selected Sub-categories: Agricultural workers Fishers and fishing 
vessel operators Forest, conservation, and logging workers. 

Major occupational categories: Construction and extraction; 
Selected Sub-categories: Boilermakers Carpenters Operating engineers 
and other construction equipment operators Construction laborers 
Electricians Pipelayers, plumbers, pipefitters, and steamfitters 
Roofers Sheet metal workers. 

Major occupational categories: Installation, maintenance, and repair; 
Selected Sub-categories: Electrical and electronic equipment mechanics, 
installers, and repairers Vehicle and mobile equipment mechanics, 
installers, and repairers Heating, air-conditioning, and refrigeration 
mechanics and installers Millwrights Precision instrument and equipment 
repairers. 

Major occupational categories: Production; 
Selected Sub-categories: Assemblers and fabricators Food processing 
Metal workers and plastic workers Printing occupations Plant and system 
operators. 

Major occupational categories: Transportation and material moving; 
Selected Sub-categories: Air transportation Motor vehicle Rail 
transportation Water transportation Material moving. 

Source: U.S. Department of Labor, Bureau of Labor Statistics, 
Occupational Outlook Handbook, 2004-2005 Edition and Bureau of Labor 
Statistics, Current Population Survey, Unpublished data, "Table 23. 
Experienced Labor Force, Employed, and Unemployed (Levels and Rates) by 
Intermediate Occupation, Sex, Race, Hispanic or Latino Ethnicity, and 
Age, Annual Average 2004." 

[End of table] 

[End of section] 

Appendix IV: Focus Group Moderator's Guides: 

[See PDF for image] 

[End of section] 

Appendix V: Employer Participant List for Roundtable Discussion on 
Older Workers: 

Debra Kilpatrick: 
National Program Consultant: 
AARP: 

Jennifer Tracy: 
Director of Staffing and College Relations: 
Aramark: 

Kathy Corcoran: 
Principal L&OD Consultant: 
Constellation Energy: 

Barbara Hoenig: 
Consultant on Mature Workers and Workforce Development: 
CVS: 

Steve Wing: 
Director of Government Programs: 
CVS: 

Sara Freeman-Smith (by phone): 
Director, Human Resources: 
First Data: 

Donna Yurdin: 
Assistant Vice President, Organizational Effectiveness: 
HCA: 

Cindy Milburn: 
Senior Director, Staffing: 
The Home Depot: 

Terry Hansen: 
Manager, Public Partnerships: 
IBM: 

Rick Ohmer: 
Pension Administrator: 
Johns Hopkins Medicine: 

Melanie Holmes: 
Senior Vice President, Business Operations Support: 
Manpower: 

Andy Chaves: 
Manager, Youth Programs, Talent Management: 
Marriott: 

Brooke Hirschfelder: 
Work/Life and Diversity Program Manager: 
MetLife: 

Sue Roselle: 
Staffing Manager: 
Toys R Us: 

Jan Magill: 
Senior Program Officer, Center for Workforce Preparation: 
U.S. Chamber of Commerce: 

Eileen Bove: 
Director of Human Resources: 
Universal Health Services: 

[End of section] 

Appendix VI: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Barbara D. Bovbjerg, Director (202) 512-7215: 

Acknowledgments: 

In addition to the contact named above, Alicia Cackley, Assistant 
Director; Mindy Bowman; Anna Bonelli; Sharon Hermes; Kristy Kennedy; 
Luann Moy; Lynn Musser; Nhi Nguyen; Corinna Nicolaou; Jay Smale; Roger 
Thomas; and Rachael Valliere; made significant contributions to this 
report. 

FOOTNOTES 

[1] GAO, Older Workers: Demographic Trends Pose Challenges for 
Employers and Workers, GAO-02-85 (Washington, D.C.: November 2001). 

[2] The age of eligibility for early Social Security retirement 
benefits is 62. 

[3] The fertility rate is defined as the total number of children born 
per 1,000 women aged 15 to 44 years. 

[4] Although a lower fertility rate contributes to the increased share 
of retirees in the population, the increased participation of women in 
the workforce has helped to reduce the number of retirees per worker. 
Some researchers have hypothesized that a rising fertility rate would 
correspond to a decline in the labor force participation of women. 

[5] Arlene Dohm, "Gauging the Labor Force Effects of Retiring Baby- 
Boomers," Monthly Labor Review, July 2000; GAO-02-85. 

[6] GAO, Older Workers: Policies of Other Nations to Increase Labor 
Force Participation, GAO-03-307 (Washington, D.C.: Feb. 13, 2003). 

[7] The full eligibility age (or normal retirement age) for Social 
Security benefits is being raised from 65 to 67 from 2000 to 2022. When 
the full eligibility age was 65, the benefit reduction for taking 
benefits at age 62 was 20 percent. When the age increase to 67 is fully 
implemented, the reduction will be 30 percent. The reduction in monthly 
payments for claiming early Social Security retirement benefits takes 
account of the longer period of time over which benefits will be paid. 

[8] EBSA data also indicates that the number of defined benefit plans 
declined by 54 percent from 1978 to 1997. 

[9] Craig Copeland, "Individual Account Retirement Plans: An Analysis 
of the 2001 Survey of Consumer Finances," Employee Benefit Research 
Institute, Issue Brief No. 259, July 2003. 

[10] GAO, Retiree Health Benefits: Options for Employment-Based 
Prescription Drug Benefits under the Medicare Modernization Act, GAO-05-
205 (Washington, D.C.: Feb. 2005). 

[11] Richard W. Johnson and Rudolph G. Penner, "Will Health Care Costs 
Erode Retirement Security?" Issue in Brief, Center for Retirement 
Research at Boston College, (2004) No. 23. 

[12] While we refer to phased retirement as any reduction in hours at 
an existing job, it should be noted that proposed IRS regulations, 69 
Fed. Reg. 65108 (2004), refer to a "bona fide phased retirement 
program" as one that is a written, employer-adopted program under which 
employees may begin working fewer hours and receiving phased retirement 
benefits on or after a specified retirement date. 

[13] In-service distributions refer to the receipt of pension benefits 
while the participant is still employed with the employer that 
sponsored the pension plan. Individuals with DC pensions are able to 
access their pension benefits once they have attained age 59 ˝ 
regardless of their work status. 

[14] Proposed IRS regulations concerning phased retirement programs 
(discussed below) do not address when a full retirement occurs and do 
not endorse a prearranged termination and rehire as constituting a full 
retirement. "Distributions From a Pension Plan Under a Phased 
Retirement Program," 69 Fed. Reg. 65108 (2004). 

[15] Ibid. 

[16] Patrick Purcell, "Older Workers: Employment and Retirement 
Trends," Congressional Research Service Report for Congress, Sept. 14, 
2005. 

[17] A recent Supreme Court ruling on the ADEA held that employees are 
allowed to make "disparate impact" claims under ADEA, meaning that 
employees do not have to prove intentional discrimination by the 
employer. Smith v. City of Jackson, Miss., 125 S. Ct. 1536 (2005). 
Another recent ruling held that employers are allowed to favor older 
workers over younger workers even if the younger workers are age 40 and 
over and, thus, are in ADEA's protected class. Therefore, a benefit 
geared toward relatively older workers, such as partial or phased 
retirement, would likely not be considered discriminatory toward 
relatively younger workers who are age 40 and over. General Dynamics 
Land Systems v. Clines, 540 U.S. 581 (2004). 

[18] GAO-02-85. 

[19] In November 2004, the Department of Labor's Employment and 
Training Administration (ETA) did form an intra-agency taskforce, 
composed of DOL staff only, focused on the issues and concerns of the 
older worker population. 

[20] See Older Worker Opportunity Act (S. 1826). 

[21] The workforce refers to employment of the total civilian 
population aged 16 and older. We define white-collar occupations to 
include the following BLS occupational categories: management, business 
and financial operations; professional and related; sales and related; 
and office and administrative support. Blue-collar occupations include 
the following BLS categories: farming, fishing, and forestry; 
construction and extraction; installation, maintenance, and repair; 
production; and transportation and material moving (for more 
information on occupational categories see app. III). Occupational data 
includes both public and private sector employment. 

[22] In prior work we found that the movement away from blue-collar 
work is more pronounced among older workers. See: GAO-02-85, 14. 

[23] We define older workers as those between the ages of 55 to 74 for 
purposes of our extrapolations. Labor force participation rates are 
considerably lower in the age 65 to 74 group compared to the age 55 to 
64 group. However, recently, labor force participation rates among 
workers aged 65 to 74 have been rising and are projected to continue 
rising as the population ages. 

[24] GAO-02-85, 14. 

[25] S. Kathi Brown, "Staying Ahead of the Curve 2003: The AARP Working 
in Retirement Study," AARP, (2003) 7. 

[26] According to the U.S. Census Bureau, among those aged 55 to 64, 
approximately 67 percent of coverage was through an employer, 18 
percent was through a public program, and 10 percent was through direct 
purchase. Workers who are 65 or older or are disabled qualify for the 
federal Medicare insurance program. Carmen DeNavas-Walt, Bernadette D. 
Proctor, and Cheryl Hill Lee, U.S. Census Bureau, "Income, Poverty, and 
Health Insurance Coverage in the United States: 2004," (2005) 74. 

[27] For workers aged 65 or over federal law requires that employers be 
the primary health insurer and Medicare becomes a secondary payer. Some 
people are concerned that the provision stipulating Medicare as a 
secondary payer creates barriers or at least complicates the 
continuation of work past age 65. Specific concerns raised are that the 
provision increases the cost of employing older workers, may prevent a 
person working for a firm from getting a benefit to which he or she is 
otherwise entitled, and therefore may be considered a tax on work, at 
least at those firms offering such health benefits. 

[28] Research has shown that having a college degree is often closely 
tied to other outcomes such as higher income and better health. 
According to one national study, in 2004, those over 25 with a college 
degree on average earn $23,000 more than those without a college 
degree. Moreover, 93 percent of those with a college degree reported 
being in "excellent, very good, or good" health, compared to 82 percent 
of those with a high school diploma. Institute for Higher Education 
Policy, "The Investment Payoff: A 50-State Analysis of the Public and 
Private Benefits of Higher Education," (2005) 7, 13. 

[29] Scott Reynolds, Neil Ridley, and Carl E. Van Horn, "A Work-Filled 
Retirement: Workers' Changing Views on Employment and Leisure," Work 
Trends, (2005). 

[30] Ibid, 5. 

[31] Ibid, 6. 

[32] Ibid, 6. 

[33] Katherine G. Abraham and Susan N. Houseman, "Work and Retirement 
Plans among Older Americans," Upjohn Institute Staff Working Paper No. 
04-105, (July 2004) 18. 

[34] Reynolds, Ridley, and Van Horn, "A Work-Filled Retirement: 
Workers' Changing Views on Employment and Leisure," 11. 

[35] The U.S. Department of Labor assisted us in assembling a group of 
employer representatives to discuss the issues raised by the aging of 
the workforce. See appendix VIII for more information. 

[36] GAO-02-85, 4. 

[37] In addition, 15 percent of partial retirees were employed in 
clerical and administrative support occupations; 13 percent were 
employed in operator occupations; 11 percent were employed in 
managerial occupations; 11 percent were employed in sales occupations; 
6 percent were employed in farming, forestry, and fishing occupations, 
3 percent were employed in construction trade and extraction 
occupations; 2 percent were employed in mechanics and repair 
occupations; and 2 percent were employed in production occupations. 

[38] However, data show that many partial retirees are no longer 
working for their career employer, but rather are self-employed. Self- 
employment is much more prevalent among partial retirees than among 
full-time workers. According to the HRS, 36 percent of partial retirees 
were self-employed in 2002 compared to 18 percent of full-time older 
workers. 

[39] Federal governmental plans are not covered by IRS regulations, 
including restrictions on in-service pension distributions. 

[40] GAO-02-85, 27-28. 

[41] Ibid, 23. 

[42] Robert M. Hutchens, "The Cornell Study of Employer Phased 
Retirement Policies: A Report on Key Findings" Faculty Publications - 
Labor Economics, (2003) 3. 

[43] Hewitt Associates LLC, "Employer Approaches to Phased Retirement," 
(2003) 1; Laurene Graig and Valerie Pagenlli of Watson Wyatt, "Phased 
Retirement: Reshaping the End of Work," Compensation & Benefits 
Management, 1999, Vol. 16, No. 2; Jessica Collision, SHRM, NOWCC, CED, 
"Older Workers Survey," (2003) vii. 

[44] Lynne Morton, Lorrie Foster, and Jeri Sedlar, The Conference 
Board, "Managing the Mature Workforce: Implications and Best 
Practices," (2005) 20. 

[45] GAO-02-85. 

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