Retirement Benefits and the Heterogeneous Impacts of Job Loss on Older Workers

• In Event: Financial Security and Well-being in Retirement

Abstract

The economic consequences of job loss are profound, affecting wages, employment, and financial health more generally. Older workers, especially those with long pre-displacement job tenure, are particularly vulnerable to large earnings reductions and prolonged unemployment. While the existing literature highlights the lasting nature of these effects, there is a lack of research examining the role that retirement benefits play in shaping post-displacement outcomes.
Using longitudinal data from the Health and Retirement Study between 1992-2022, we investigate the influence of retirement plan characteristics on the well-being of older workers who experience job loss. Focusing on the period of time before workers become eligible for Social Security and Medicare (ages 50-65), we first use a matched sample of displaced and non-displaced workers to estimate the impacts of job displacement. Consistent with prior work, we find that involuntary job loss at older ages leads to reduced earnings and hours worked, higher rates of partial and complete retirement, worsening mental health, and a higher likelihood of difficulty with the activities of daily living. Next, we investigate how these impacts vary by retirement plan characteristics. Specifically, we use reweighting techniques and an event study design to study how job loss varies by pension type and access to (pre-Medicare) retiree health insurance.
Our results shed light on the role that retirement benefits play in buffering the negative consequences of late-career job displacement and carry implications for the design of retirement policy, particularly as AI and automation increasingly reshape the labor force, potentially displacing older workers at unprecedented rates.

Authors

• Grace Beata Brang, New York University
  Presenting Author

• Sewin Chan, New York University
  Non-Presenting Co-Author

• Travis St.Clair, New York University
  Non-Presenting Co-Author