Working after Retiring from Career Jobs:

Worklife Transitions of Public Employees in North Carolina

Robert L Clark

Robert G Hammond

Melinda Sandler Morrill

Aditi Pathak

Prepared for the 2015 SIEPR Conference on Working Longer and Retirement

Stanford University

Draft

October 2015

Robert L. Clark is Stephen Zelnak Professor of Economics and Management, Innovation, and Entrepreneurship, North Carolina State University and Research Associate, National Bureau of Economic Research, robert_clark@ncsu.edu. Robert G. Hammond is Associate Professor of Economics at North Carolina State University, robert_hammond@ncsu.edu. Melinda Sandler Morrill, Associate Professor, Department of Economics, North Carolina State University, melinda_morrill@ncsu.edu. Aditi Pathak is a doctoral student of Economics at North Carolina State University, aspathak@ncsu.edu.

The authors gratefully acknowledge funding from the Sloan Foundation, Grant Number 2013-10-20. The research reported here is part of an on-going project that is being conducted in partnership with the North Carolina Retirement Systems Division. The authors gratefully acknowledge the help and support of Janet Cowell, North Carolina State Treasurer, Steven C. Toole, Director of the Retirement Systems Division, Mary Buonfiglio, Deputy Director of Supplemental Retirement Plans, and Sam Watts, Policy Director of the Retirement Systems Division. The authors would like to thank Bryan Allard, Emma Hanson, and Christelle Khalaf for research assistance. The opinions and conclusions expressed herein are solely those of the authors and do not represent the opinions or policy of the North Carolina Retirement System or any other institution with which the authors are affiliated.

For the past three decades, labor force participation rates among older persons have been rising.[footnoteRef:1] A longer worklife is consistent with increasing life expectancy and improving health status. However, working longer does not necessarily imply delaying retirement from career jobs. Increasingly, retirement is becoming a transitional process instead of a one-time event. Individuals leave their career jobs and move on to new employment situations before permanently leaving the labor force. This is especially true in the public sector where long-career employees covered by defined benefit pension plans without a minimum age requirement could potentially retire in their 50s with unreduced benefits after some minimum years of service (e.g., 30 years of service). In addition, many of these relatively young retirees are eligible to remain in their employer’s health plan, which is a valuable benefit for those not yet eligible for Medicare.[footnoteRef:2] Together, defined benefit pension and retiree health insurance plans provide strong incentives for employees to leave their state or local government job as soon as they qualify for retirement benefits. Using these benefits as a base for annual income and health insurance coverage, public sector retirees can consider a wide range of employment and leisure opportunities including part-time jobs, employment in less stressful environments, volunteer work, and other types of employment that they may find more appealing. [1: The Bureau of Labor Statistics reports that the participation rate of men aged 60-64 rose from 54.7 percent in 1992 to 60.5 percent in 2012. Over the same period, the rate for men 65 and older increased from 16.1 percent to 23.6 percent. Similarly, the participation rate of women aged 60-64 increased from 36.4 percent to 50.4 percent while the rate for those aged 65 and older rose from 8.3 percent to 14.4 percent. http://www.bls.gov/emp/ep_table_303.htm ] [2: Retirees from state and local employment are typically allowed to remain in the government’s health plans after they retire from public serve. In general, the government pays some or all of the health insurance premium for retirees (Clark and Morrill, 2010).]

Economists have been studying and documenting the various types of worklife transition from full-time career employment into a final period of zero hours of paid work. Potential steps in this process include accepting phased retirement with one’s career employer, gaining new employment at either full or part-time, or moving into self-employment. The transition may include periods of no work followed by months of full- or part-time employment. Virtually all of the economic studies of the final worklife transition examine data from either the Retirement History Study (RHS) or the Health and Retirement Survey (HRS). In general, these studies do not consider important differences between public and private sector workers.

Using individual-level survey data merged with administrative records, this study examines the worklife transitions of public sector workers and recent retirees in North Carolina. We observe and analyze the plans of older workers concerning when they expect to retire and whether they anticipate working after retirement from their government job. Then, we examine the labor force choices by recent retirees as they re-enter the labor force (or not). In particular, many public retirees have the opportunity to return to work for the state or local government. In some cases, retirees are able to return to the same job, raising concerns over potential ‘double dipping’. The terms of re-employment by the same or different government agencies are typically prescribed by law and these regulations describe how the return to work may impact current and future pension benefits. Understanding what retirement paths individuals follow and why can help inform government and employer policies regarding benefit design and return to work provisions. Further, this study contributes to the small and growing literature aimed at understanding contemporary worklife transitions, described further below.

I. What Do We Know About the Retirement Transition?

Most workers will retire from their career employer in their 50’s or 60’s and can expect to live for an additional 30 or more years. Younger retirees might be looking for changes in hours of work, less stressful working conditions, and new employment challenges. As such, they may not wish to completely and permanently leave the labor force. ‘Retirement’ has many potential meanings including leaving a career job, claiming retirement benefits, or completely leaving the labor force. In this paper, we use the term “retirement” and “retiree” to indicate that an individual has left their full-time state or local government job and begun to receive a benefit from a North Carolina public pension plan. Thus, an individual may be retired from a North Carolina public employer but still working full-time.

After retiring from a career employer, there are several possible worklife transitions that individuals might experience. These transition types include phased retirement with the same employer, return to work with the same employer (either full or part-time), or a shift to bridge jobs (including self-employment). A further complication is that individuals may leave the labor force entirely for a period of time and then return to the same or a different employer. Returning to the labor force after a period of no employment may be planned in advance or could be due to a health or financial shock (Maestas, 2010). Figure 1 provides a visual flow chart of possible retirement transitions. This section describes these transitions in detail and reviews the relevant literature.

[Figure 1]

I.A. Post-Career Employment with Same Employer

Individuals who retire from their career jobs may find that their best employment opportunities are to continue their relationship with the career employer but in different employment conditions. We divide post-career employment into two types: phased retirement and returning to work after retirement. Phased retirement is when an older worker shifts from full-time to part-time employment with the same employer.[footnoteRef:3] When returning to work, the individual generally retires, has a period of separation, and then returns to work, perhaps as some type of contract worker. In our discussion, returning to work includes both the movement to bridge jobs and returning to the same employer. IRS and employer-specific rules will govern the requirements for a period of separation and the ability to renegotiate salary and benefits. [3:  Phased retirement is defined by the Department of Labor as “A phased retirement option allows employees at or near retirement age to reduce their work hours to part time, receive benefits, andcontinue to earn additional funds." http://www.dol.gov/ebsa/faqs/faq_consumer_pension.html]

Phased Retirement. Older workers may wish to remain with their career employer, but with reduced hours and/or responsibilities. Phased retirement can be defined as a change in working conditions while remaining with the same employer, such as when an older worker continues to work with a career employer but shifts from full-time to part-time. One might also include situations where the employee still works full-time, but accepts lower compensation and/or reduced responsibilities. Clark and Morrill (2015) find that the first retirement transition of 8 percent of employees in the 1992 HRS cohort was to reduce hours while remaining with their career employers.[footnoteRef:4] This transition could entail a shift in job assignments, or the employee in phased retirement could continue doing the same tasks but only work a part of the day, fewer days per week, or full-time for part of the year. [4: This analysis is based on comparing the work status of HRS respondents from one wave of the survey to the next, a period of two years. A shortcoming of this analysis is that it is a comparison of labor market status in the two survey years and does not capture labor market activities between the survey years.]

In general, it appears that many older workers would like the option of phased retirement with their current employer. However, relatively few firms have adopted formal phased retirement policies and many seem uninterested in including phased retirement as part of their formal human resource policies.[footnoteRef:5] McGill, et al. (2010) found that despite potential advantages of phased retirement, there are few broad-based phased retirement programs in the private sector. The lack of interest by employers in establishing phased retirement programs may be due to legal and regulatory policies associated with retirement plans, tax policies, and age discrimination laws.[footnoteRef:6] Changes in federal legislation to allow in-service distributions of pension benefits after employees have attained the normal retirement age has moderated a significant impediment to phased retirement (Hill, 2010).[footnoteRef:7] [5: Clark and Morrill (2015) review the literature on phased retirement and discuss why employers may have economic concerns about adopting formal phased retirement plans.] [6: One sector of the economy where phased retirement is rather common is higher education where retiring faculty seemingly can shift to part-time work smoothly. In this setting, faculty and institutions tend to favor the adoption and use of formal phased retirement plans. See Allen, Clark, and Ghent (2004) for an analysis of the impact of the introduction of a phased retirement program.] [7: Interestingly, the Federal government has recently adopted a phased retirement program and issued basic guidelines governing eligible workers and the terms of their employment while in phased retirement. These phased retirees can receive a partial retirement benefit and will continuing to accrue service credits that will be used in the determination of their ultimate retirement benefit (Plansponsor.com 2014) http://www.plansponsor.com/Phased_Retirement_Program_Set_Up_for_Federal_Employees.aspx. ]

Returning to Work. Another method of extending worklife with employers occurs when a worker leaves a career job, starts her pension benefit, and returns to work after a period of being out of the labor force. The feasibility of returning to work with a career employer depends, in part, on the retirement benefits offered by the firm and federal tax policy and regulations concerning pension benefits. Furthermore, the labor supply needs of the employer will dictate whether an individual has the opportunity to return to work after a period of separation. In the public sector, the length of time between retirement and re-employment is clearly stated along with how returning to work impacts the annual pension amount.[footnoteRef:8] [8: The rules governing return to work for state retirees in North Carolina are defined in https://www.nctreasurer.com/ret/Return%20to%20Work/RTWGuidanceTSERS.pdf while the regulations for employees of local governments are described at https://www.nctreasurer.com/ret/Return%20to%20Work/RTWGuidanceLGERS.pdf]

Most public sector employees are covered by defined benefit pension plans (Clark, Craig, and Sabelhaus, 2011). The benefit formulas and eligibility conditions of these plans are an important determinant of the worklife transition of public employees. The retirement benefit in defined benefit plans is typically a function of the final average salary using the last 3 to 5 years of annual earnings. Basing benefits on final salary makes reduced hours, without retiring and determining annual pension benefits, unfeasible for most public employees. Thus, retirement followed by a break in service is the norm for public employees returning to work

I.B. Bridge Jobs.

Over the past three decades, economists have been documenting the change in the worklife transition and the importance of individuals moving to bridge jobs (e.g., Quinn 1999, Ruhm 1990). Bridge jobs are typically defined as a job not with one’s former employer. Bridge jobs include self-employment and can be either full-time or part-time. These jobs can be short-term or become essentially a second career lasting for a number of years. The transition to a bridge job can be immediately after retirement or after a planned period of being out of the labor force, hence ‘bridging’ the gap between retirement from a career employer and a full exit from the labor force.

Clark and Morrill (2015) find that the first transition of 20 percent of career employees in the 1992 HRS cohort was to a bridge job with an additional 5 percent moving into self-employment.[footnoteRef:9] Individuals who leave career employers but choose not to move directly into complete retirement may be seeking new challenges in different types of jobs or they may be looking for jobs with less physical or mental stress. Two interesting points related to employment transitions are whether these job shifters planned for a period of work after retirement while still at their career job and whether, in the years prior to retirement from career jobs, they engage in training to acquire new skills needed to be competitive for these bridge jobs. [9: This analysis of transitions is based on comparing the employment status in one wave of the HRS to the next wave, which is two years later. Thus, what is reported as a change in status for a career job to a bridge job could have involved some period of time out of the labor force.]

A series of studies indicate that the new norm of retirement is to gradually transition from full-time work with a career employer to an additional period of employment prior to leaving the labor force permanently.[footnoteRef:10] Giandrea, Cahill, and Quinn (2009) find that 60 percent of individuals leaving full-time career jobs ultimately moved to bridge jobs instead of permanently retiring. The transition often includes changes in occupations, industries, and hours of work. For example, Cahill, Giandrea, and Quinn (2006) show that 55 percent of men and 59 percent of women transiting to bridge jobs were working part-time. Johnson, Kawachi, and Lewis (2009) find that two thirds of older job changers switched occupations and that hourly wages were substantially lower in their bridge jobs. They note that bridge jobs tend to be less stressful, have more flexible work schedules, and are less likely to have health insurance. Cahill, Giandrea, and Quinn (2006) also find that the tendency to move to a post-career job declines with age. [10: For some individuals, the retirement transition includes a movement into self-employment where hours and work assignments can be more flexible (Giandrea, Cahill, and Quinn, 2008).]

The probability of a gradual transition into retirement is found to be affected by the age of termination of career job, health status at retirement, and type of pension in which the individual was enrolled. Cahill, Giandrea, and Quinn (2006) examined ten years of data from the HRS and found an increase in the tendency to move from career jobs to bridge jobs before leaving the labor force. They find that approximately 60 percent of both men and women leaving career jobs after age 50 moved first to bridge jobs instead of totally leaving the labor force.

I.C. Returning to the Labor Force.

In addition to a phased retirement or bridge job, the worklife transition may include a period of non-employment followed by the return to the labor force. An individual who is reentering the labor force could choose to return to the previous employer or a different employer (i.e., bridge job). The decision to re-enter the labor force after a period of nonparticipation may be part of an ex ante retirement plan. As part of their worklife transitions, individuals may have planned to retire from their career job, have a few years away from work, and then re-enter the labor force in a different job, perhaps at reduced hours. The retirement plan may include learning new skills in order to be prepared for a different job or simply reflect a preference for time away from work before moving on to a second career. Alternatively, re-entry may not be planned at the time of retirement. Instead, unexpected economic events, such as a shock to retirement wealth due to market fluctuations or changes in family circumstances, can create a renewed need for earned income.

Maestas (2010) uses the HRS to examine the tendency of individuals to return to work after retiring and completely leaving the labor force. She finds that between 27 and 37 percent of individuals who moved from work to full retirement reversed their retirement decisions and re-entered the labor market. Some of these re-entries were planned while individuals were still on their career jobs and some were the result of unanticipated events in the post-retirement period. She finds that the jobs obtained by these individuals are similar to the bridge jobs of those that move from career jobs to new employment.

Zissimopoulos and Karoly (2009) examine data from the HRS from 1992 to 2002. They pool individuals across all waves and find that 5 percent of retirees find new employees between waves of the survey and that about one third of those who had left the labor force moved into self-employment. Cahill, Giandrea, and Quinn (2011) estimate that about 15 percent of career employees who exited the labor force returned to work. As might be expected, younger and healthier individuals are more likely to return to the labor force. Taken together, this limited research on labor force re-entry by retirees indicates that complete withdrawal from the labor force is not a permanent state for many individuals and that re-entering the labor force after a period of zero hours of work can be part of a lifetime plan or driven by unexpected events that occur after retirement.

I.D. Implications for Retirement by Public Employees.

None of the studies discussed above focused on the worklife transitions of public employees. As a result, little is known about the transition from career employment to complete withdrawal from the labor force by workers who spent their career working for state and local government agencies. There are some clear differences in the situations confronting older public employees that may influence the retirement transition. Individuals employed in the public sector are much more likely to be covered defined benefit pension plans that have strong early retirement incentives compared to workers in the private sector and they are more likely to be included in employer-provided health insurance in retirement. These plans provide a base level of annual income in retirement, and, thus, one might expect public retirees to be less likely to work in retirement. However, public workers retire from their career jobs at considerably younger ages than their private sector counterparts in large measure because of the incentives associated with retirement plans. Thus, these relatively young retirees might be more likely to desire some form of post-retirement work as they can expect 30 or more years of life after retirement and on average, will be in better health than persons who retire at older ages. Of course, some public employees, like private sector workers, retire at young ages due to health problems.

The public sector may also be more accommodating to providing opportunities for retirees to return to work after a period of separation. While “double dipping” is a concern to many policy makers, state and local governments often have clear rules concerning the ability of retirees to return to work. These rules can be considered guidelines for returning to work by public employees. Thus, workers approaching retirement can consider how they can use these rules to achieve a period of post-retirement employment or a type of phased retirement with their old government agency.

II. Public Employees in North Carolina

Relatively little attention has been devoted to studying the final stages of worklife transitions by public employees. This study provides a detailed assessment of retirement and work after retirement plans of older public employees in North Carolina along with the post-employment labor market behavior of recent retirees. The analysis is based on a survey of employees aged 50 to 69 who were working full-time in 2014 and a separate survey of individuals who retired and began a retirement benefit between January 1, 2009 and December 31, 2014.[footnoteRef:11] [11: The Data Appendix provides a discussion of these surveys.]

Table 1 presents the means of economic and demographic characteristics of the respondents in the two surveys. Among respondents in the survey of workers, the mean age is 57 years and these individuals had on average 18 years of service. The average age of retirees is 63 and these retirees had on average 23 years of tenure when they retired. About 70 percent of both samples are female and the respondents are mostly white with relatively high levels of education. School personnel represent about 40 percent of both samples. Over two thirds of the retirees had returned to the labor force by the time of the survey.

[Table 1]

All full-time employees working for a state agency in North Carolina, as well as teachers employed by local public school systems, are required to enroll in the Teachers and State Employees Retirement System (TSERS). Most municipal, county, and other local governmental employers participate in Local Government Employees Retirement System (LGERS). Both plans are defined benefit pension plans and are managed through the office of the State Treasurer. The benefit formula for TSERS is 1.82 percent of the employees’ final average salary per year of credited service while the LGERS benefit is based on 1.85 percent per year of service. Both plans provide an unreduced benefit for individuals at any age with 30 years of service, at age 62 with 20 years of service, or at age 65 with 5 years of service. Thus, individuals who entered public employment in NC immediately after completing high school or college could be eligible for an unreduced benefit beginning around age 50. Early retirement benefits are available to individuals who attain age 50 with 20 years of service.[footnoteRef:12] Over three quarters of the sample of workers are teachers or working for a state agency and therefore enrolled in TSERS. [12: Details of the benefit formulas and eligibility conditions for retirement benefits are described in the employee handbooks for both systems which can be found at https://www.nctreasurer.com/ret/Benefits%20Handbooks/TSERShandbook.pdfhttps://www.nctreasurer.com/ret/Benefits%20Handbooks/LGERShandbook.pdf.]

Most of those who are covered by TSERS are also eligible to remain in the state health plan after retirement. Some local governments also cover employees and retirees in the state health plan, while others provide their own health insurance plan. Most state and many local employees are also eligible to participate in the two state-managed voluntary supplemental retirement saving plans, the NC 401(k) Plan and the NC 457 Plan, in addition to other voluntary supplemental retirement saving plans administered by North Carolina public employers (i.e., local 457 plans or 403b plans for school district employees).

III. Older Employees Plans to Work After Retirement

A key objective of this study is to examine older workers’ plans for their upcoming retirement transitions. Respondents in the older worker survey were asked their expected retirement age, whether they plan on working after retirement, and why they either are or are not planning to work after retirement. We begin the analysis by showing the pattern of expected retirement age compared to the current age of the employee. Table 2 clearly shows that most older public employees in North Carolina expect to retire from their public job at a relatively young age. Among employees age 50 to 54, 36 percent expect to retire prior to age 60 and two thirds anticipate retiring by age 62. Similarly, 61 percent of those aged 55 to 59 report plans to retire by age 62. The expected retirement age will rise as current age of workers increase, since the sample is restricted only to active workers that are not yet receiving retirement benefits. Still, given these rather young expected retirement ages, we might expect that many North Carolina public employees would be planning to stay engaged in the labor force after leaving public employment.

[Table 2]

Table 3 presents respondents’ post-retirement work plans separately by several categories of expected age at retirement. Column 1 of the table shows that only 15 percent of individuals who anticipate retiring from public employment prior to age 60 do not plan on working once they leave their public job. As expected, the proportion of those not planning on working after retirement rises with the age of expected retirement so that one third of those exiting public employment after age 65 plan on not working in retirement. Columns 2 and 3 also illustrate an interesting pattern of work after retirement plans. One quarter of employees who expect to retire between 50 and 54 expect to work full time after they leave public employment. This proportion drops sharply with higher ages of expected retirement.

[Table 3]

Table 4 reports the stated reasons for not working after retirement. A majority of older workers who do not anticipate working after retirement reported that the main reason for not re-entering the labor force is that they “expect to have enough money in retirement and will not need to work.” One fifth of individuals who plan to retire at age 65 or older indicated that they did not think they would “be able to find work.” This answer may reflect perceived age discrimination in the labor market that makes it more difficult for older retirees to find employment or that older retirees have fewer skills and less human capital that potential employers find attractive.

[Table 4]

Over all, the survey of older workers indicates that two thirds of employees aged 50 to 59 anticipate retiring from their state and local jobs by age 62. These future, relatively young retirees overwhelmingly plan to work after retirement as 85 percent of those planning to retire between the ages of 50 and 59 indicate that they expect to work after retirement. Similarly three quarters of those who expect to retire between 60 and 65 indicate that they are planning post-retirement employment. To examine how retirement plans vary across older workers, we estimate the expected retirement age of the respondent and whether they expect to return to work after retirement as a function of a series of economic, demographic and household (see Table 5). Among these older workers, men expect to retire about 0.7 years later. Individuals with more years of tenure with the government expect to retire earlier. Among these survey respondents, tenure is correlated with salary and future retirement benefits. The estimated coefficient indicates that workers with 5 additional years of tenure anticipate retiring 1.2 years sooner. School personnel expect to retire about one year earlier than general public employees while police, and firefighters expect to retire almost three years earlier. In contrast, university faculty anticipate retiring 0.7 years later.

[Table 5]

As noted earlier, 73 percent of these older workers expect to work after retiring from their public sector job. The estimated coefficients in Column 2, Table 5 indicate that a 5 year increase in the expected retirement age is associated with a 5.5 percentage point decrease in the likelihood of workers expecting to work after retirement. Men are 8.3 percentage points more likely to expect to return to work after retiring from their career job. Individuals with professional degrees are 15 percentage points more likely to report that they expect to re-enter the labor market after retiring. Married workers with a spouse in good health are less likely to anticipate returning to work after retiring from their government job while those whose spouse is working are more likely to expect to work in retirement.

IV. Do Retirees Return to the Labor Force After Leaving Public Employment?

Responses from our survey of older workers indicate that public employees in North Carolina expect to retire at relatively young ages. Further, most of these young retirees anticipate that they will work after retirement. To assess whether plans to work after retirement are realized, we also conducted a survey of recent retirees to follow their transitions into complete retirement. Table 6 indicates a substantial tendency of retirees to return to work but the proportion that are working at the time of our survey is considerably lower compared to the plans reported in Table 3. Column 4, Table 6 shows that 46 percent of individuals who retired prior to age 55 were not in the labor force when they responded to the survey in spring 2015. Recall that only 15 percent of older workers who indicated that they would retire prior to age 55 did not anticipate working in retirement; however, they were not asked the duration or timing of work after retirement. Thus, the smaller proportion who are working in 2015 could reflect the fact that some retirees had returned to work but had completely retired by the time of our survey while others may still be planning to return to work at a later date.

[Table 6]

As the age of retirement from public employment rises, the proportion of retirees not working increases quickly so that among those that retired after age 60 over 75 percent were not working at the time of the survey. It is important to remember that the survey and the discussion below relates to retirees who are working at a point in time, i.e. when the survey was conducted and not whether they ever worked after retiring from their state and local jobs. In addition, many of the recent retirees left their public jobs during the recession years and thus they faced adverse labor market conditions for older individuals seeking employment.

Another interesting aspect of the retirement transition for public employment is the opportunity to return to work with the same agency where one was previously employed. Using the information in the first three columns of Table 6, 47 percent of retirees who had returned to work at the time of the survey had found re-employment by state and local government agencies in North Carolina. Of those returning to work in the public sector, 55 percent were reemployed at the same North Carolina state or local government from which they retired. Among all public employees who retired between 2009 and 2014, 31 percent had returned to the labor force with 14 percent being reemployed by the state or by a local government in NC.

These data indicate the work status at the time of our 2015 survey. As a result, they may underestimate the proportion of individuals who ultimately return to the labor force for two reasons. First, individuals may have already completed a spell of employment post-retirement and entered into a new spell of non-employment. Second, individuals may be currently in a period of non-employment but planning to re-enter the labor force at some point in the future. While we cannot capture unplanned re-entry into the labor force, we did ask nonworking retirees about their intentions concerning the likelihood that they will re-enter the labor force in the future. Table 7 reports these intentions by the age at retirement. The age pattern of work expectations are clear – among retirees who are currently not working, the higher the age at retirement, the less likely individuals are to expect to re-enter the labor force. Among workers who retired at ages younger than 55 and who are not currently working an equal proportion indicated that they were likely and unlikely to return work. In comparison, individuals who at or after age 65, five times as many thought it was unlikely that they would return to work.

[Table 7]

To further investigate post-career worklife transitions, we estimate three work decisions for public retirees. Column 1, Table 8 reports the results from a linear probability model with the dependent variable equaling one if the retiree was working at the time of the survey. In general, the results are consistent with expectations. We find that older retirees are less likely to be currently working while males are 10.7 percentage points more likely to be working compared to female retirees. Having more than $250,000 in a supplemental retirement saving plan is associated with a 4.7 percentage point lower probability of working. Good health of the respondent is associated with a 10.6 percentage point higher likelihood of being employed at the time of the survey.

[Table 8]

Individuals who report that their spouse was in good health were 7.3 percentage points less likely to be working, perhaps due to complementarities in leisure activities. We also find a tendency for joint labor market choices as the probability of individuals being employed whose spouses are working is greater than in households where their spouse is not working. Family responsibilities also seem to affect the probability of working by these retirees. Individuals who report having three or more children are 4.4 percentage points less likely to be working and those who report significant time spent caregiving for family members are 3.8 percentage point less likely to be working.

Second, among those who have returned to work, we estimate the probability that they have found new employment in the North Carolina public sector, see Column 2. Men are 8.2 percentage points less likely to have re-entered public. Individuals who were career employees with local governments are 11 percentage points less likely to be working at the time of the survey. Larger retirement benefits are associated with a higher probability of becoming re-employed with the state or local government.

Finally, in Column 3, Table 8, among retirees who are currently not working, we estimate whether they plan to re-enter the labor force in the future. We find that nonworking men are 5.6 percentage points more likely to expect to seek future employment compared to similar women and older retirees are less interested in returning to work. Retirees reporting good health are 11.1 percentage points more likely to plan to return to work while those whose spouse is in poor health are 6.6 percentage points less likely to plan to re-enter the labor force. Having a spouse who continues to be employed is associated with a 9.3 percentage point higher probability of planning to return to work.

V. Worklife Transitions Among Public Employees

When a public employee becomes eligible for retirement benefits, she faces a choice to continue working or to separate employment and initiate retirement benefits. We refer to the latter decision as “retirement”, although the individual may continue engaging in paid labor market activities for a number of years. Once retired, that individual might return to her previous employer in the same role or in a role with a reduced time commitment (and, potentially, compensation level). Or, the individual may seek out a ‘bridge job’ at another employer, again either full or part-time. On top of this, an individual might spend a period of time not working and then re-enter the labor at either her previous employer or a bridge employer. It is difficult to capture the full experience of worklife transition.

This study examines the final worklife transitions of career public sector employees in North Carolina. First, we assess expectations for retirement and plans for working after retirement for a cohort of workers aged 50 to 69. Career public employees, whether at the state or local level, plan on retiring at relatively young ages; however, two thirds of the older workers indicate that they plan to work after retirement. Next, we consider the current labor market activities of individuals who retired between 2009 and 2014. We trace the paths of worklife transitions for these recent retirees. Some interesting patterns emerge. Individuals that retire at younger ages are much more likely to be actively employed in the years following retirement. Many public sector retirees are able to find re-employment in either state or local government agencies. Furthermore, we observe evidence consistent with individuals retiring from their career job, having a period of time where they are out of the labor force, and then returning to work. The analysis represents an initial effort to document and understand the worklife transitions of career public employees.

REFERENCES

Allen, Steven, Robert Clark, and Linda Ghent. 2004. “Phasing into Retirement.” Industrial and Labor Relations Review, 58(1): 112–127.

Cahill, Kevin, Michael Giandrea, and Joseph Quinn. 2006. “Retirement Patterns from Career Employment.” The Gerontologist 46 (4): 514–523.

Cahill, Kevin, Michael Giandrea, and Joseph Quinn. 2011. “Reentering the labor force after retirement,” Monthly Labor Review, 134(6): 34-42.

Clark, Robert and Melinda Morrill. Retiree Health Plans in the Public Sector: Is There a

Funding Crisis? Northhampton, MA: Edward Elgar Publishing, 2010.

Clark, Robert, Lee Craig, and John Sabelhaus. State and Local Retirement Plans in the United

States. Northhampton, MA: Edward Elgar Publishing, 2011.

Clark, Robert and Melinda Morrill. 2015 forthcoming. Extending Work-Life of Career Employees: Employer Interests and Concerns. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.

Giandrea, Michael, Kevin Cahill, and Joseph Quinn. 2008. “Self-Employment Transitions among Older American Workers with Career Jobs.” BLS Working Papers No. 418.

Giandrea, Michael, Kevin Cahill, and Joseph Quinn. 2009. “Bridge Jobs: A Comparison across Cohorts.” Research on Aging, 31(5): 549–576.

Hill, Tomeka. 2010. “Why Doesn’t Every Employer Have a Phased Retirement Program?” Benefits Quarterly, 26(4): 29-39.

Johnson, Richard. 2011. “Phased Retirement and Workplace Flexibility for Older Adults: Opportunities and Challenges.” The Annals of the American Academy of Political and Social Science, 638: 68–85.

Johnson, Richard W, Janette Kawachi, and Eric K Lewis. 2009. “Older Workers on the Move: Recareering in Later Life.” AARP Public Policy Institute. Available: http://assets.aarp.org/rgcenter/econ/2009_08_recareering.pdf.

Maestas, Nicole. 2010. “Back to Work: Expectations and Realizations of Work after Retirement.” Journal of Human Resources, 45(3): 718–748.

McGill, Dan, Kyle Brown, John Haley, Sylvester Schieber, and Mark Warshawsky. 2010.

Fundamentals of Private Pensions. 1st ed. Oxford: Oxford University Press.

Quinn, Joseph. 1980. “Labor Force Participation Patterns of Older Self-Employed Workers.” Social Security Bulletin, 43(4): 17-28.

Quinn, Joseph. 1999. “Retirement Patterns and Bridge Jobs in the 1990s.” Employee Benefit Research Institute (EBRI), Issue Brief No. 206: 1–22.

Ruhm, Christopher. 1990. “Bridge Jobs and Partial Retirement.” Journal of Labor Economics, 8 (4): 482–501.

Zissimopoulos, Julie, and Lynn Karoly. 2009. “Labor Force Dynamics at Older Ages: Movements into Self-Employment for Workers and Nonworkers.” Research on Aging, 31(1): 89–111.

Figure 1: Worklife Transitions

Table 1. Descriptive Statistics: Surveys of Older Workers and Recent Retirees

Survey 1

Survey 2

Workers

Retirees

Number of Individuals

1,882

6,370

Age

56.8

62.7

Years of service

18.0

22.8

Gender

Female

70.72%

68.13%

Male

29.28%

31.87%

Marital Status

Married

62.86%

70.94%

Missing

10.15%

0.11%

Race

African-American/ Black

12.59%

11.71%

White/Caucasian

73.11%

84.63%

Other

3.03%

2.51%

Missing

11.26%

1.15%

Education

High School Diploma or less

6.22%

6.83%

Some college

22.85%

24.10%

Bachelor's Degree

28.16%

29.56%

Master's Degree

27.47%

32.73%

Professional Degree

5.42%

6.04%

Missing

9.88%

0.74%

Employment Status

Not working

68.54%

Working

100.0%

31.46%

Annual Salary

$55,643

Annual Benefit

$27,250

Retirement System

TSERS

77.95%

68.90%

LGERS

22.05%

17.72%

Both

N/A

13.38%

Public school employees/retirees

39.05%

43.60%

Table 2. Expected Retirement Age by Current Age of Respondents

Expected Age of Retirement from Public Employment

Age at Survey

50-54.99

55-59.99

60-61.99

62

63-64.99

65

66-69.99

70 and Above

Total Number of Respondents at Each Age

Percent

50-54.9

11.8

24.0

16.9

12.7

3.8

19.6

6.9

4.4

685

55-59.9

0.0

13.7

25.0

22.0

5.5

18.6

11.5

3.7

672

60-61.9

0.0

0.0

13.1

24.3

14.0

21.2

21.6

5.9

216

62

0.0

0.0

0.0

11.6

30.5

25.3

27.4

5.3

95

63-64.9

0.0

0.0

0.0

0.0

15.3

25.2

39.6

19.8

110

65

0.0

0.0

0.0

0.0

0.0

8.3

81.3

10.4

42

66-69.9

0.0

0.0

0.0

0.0

0.0

0.0

38.5

61.5

62

Number of respondents

78

252

310

298

139

359

306

140

1882

Percent of respondents

4.1

13.4

16.5

15.8

7.4

19.1

16.3

7.4

100.0

Source: Survey of state and local employees aged 50 to 69 who were working in March 2014.

Table 3. Respondents’ Plans Concerning Work after Retirement by Expected Retirement Age

Do Not Plan to Work After Retirement

Plan to Work After Retirement

Total Number of Respondents at Each Age

Expected Retirement Age

Full-time

Part-time

Percent

50-54.9

14.1

25.6

60.3

78

55-59.9

15.5

15.5

69.0

252

60-61.9

25.5

9.4

65.2

310

62

28.2

5.0

66.8

298

63-64.9

23.0

6.5

70.5

139

65

31.5

5.0

63.5

359

66-69.9

33.0

5.6

61.4

306

70 and above

34.3

5.7

60.0

140

Number of respondents

507

155

1220

1882

Percent of respondents with this answer

26.9

8.2

64.8

100.0

Source: Survey of state and local employees aged 50 to 69 who were working in March 2014.

Table 4. Reasons Respondents Are Not Planning to Work after Retirement

Expected Retirement Age

No Financial Need to Work

Health Reasons

No Longer Enjoy Job

Will Not Be Able to Find Work

Other

Total Number of Respondents at Each Age

Percent

50-59.9

52.1

6.3

8.3

8.3

25.0

48

60-64.9

58.3

3.2

7.5

8.0

23.0

187

65 and above

47.5

3.5

3.1

19.6

26.3

255

Number of respondents

255

18

26

69

122

490

Percent of respondents not planning to work with this answer

52.0

3.7

5.3

14.1

24.9

100.0

Source: Survey of state and local employees aged 50 to 69 who were working in March 2014. Individuals who chose response option ‘Other’ include several reasons for not planning to work after retirement including spending time with family, travel, volunteer work, enjoy retired life etc.

Table 5. Retirement Expectation of Workers

Expected Retirement

Age (OLS)

Expect to Return to Work (LPM)

(1)

(2)

Age at survey

0.493***

(0.020)

Expected retirement age

-0.013***

(0.004)

Male

0.705***

0.083***

(0.200)

(0.030)

Married

0.660

-0.083

(0.637)

(0.095)

Black

-0.459

0.024

(0.282)

(0.042)

Other race

0.641

0.059

(0.519)

(0.078)

Less than Bachelor’s degree

-0.119

-0.063*

(0.242)

(0.036)

Master’s degree

0.007

0.039

(0.234)

(0.035)

Professional degree

0.542

0.149**

(0.416)

(0.062)

Self-reported health good

0.302

0.075

(0.388)

(0.058)

LGERS

-0.370

-0.058

(0.244)

(0.037)

K-12 teacher/administrator

-1.039***

0.006

(0.245)

(0.037)

Police/ Firefighter

-2.818***

0.027

(0.585)

(0.088)

University/College faculty

0.683**

-0.014

(0.287)

(0.043)

Annual Salary (10K)

-0.043

-0.002

(0.045)

(0.007)

Tenure

-0.213***

0.002

(0.010)

(0.002)

High financial knowledge

-0.352*

-0.041

(0.181)

(0.027)

Married*Spouse relative age

-0.002**

0.000

(0.001)

(0.000)

Married* Spouse health good

-0.086

-0.069*

(0.271)

(0.041)

Married*Spouse currently working

-0.152

0.067**

(0.217)

(0.032)

Observations

1,149

1,149

Mean of Dependent variable

62.74

0.7306

Coefficients not reported above include binary variables for missing race and missing education

Table 6. Working after Retirement

Age at Retirement from Public Employment

Total Number of Respondents at Each Age

Not Currently Working

Retirees Are Currently Working

Same State or Local Government

Other State or Local Government

Private Sector

Percent

Less than 55

46.1

12.7

12.0

29.2

1212

55-59.9

61.9

11.1

6.6

20.4

1235

60-61.9

75.0

6.1

6.1

12.8

1394

62

77.2

7.1

2.5

13.2

734

63-64.9

79.6

7.2

2.6

10.5

722

65

77.7

5.5

3.0

13.8

435

66-69.9

82.5

6.6

3.0

7.8

498

70 and above

86.2

6.5

1.6

5.7

123

Number of respondents

4334

536

362

1029

6353

Percent of respondents

69.2

8.6

5.8

16.4

100.0

Source: Survey of public employees who retired between 1/1/2009-12/1/2014

Table 7. Expectations for Returning Work: Retirees not Currently Working

Unlikely

Likely

Undecided

Total Number of Respondents at Each Age

Age at retirement

Percent

Less than 55

40.4

39.0

20.6

559

55-59.9

50.5

26.4

23.0

764

60-61.9

66.5

16.7

16.8

1045

62

67.0

18.5

14.5

567

63-64.9

67.8

16.5

15.7

575

65

71.3

13.3

15.4

338

66-69.9

70.3

14.4

15.3

411

70 and above

72.6

13.2

14.2

106

Number of respondents

2684

912

769

4365

Percent of respondents with this answer

61.5

20.9

17.6

100.0

Survey of public employees who retired between 1/1/2009-12/1/2014.

Table 8. Work Status of Retirees

Currently Working:

Full Sample

Working in the Public Sector: Only Workers

Plan to return to work

(1)

(2)

(3)

Age

-0.023***

0.003

-0.017***

(0.002)

(0.003)

(0.002)

Male

0.107***

-0.082**

0.056***

(0.016)

(0.033)

(0.018)

Married

-0.101**

-0.020

-0.083

(0.050)

(0.093)

(0.057)

Black

-0.039

0.017

0.118***

(0.024)

(0.052)

(0.026)

Other race

-0.004

-0.101

0.008

(0.049)

(0.099)

(0.053)

Less than Bachelor’s degree

-0.265**

0.637

-0.014

(0.125)

(0.495)

(0.117)

Master’s degree

-0.036**

-0.041

-0.028

(0.018)

(0.038)

(0.019)

Professional degree

0.023

-0.060*

0.031*

(0.017)

(0.035)

(0.019)

Self-reported health good

0.106***

-0.138**

0.111***

(0.031)

(0.059)

(0.035)

Receiving LGERS benefit

0.012

-0.113***

-0.029

(0.019)

(0.040)

(0.021)

Annual benefit amount(10K)

0.005

0.028***

-0.001

(0.004)

(0.008)

(0.004)

Retirement account balances >250K

-0.047***

-0.015

-0.050***

(0.016)

(0.035)

(0.017)

High Financial knowledge

-0.014

-0.033

-0.040***

(0.014)

(0.029)

(0.015)

Married*Spouse relative age

-0.001

0.001

-0.002

(0.002)

(0.003)

(0.002)

Married*Spouse health good

-0.073***

0.034

-0.066***

(0.020)

(0.043)

(0.021)

Married*Spouse currently working

0.152***

-0.049

0.093***

(0.015)

(0.032)

(0.017)

1-2 children

0.020

0.044

0.010

(0.018)

(0.036)

(0.019)

3 or more children

0.044***

0.089**

0.014

(0.017)

(0.035)

(0.018)

Caregiving

-0.038***

-0.005

0.027*

(0.014)

(0.029)

(0.015)

Observations

4,055

1,249

2,799

Mean of dependent variable

0.3146

0.4648

0.2089

Estimates from a linear probability model. Coefficients not reported above include retirement year dummies and binary variables for missing race and missing education.

1

Data Appendix

This analysis of worklife transitions of public employees in North Carolina utilizes information from a survey of older workers who were employed full-time in 2014 to examine the retirement plans of older workers. A second survey of individuals who retired from public employment between 2009 and 2014 is used to report the employment choices made by these retirees. These surveys are then augmented by data from administrative records from the North Carolina Retirement Systems Division (RSD) matched to respondents in each of the surveys. This section describes the information from each of these data sources.

Survey of Older Workers

To analyze the transitions from career employees to retirements, we utilize information from a detailed survey of full-time employees aged 50-69 in 2014. The survey responses were merged with information from administrative records maintained by the North Carolina Retirement Systems Division (RSD). The administrative data provide basic demographics (gender and date of birth), details about employment history (date of hire, agency of employment, and service credit information including membership, non-contributory, and purchased service), and salary information from 2008-2013.

RSD provided information covering local and state government workers who participated in either TSERS or LGERS. The population of older workers was restricted to those aged 50 to 69 who were not receiving a benefit from TSERS or LGERS as of March 2014. From these older workers, we drew a sample of 15,000 state and local employees. Employees with valid e-mail addresses received an on-line survey while those without email addresses were sent a print version of the survey with a self-addressed, stamped envelope. The response rates were 25 percent for the email sample and 9 percent for the print sample. After excluding respondents with missing values on key retirement questions, we had a combined sample of 1,882 individuals.

Survey of Retirees

We use responses from a survey of recent retirees (those retired between January 1, 2009 and December 31, 2014) to examine the return to work decisions of public sector employees. The administrative data include benefit account information (account effective date, benefit calculation details and benefit amounts) for retirees in addition to demographic variables, membership and employment history. The population for the retiree survey comprised of individuals who had positive contributory service and who were receiving a benefit from TSERS or LGERS. We dropped individuals with invalid email-addresses and drew a sample of 32,171 retirees. After merging survey responses with administrative records, we dropped individuals with missing response for current employment status to obtain our estimation sample of 6370 retirees.

Means for demographic and employment variables are shown in Table 1. As one would expect, the majority of state and local employees/retirees are women, in our survey samples, about 70 percent of both groups are female. About 30 percent of public employees/retirees in NC have less education than a college degree; however, more than one third of these individuals have either a master’s degree, a Ph.D., or a professional degree. Approximately three fourths of both groups were covered by TSERS.