The employment and retirement transitions of New Zealanders aged in their '60s Sylvia Dixon and Dean Hyslop Statistics NZ and Department of Labour Population Ageing and the Labour Market Workshop University of Waikato 2-3 February 2012

Working Papers – posted on Statistics NZ and DoL websites Sylvia Dixon and Dean Hyslop (2008) ‘The employment and retirement transitions of New Zealanders aged in their 60s’ Sylvia Dixon (2008) ‘Transitions from work to retirement’ Sylvia Dixon (2009) ‘Who hires older workers’ work/employment_and_unemployment/leed/references.aspx

Employment rates by age and year – males, HLFS

Employment rates by age and year – females, HLFS

Outline of presentation 1.How do employment and income support rates change with increasing age? 2.How does the continuity and intensity of employment change with increasing age? Movements in and out of employment Reductions in hours Changes of employer 3.What are the typical paths from work to retirement? 4.Do transitions from work to retirement tend to be sudden or phased?

Data and study population Data source Longitudinal data from LEED covering the period (8 years) Study population Persons born between April 1936 and March 1940 (4 birth years). They turned 65 between 1 April 2001 and 31 March Observed while in their 60s (youngest aged 60-67, oldest aged 63-70) All were eligible for NZS at 65 years Restricted to people who received some form of taxed income at the age of 66 Our final study population represents 89 percent of the total population (using Statistics NZ’s population estimates for these birth cohorts)

Work patterns of the study population All people born and observed during Work activity analysed by year: 36 percent did not work at all during – had already 'retired' 27 percent worked in every financial year (not necessarily every month) 37 percent worked in some years but not all Considering those who worked in some years but not all: 20 percent were working at the beginning but had made a long-term exit from work by the end of the observation period 17 percent were still working at end observation window Overall: Only around 2/3rds were employed during the observation window Only around 1/5th 'retired' (moved from work to non-work) within the observation window

Q1 How do employment rates and income support rates change with increasing age?

Total employment rates by birth cohort

Wage and salary employment rates by birth cohort

Self-employment rates by birth cohort

Total income support rates by birth cohort

Summary Q1 Employment rates decline very gradually with year of age Very few people stop working at exactly 65 years. But for employees who are still at work, there is a higher likelihood of leaving at the 65th birthday than at any other age. Birth cohort comparisons reveal large increases in wage & salary employment rates across birth cohorts, but little change in self-employment rates. Self-employment makes up a large fraction of total employment for this age group - implies some direct control over hours of work and work continuity Most people who weren't working in a given year received public income support

Q2 How does the continuity and intensity of employment change with increasing age? Focus on wage and salary employment Movements in and out of employment Reductions in hours Changes of employer

Full-year and full-time employment rates across the ages ( for employees)

Discontinuous work histories more common than continuous For employees in the study population, during 8-year observation window

Full-year employment rates by birth cohort Percent who worked in every month of the year (excluding those in their final year of employment)

Full-time employment rates by birth cohort Percent of months that generated full-time earnings

Multiple or new employers during the year

Summary Q2 Much diversity in levels of employment activity within this age range Work histories more likely to be discontinuous than continuous: –72% employees had at least one break in their employment before their final work episode, –51% a break of 3 months or more Part-year employment is more common for employees in their '60s Part-time employment increases strongly with age during the '60s Employer mobility rates are relatively stable in age range. –Around percent of started a new employment relationship in any given year.

Q3 What are the typical paths from work to retirement? Q4 Do transitions from work to retirement tend to be sudden or phased?

Retirement path preferences Most New Zealanders want to retire gradually! EEO Trust Work and Age Survey (2006) On-line survey of 6,500 persons, mostly aged Aspirations of those still in workforce were as follows: –48 percent would like to move to part-time or flexible hours before retiring –20 percent would like to move to a less demanding job before retiring –10 percent would like to move to self-employment before retiring MSD survey of 65-year-old applicants for NZ Superannuation (2008) Of those who were employed when surveyed: –31 percent would like work fewer hours over the next year –7 percent would like to give up work completely

Types of transition from work to non-work 'Retirement' is a subjective state, not measured in LEED We examined employment patterns in the three years leading to the 'final' exit from work Classification into 4 transition path types –Traditional. Continuous full-time employment prior to a single exit with no return –Single exit with some part-time work. Continuous employment prior to a single exit with no return –Single pre-retirement exit. One significant gap in employment before the final exit –Multiple pre-retirement transitions. Two or more employment gaps before final exit.

Phased transitions more common

Pre-retirement employment patterns – final 3 years

Summary Q3 and Q4 Most New Zealanders say they would prefer to retire gradually 'Phased retirement' was defined as working part-time or in short-duration jobs before the final exit. Phased transitions from work to retirement much more common than abrupt transitions

Lessons learned Diversity in employment circumstances Need year observation period to study work-to-retirement transitions Discontinuous employment patterns are common (not universal) Cohort comparisons suggest an increasing share are in continuous, full-time employment at each year of age Minority make abrupt transitions from work to retirement, majority don’t What factors influence employment patterns and transitions? ‘To work or not to work? Findings from a survey of 65-year-old New Zealanders’ Ministry of Social Development, September 2009

Acknowledgements & disclaimers This research was undertaken while the authors were on secondment to Statistics New Zealand. Any views expressed are those of the authors and do not purport to represent those of Statistics NZ or the Department of Labour. Any errors are the sole responsibility of the authors. Access to the data used in this study was provided by Statistics NZ under conditions designed to give effect to the security and confidentiality provisions of the Statistics Act Only people authorised by the Statistics Act 1975 are allowed to see data about a particular person or firm. The results are based in part on tax data supplied by Inland Revenue to Statistics NZ under the Tax Administration Act. These tax data must be used only for statistical purposes, and no individual information is published or disclosed in any other form, or provided back to Inland Revenue for administrative or regulatory purposes. Careful consideration has been given to the privacy, security and confidentiality issues associated with using tax data in this project.