To determine whether the change in the trend
of the male participation rate is permanent or if
the decline has merely been interrupted, it would
be necessary to identify the dominating influ-
ences on the timing of permanent withdrawal
from the work force. These factors would include
the state of workers’ health and sources of retire-
ment income (from personal wealth, employer re-
tirement plans and social security). The role of
education in the retirement decision might be ex-
pected to be important, but at the present time,
the evidence is inconclusive.
While the improvements in various measures
of social security aimed at the elderly have no
doubt enabled a growing proportion of older peo-
ple to drop out of the labour force, the provision of
public pensions does not always have that effect.
People may “retire” but still opt to work, perhaps
at reduced hours, if there is no earnings penalty.
Unlike in the case of social security in the United
States, there is no restriction or tax on work in or-
der to receive the Canada or Quebec Pension
Plans.31 Changes in Canada, such as the introduc-
tion of cost-of- living indexation and an early re-
tirement option, have made early retirement more
attractive since the 1970s32 but there is little evi-
dence of any substantial effect on labour market
decisions from early retirement options in public
pension plans in Canada (Baker and Benjamin,
1997:16). It should be remembered that a large
percentage of CPP/QPP beneficiaries do not qual-
ify for the maximum pension ($744.79 a month
for both CPP and QPP as of July 1, 1998) when
they become eligible to claim benefits. Many peo-
ple have not accumulated the maximum number
of years and may, therefore, increase their average
pension by working longer. Others may be able to
replace years when earnings were low with years
at, or close to, the maximum. While disincentives
to remaining in the labour force are built into the
CPP/QPP, they may affect only those whose in-
comes would be marginally higher than the pen-
alty level. Higher-income individuals (who likely
also have post-secondary education) may have
greater motivation to remain in the work force be-
cause their opportunity cost of retiring is very
large. One study of the relationship between so-
cial security and retirement in the United States
found that the influence of social security provi-
sions on retirement planning varied according to
such factors as marital status and earnings. For
example, there was a disincentive for workers
with low earnings to continue work after age 61
but a large incentive for high-earnings workers to
continue to work from 62 to 64 (Diamond and
Gruber, 1997:24-25).
Rather than social security availability being a
major incentive to withdraw from the labour
force, especially before age 65, a combination of
factors such as economic conditions, industrial
restructuring and the availability of employer-
provided pension plans, may be more influential.
For example, for U.S. workers who were covered
by both private-sector pension plans and social
security, decisions to withdraw from the labour
force were found to be influenced more by the em-
ployer pension plans (Wise, 1996:3). A Canadian
survey of people not in the labour force provided
evidence that older workers, who are subject to
downsizing, may choose to leave the labour force
rather than start a new career. The number of
workers who made this decision because of lay-
offs, plant closures or voluntary early retirement
options during the 1990-92 recession was about
two thirds larger than the number that left for
these reasons in 1987-89 (Siroonian, 1993 and
Gower, 1997:11). This development suggests
structural change may cause the cyclical effect to
be greater than otherwise.
Evidence for the role of education in the retire-
ment decision is both scant and mixed. An analy-
sis of Canadian LFS data for 1991-95 found those
with a postsecondary diploma or degree retired
earlier than those with eight years of schooling or
less (Gower, 1997). Evidence for the United
States, however, suggests people with more
schooling are more likely to continue working
past age 55. In fact, in the United States the par-
ticipation rate for those who have completed four
years or more of college has begun to rise in recent
years (Besl and Kale, 1996). It is possible the Ca-
nadian findings are a temporary phenomenon, re-
flecting the generous early retirement options
that, in the 1990s, have been a feature of many
restructuring efforts in sectors where employees’
levels of education tend to be high, e.g. education
and public administration. Later retirement
among those with the least schooling may be be-
cause of inadequate pension entitlements or per-
sonal wealth. Many of these people would not
even be eligible for the maximum CPP/QPP pen-
sion. Canada may, therefore, see a similar turn-
around in the participation rate for higher edu-
12
Canadian Business Economics
Summer 1999