Industry sweetens incentives for taking early retirement
Just at a time when many workers are deciding for a economic reasons to postpone retirement, a number of companies find the economy is forcing them to try to persuade more older workers to retire early.
The paradoxical trends have roots for the worker in inflation and for companies in the recession.
Labor experts say that until either the economy or the existing structure of retirement benefits changes, the two trends will continue. But many add that over the long run they expect the number of early retirements to fall off and postponed retirements to increase.
Observers at the Work in America Institute, a Scarsdale, N.Y. firm that monitors employment trends, foresee almost certain growth in the percentage of employees staying on the job after 65.
Though data from the US Bureau of Labor Statistics indicates that only 19 percent of men over 65 now work -- an almost steady drop from a high of 47 percent just after World War II -- experts on labor trends at the Scarsdale Institute estimate that the proportion may climb back to 25 percent by 1990.
"Inflation is the strong reason for staying -- you have the chance to get a better pension," notes institute vice-president Robert Zager. He says that while the evidence during the two years since the federal law raising the mandatory retirement age from 65 to 70 is slight, there is enough of it to infer that larger numbers of workers are not retiring at 65.
One indicator that later retirements are taking hold is the slight decline in the proportion of workers drawing social security benefits at 62. The assumption, since virtually all workers qualify for social security, is that fewer are retiring early.
Another sign is a January 1980 survey by the American Society for Personnel Administration and the Bureau of National Affairs. A random sample of more than 260 businesses found that 20 percent reported an increase in the number of workers electing not to retire at 65.
"We need a little longer to come to some conclusions," cautions Dr. Sally Coberly, assistant director of the National Policy Center on Employment and Retirement at the University of Southern California. "My hunch is that what we're seeing is not a dramatic increase in staying on after 65 but fewer retiring at 62 or 63. They're at least postponing it a year or two."
Meanwhile, faced with sagging profits and a need to keep recruiting and promotions to a minimum, a growing number of companies are trying to sweeten the way for more workers to retire early.
The companies generally are removing the penalties for early retirement and adding incentive pay rather than ordering heavy layoffs to accomplish a trim at the top. These firms range from General Motors and Caterpillar Tractor to B.F. Goodrich and Pan American Airways. The companies generally save in the amount they must pay in pensions over the long run. Many of the eligible employees, worried that a layoff could come later and another job could be hard to find, eagerly snap up the offers.
"If you look at the statistics for 1980, it does appear that there's a start back to early retirement again among men who are 65 and over," confirms Philip Rones, with the US Bureau of Labor Statistics.
Last year Sears Roebuck & Co., which had argued strongly against extending the mandatory retirement age when Congress weighed the issue, watched as 60 percent of its 65-year-old salaried workers elected to stay aboard.
A few months ago, Sears offered a package of special incentive pay in addition to the usual retirement benefits to 2,400 of its executives over 55. When a full 1,500 accepted, chairman Edward Telling declared that the resulting "rejuvenation" and promotions opened up could never have been achieved in years of normal retirements.
American Airlines, which offered a similar package last year to a number of seasoned older workers, has rated the 35 percent acceptance rate "excellent."
Most experts feel that as the economy recovers, however, the early retirement offers will taper off. A number of companies made similar offers during the 1973-74 recession. But the change in the mandatory retirement law has intensified the effort this time to make the offers appealing but strictly voluntary.
"There is much less pushing people out and an intensified effort to sweeten the way," observes the Work in America Instit ute's Robert Zager.