The Evolution of Retirement: An American Economic History, 1880-1990 (review)

The Evolution of Retirement is an economist’s effort to explain why the labor-force participation rates (lfprs) of elderly men have been declining steadily since 1880. Just to ask the question is to minimize the role of Social Security Old Age Insurance, which did not begin paying benefits until 1940, when about 60 percent of the decline in lfprs had already taken place. Poor health? Unlikely. The elderly are healthier now than ever before. Modernization? Not in the most basic sense. Costa argues that retirement rates for farmers and non-farmers, rural and urban dwellers, were roughly equal. She is more receptive to the possibility that the elderly were pushed out of the workplace by age discrimination, unemployment, changing technology, and mandatory retirement. However, her treatments of these factors are cursory and, in the case of the impact of unemployment, do not do justice to her own figures, which suggest that declines in labor-force participation were concentrated in the 1890s, the 1930s, and the 1970s—all decades of economic distress (Table 2A.1, 29). Similarly, arguments about ideas—for example, that the century-long transition from work to retirement might involve education and marketing—are neither ignored nor fully engaged.

According to Costa, money is everything, or nearly so. Using the Union army pension program (and mathematics) to isolate the income variable, Costa argues that much of the difference between retirement rates for veterans and the general population can be attributed to their federal pensions and, furthermore, that some 60 percent of the twentieth-century decline in lfprs can be linked to rising incomes. In contrast, after 1950, when incomes had moved comfortably above subsistence levels, rising rates of retirement had more to do with the quality, availability, and desirability of leisure and recreation. In a brief look at what the future holds, Costa argues that baby boomers are likely to live much longer than anticipated and that, because retirement is less a function of income than it once was, it will prove difficult to bring the elderly back into the labor market, where their presence might lessen the strain on resources.

A sensible, accessible narrative leavens the statistical series that ground Costa’s most important arguments, and historians of a literary bent should enjoy a revealing chapter on pension politics that examines the success of the elderly in using the state to generate the income needed to retire. This is a provocative and important book, and a welcome addition to a growing literature on the history of retirement.