A Test of the Increment-Decrement Method of Calculating Worklife Expectancies of Older Females

Abstract

Using longitudinal data, the actual worklife of older females is compared to predicted worklife derived with the Increment-Decrement (ID) method. The findings show that the ID method underestimates the worklife of actives, but the error is neither sizable nor significant. On the other hand, the ID method significantly and sizably overestimates the worklives of inactives. This paper finds that actives (those in the labor force) tend to remain more active than implied by their most recent labor force experience and that inactives tend to remain more inactive. This rejects the usual Markov model used in ID analysis for older inactive females and likely explains the errors in the ID estimates of worklives. In addition, it was found that older women in the labor force tend to live longer than those out of the labor force, in contrast to the usual assumption that all have an equal chance of survival.