Labor Force Transitions at Older Ages: The Roles of Work Environment and Personality

Besides compensation and financial incentives, several other work-related factors may affect individual retirement decisions. Specifically, job characteristics such as autonomy, skill variety, task significance and difficulty, stress and physical demands, peer pressure and relations with co-workers, play a crucial role in determining psychological commitment to work at older ages. While financial preparedness for retirement and health shocks are often cited as main predictors of the choice to exit the labor force, there exists relatively little research documenting the extent to which the work environment itself and its interaction with economic variables influence retirement decisions. We document that job characteristics are associated with labor force transitions at older ages, in particular transitions to retirement and part-time employment. Additionally, we show that while personality traits do not directly drive labor force transitions, the effect of job characteristics on labor supply outcomes varies with the “intensity” of personality traits. We also document that job characteristics themselves are strongly related to personality traits. This suggests that, depending on their personality, individuals may select into specific jobs, whose characteristics ultimately shape their retirement paths.