retirement system age-neutral with respect to work; that is, to end the age-specific penalties for work beyond specified ages that are imbedded in our current retirement system so that the lifetime value of retirement benefits will not depend on the age at which they are first claimed.

But a more fundamental force is likely to affect retirement policy in the future—the aging of postwar baby boomers. The United States and Germany have already enacted changes in their primary retirement insurance systems that will raise the age of normal retirement early next century. A review of past policies will be useful as we lay the groundwork for retirement policy in the twenty-first century.

Our discussion of retirement policy extends beyond the Social Security retirement program. In most countries, and certainly in the United States, Social Security disability programs provide a bridge to retirement for some of those too young to qualify for retirement benefits. This protection raises the same economic incentive issues that are the focus of much of the retirement research. Hence, in looking at labor force participation at older ages, we must look at the full impact of the social welfare system on work decisions.

Retirement policy extends well beyond government transfer programs. Private contracts between employers and employees can also alter the incentives to work at older ages even when explicit wage rates do not change. Employer pension plans and health benefits also influence the retirement patterns of older workers. Government attempts to alter these contracts provide another topic for public policy analysis.

Below, we first document some worldwide trends in labor force participation at older ages and review the literature that has attempted to explain them. We find that although most workers have a choice with respect to retirement age, the choice is constrained by personal health factors, government retirement and disability policies, and employer pension plans. The major debates in the literature are not about the presence of such constraints but rather about the magnitude of their impacts. We end by suggesting how labor force behavior may change as new cohorts of older workers emerge in the next century, and outlining the research and data that will be needed to track this behavior.

THE LABOR SUPPLY OF THE ELDERLY

Labor Force Participation

The United States

The retirement trend of older Americans over the last several decades is dramatic. A simple measure is the labor force participation rate—the ratio



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