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Retirement, Patterns

RETIREMENT, PATTERNS

The pattern of retirement at the end of the work career is shaped less by aging per se than by institutional mechanisms that provide incentives and support structures for workers exits from the labor force. The origins of retirement institutions across industrial societies have been traced to emergent economic and governmental conditions in the late nineteenth century. These institutions developed gradually until the mid-twentieth century, then rapidly over the next quarter-century, and are undergoing critical review and reorganization in the early twenty-first century. Factors driving these developments changed over time, and ranged from the politics of veterans pensions to class politics in the context of economic downturns and globalization. The twenty-first-century reorganization of retirement and other welfare institutions is being motivated by population aging, the growing insecurity of financial and labor markets stemming from global economic restructuring, and the changing nature of the family. These changes raise questions regarding the future of retirement as a standardized and permanent age-related transition from an income status based on employment to one based on transfers and assets at the end of the work career.

The institutionalization of retirement

The earliest pensions in U.S. history emerged in both public and private contexts. In the public sector, Union Army veterans pensions began benefiting northern white males in particular before 1900 (Skocpol). By 1900, thirty-five percent of white males age fifty-five to fifty-nine were receiving Civil War pensions (Costa). And while ill health and unemployment were factors in these retirement rates (Graebner), the availability of these pensions probably motivated their recipients exits from the labor force. Other early pension schemes are traceable to the private sector, where they were developed by employers to control the age composition of their workforces and to ensure labor stability. The American Express Company initiated a pension plan in 1875 for incapacitated workers who had been with the firm for twenty years or more. And in 1884 the Baltimore and Ohio Railroad instituted a pension plan that, in many respects, anticipated the major structure of twentieth century pensions. It called for mandatory retirement at age sixty-five after a minimum of ten years service. Age, years of service, and salary level were the elements of the benefit calculation.

The first three decades of the twentieth century brought a slow development of retirement plans although the number of workers covered by pensions, health insurance, profit-sharing, and other employee benefits grew steadily (Jacoby). Industrialization consisted of more than production lines; it included the development of personnel management and the growth of unionization, both of which would shape the boundaries of the regular work career with negotiated rule structures regulating hiring, promotion, wages, and income maintenance (including health insurance and retirement). Over time, these workplace regimes created age-structured work careers (Henretta).

The passage of the Social Security Act in 1935 stimulated the more rapid growth of pension plans by establishing minimum standards. Its setting of sixty-five as the age of eligibility eventually made that age the most common age for retiring (Costa). And, somewhat paradoxically, wage control policies during World War II further stimulated the development of more elaborate employee benefit packages (termed the hidden payroll by the U.S. Chambers of Commerce in 1947) to permit employers to compensate their most valued workers without violating wage limits. These highly valued workers constituted internal labor markets whose long-term commitments to their employers were shaped, in part, by back-loaded pension plans. Such plans encouraged long tenure but also presented strong incentives to retire by a specific age. Unions also negotiated or provided for these plans for their workers. Referred to as defined benefit plans, they were, in effect, earnings predictably derived from formulas linking age, years of service, and peak salary levels.

The institutionalization of retirement is best characterized as the regularized exit from the workforce when income changes from wages and salaries based on employment to public transfers like Social Security and private assets including employee pensions. In industrialized societies, retirement has become a universal transition among workers and their families. However, it has changed as economic fortunes have varied, the political climate has shifted, and the structural and demographic compositions of the workplace have been transformed. These changes are addressed below.

From early retirement to variable retirement

Economic prosperity followed by economic turndown in the postWorld War II period led to changes in retirement patterns. By the end of the 1960s a trend toward early retirement emerged, especially among workers covered by private pensions in major manufacturing and related sectors. Early retirement meant that more and more workers began to voluntarily and permanently exit the labor force prior to Social Security eligibility, in large part because of eligibility for private pension benefits. Economic downturn and restructuring between the early 1970s and the early 1990s further accelerated early retirement, but in this period it was also motivated by incentive packages used by employers to trim their liabilities via plant closings and workforce downsizing (Hardy et al.). Two streams of early retirees developed by the 1980s, one representing the most privileged category of pension elites from professional, managerial, and skilled sectors and the other representing workers in declining industries whose early retirements were accelerated by employers efforts to downsize and reorganize their production and distribution systems.

These economic cycles coincided with the growth in government regulation of pension plans beginning with the Employee Retirement Income Security Act (ERISA) in 1974 and extending through the Retirement Equity Act of 1984, and the Pension Protection Act and later amendments of ERISA in the 1990s. These legislative actions extended minimum standards of reporting, disclosure, vesting, and benefit management, and sought to regulate plan termination policies by holding employers liable for their pension promises. These rising pension liabilities, coupled with growing market uncertainties, provoked employers to abandon the long-term contracts implicit in back-loaded, defined benefit plans and to adopt new pension instruments. The rapid spread of these new instruments, called defined contribution plans, redesigned the pension landscape at the end of the twentieth century. Defined contribution plans are retirement accounts invested by workers in a mix of equity, bond, or money market funds that do not promise a specific benefit level. Workers are primarily responsible for contributions and the financial risks associated with different investment mixes. Employers have limited responsibility and do not always contribute on behalf of employees. The accounts are portable across jobs and can usually be borrowed against, under strict rules of repayment and penalty. Thus they are highly individualized and reflect a departure from the defined benefit plans, born in the nineteenth century, that standardized the work career and the exit from it.

The effect on retirement patterns of these more widely adopted plans is not well established. However, the trend toward early retirement has reversed (Quinn; ORand and Henretta). Four patterns appear to have emerged more strongly than at earlier times. Workers are leaving their major jobs later, although still before normal Social Security ages. More workers, especially in the public sector, are reducing their work hours rather than leaving the labor force completely, following what has come to be called phased retirement. They are moving to post career jobs, sometimes referred to as bridge jobs. And they are returning to work after retirement. Accordingly, retirement is increasingly less crisp as a life transition. Jan Mutchler and her colleagues report that as early as the mid-1980s a significant minority of men age fifty-five to seventy-four who were observed over twenty-eight months followed patterns characterized by repeated exits and entrances and spells of unemployment. These patterns appear to have increased over the 1990s (Herz).

The volatility of labor and financial markets in the 1990s and its direct bearing on the performance of defined contribution accounts and on workers perceptions of economic security, are potentially important sources of the variability in retirement behaviors. Employers and employees are renegotiating the employment contract. The implicit lifetime employment model associated with industrialization and personnel policies over most of the twentieth century is being replaced with a more contingent model. Higher rates of job mobility, job displacement, and retirements follow. However, these retirements are increasingly less likely to be crisp and permanent. The growing responsibility of workers to manage their own retirements with less institutional support increases expectations of more diversity and heterogeneity in retirement behavior.

However, factors besides labor and financial markets probably also play important roles in these complex patterns (Kim and Moen). The first is that the workforce has become steadily more heterogeneous in its composition: more women and more minority groups participate in the labor market than during the peak period of voluntary early retirement. Women and ethnic minority workers are more likely to have less stable wage/salary histories, more job shifts, multiple spells of unemployment, and higher rates of contingent work. These workers are less likely to be covered by pensions, and when they are covered, they are more likely to be covered by defined contribution plans. There is evidence that these lower wage groups contribute proportionately less to their pensions and are more risk-averse in their choice of investment mix (Bajtelsmit and VanDerhei). In addition, these workers are less likely to be covered by retiree health insurance, another employee benefit that has influenced retirement patterns. Workers with this coverage tend to retire at higher rates. Trends beginning in the 1990s suggest that access to retiree health insurance is declining rapidly for all workers (U.S. Department of Labor) and may disappear for all but the most privileged labor sectors.

The changed demographic composition of the U.S. labor force has had implications for retirement patterns above and beyond the effects of differential access to employee benefits. Disparities in health over the life course allocate workers down different paths to retirement. Racial health disparities account significantly for pre-retirement labor force patterns. Black men and women are more likely to enter retirement via a disability pathway (as disability insurance recipients) or as previously unemployed (Flippen and Tienda). The concentration of Hispanic and African-American males in manual and blue-collar jobs with greater exposure to environmental hazards and occupational injury systematically selects them into disability categories prior to retirement eligibility (Hayward and Grady).

Finally, the recent trend toward increased active life expectancy, especially among white aging cohorts, may become a stronger force to further differentiate retirement behaviors. Active life expectancy is the average number of years of impairment-free life estimated for a population, based on the distribution of aged-based prevalence of functional impairment. Active life expectancy has increased across recent cohorts of those age sixty-five and older, meaning that the prevalence of functional impairments is occurring at later and later ages (Manton and Land), with a notable disparity in this trend between whites and Hispanics and African Americans (Hayward and Heron).

The improved health of current and future aging cohorts may have significant implications for retirement, especially in the context of an aging society. Population aging results from increased life expectancy and declining fertility, with fertility decline the more important factor. It is reflected in the increased ratio of older to younger population groups (e.g. in the ratio of those aged sixty-five and over to those younger or to those of working ages eighteen to sixty-four). Aging societies are confronted by the fiscal implications of these changing ratios. How can fewer workers support more retirees? The trend toward increased active life expectancy may in fact provide a solution to this problem. Healthier, older workers may choose to remain at work, and employers may choose to retain these workers in one fashion or another (e.g., through later retirement, phased retirement, or even post-retirement contingent reemployment). The coincidence of increased active life expectancy with public policies that delay eligibility for Social Security to later ages and that eliminate earnings limits while collecting Social Security, and with private policies that place more savings responsibilities on workers, has the potential impact of diversifying retirement even more, with major subgroups of early permanent retirees, intermittent retirees, later retirees, and so on. Consequently, a dominant pattern such as early retirement may be supplanted by multiple patterns.

Gender and retirement

Gender has differentiated retirement behavior over the twentieth century, although womens and mens work histories have become more similar. The household division of labor and womens limited opportunities for pension acquisition based on their own employment resulted in the past in the prevalent tendencies of women to retire (1) earlier than men or jointly with their husbands; (2) as spouses, survivors (widows), divorced dependents, or welfare recipients (Supplemental Security Income recipients) whose employment histories do not qualify them for worker Social Security benefits; (3) with greater and increasing dependence on Social Security as income over retirement; and (4) at higher risk for poverty after retirement, especially following the death of a spouse and when reaching the oldest age categories.

Employer pensions and Social Security account for 80 percent of median incomes of retirement households (Clark and Quinn). However, the significant majority of retiree households with any employer pension income fall above the median total income of all households. Moreover, less than one-third of women over age sixty-five receive employer pensions, whereas nearly half of men over sixty-five receive pensions; womens pension benefit levels average about 60 percent of mens, mirroring preretirement wage ratios (ORand and Henretta). One consequence of this distribution of pension income across households and gender groups is womens greater dependence on social retirement benefits (i.e. Social Security). When husbands with pensions die, their pensions may not continue to support their survivors over the remainder of retirement. About one-third of husbands still do not elect joint-survivor options, which offer them the opportunity to reduce their initial benefits and spread them longer into the future to support their survivors (Smeeding). Accordingly, as widows age, their incomes from private pensions held by their deceased spouses (if they had them) decline.

Extensions of the Social Security Act since 1935 have slowly progressed to meet the needs of older women, beginning with widows in the 1939 extension and finally reaching divorced spouses in marriages that lasted ten years or more in the 1983 amendment. However, the system still places women at risk for poverty with its survivor benefit policies. Women tend to outlive men and survive an average of fifteen years as widows. Social Security benefit rules result in a significant reduction in benefits following the spouses death, with women who have retired as workers rather than as dependent spouses often penalized more as widows. While this bias toward traditional male breadwinner couples can be criticized as unfair, the benefit reductions to both groups of widows are nevertheless at odds with womens well-being, especially as out-of-pocket medical costs increase over the remainder of life and as other sources of income diminish (Smeeding).

Joint retirement. One source of variability in womens retirement patterns now, and increasingly in the future, is their retirement to their own pensions and Social Security based on longer work careers over the life course. More than half of women between the ages of fifty-five and fifty-nine and nearly 40 percent of women in their early sixties were participating in the labor force by the late 1990s. Projections of future cohort participation patterns at these ages foretell significant increases in these rates (Bianchi). And, currently, women and men are about equally likely to participate in pension plans; approximately half of each group participates. Finally, approximately two-thirds of women currently retire as workers rather than as dependent spouses under Social Security (U.S. Social Security Administration). Accordingly, womens retirement as dependent spouses is decreasing, although the continuing gender-based wage and pension gaps will slow their retirement income parity with men.

These changes in the economic roles of women suggest that the dynamics of decision-making in retirement may be shifting in a direction that will produce even more heterogeneity in couples retirement behaviors. Joint retirement may change from a process in which wives retire ahead of or with their husbands, based on their dependent statuses, to a more complex decision based on balancing independent opportunity sets and common preferences, especially within the context of the changing pension environment described earlier. Research on retirement of worker couples finds strong patterns of synchronization or joint exit among couples retiring between the 1970s and the 1990s (e.g., Henretta et al.; Gustman and Steinmeier; Blau). The studies also show that wives are more responsive to their spouses exits. Yet, the most recent patterns reveal that wives labor exits are also highly influenced by their own market characteristics, specifically their own earnings, health insurance coverage, and pension eligibility (Honig). The extent to which these characteristics will become more important in the retirement decisions of future cohorts is a matter of conjecture.

Solitary retirement. One final pattern of retirement with gender-related implications is solitary retirement. The growing proportions of never-married and divorced and unremarried persons entering retirement are changing the composition of the retired population. Historically, widowhood has been the predominant solitary status among retirees. However, the Social Security Administration has projected that by 2020 the widowhood rate will decline to 31 percent from 42 percent in 1991; less than half of women over age sixty-two (46 percent) will be married; and nearly one-fifth (19 percent) will be divorced, up from 6 percent in 1991. The likelihood of remarriage among women is lower than among men, and this disparity increases with age. Thus, among women, solitary retirement will include women without spouses and with fewer benefits from marriage, including disposable shared assets and social support. Eligibility for divorced spouse Social Security benefits does not provide adequate support against poverty, and poverty rates in the older population are highest among widowed, divorced, and never-married women (Smeeding).

The future of retirement

Population aging has proceeded faster in other advanced societies than in the United States, although the aging of the postWorld War II baby boom cohorts is increasing the U.S. rate dramatically at the turn of the twenty-first century. Early retirement in Europe was a response primarily to public institutions erected to control the age composition of the labor force, making room for younger workers (Kohli et al.). Since the 1980s, however, the fiscal burden of these regimes has motivated even the most advanced welfare states (e.g., Sweden, Germany, the Netherlands) to develop flexible extensions of disability and unemployment compensation policies to manage high unemployment among younger age groups and to introduce more privatized pension schemes, including defined contribution accounts following the U.S. model, in order to ameliorate the crisis of public pension financing (Esping-Andersen).

Some scholars anchor the crisis of the welfare state primarily in the changing family and economic stagnation following global restructuring. Esping-Andersen argues that the welfare state was constructed on three institutional foundations: family reciprocity, market distribution, and state redistribution. Family reciprocity refers to the nonmonetary exchange of goods and services in families on which welfare programs have been predicated. The existence of unpaid domestic work by family members, especially wives and children, has always been a presumption of welfare policies. Social Security policies in the United States, described earlier, exemplify this taken-for-granted aspect of welfare policies. Except in the most socially democratic states like Sweden, the breadwinner (single wage earner) model has linked the labor market and the family directly to welfare programs on the basis of the industrial nuclear family with a gendered division of labor (Ginn et al.).

However, the market has changed: the decline in wages or jobs for mens and womens increased labor force participation has changed economic roles in the family; structural forces have increased the demand for female labor and decreased the demand for male labor. The family, in turn, also has changed: declines in fertility, delays in marriage, the increase in divorce, childbearing out of wedlock, and geographic mobility away from families of origin have transformed the family reciprocity system. In the absence of the familys capacity to absorb social risks related to the welfare of its members and of the labor markets capacity to sustain full employment, the three-legged stool of the welfare state is collapsing and impelling changes in family and labor policies, including retirement policies.

Alan Walker has argued further, and cogently, that the future of retirement institutions is integrally connected with the health status of aging populations: If the health of workers is maintained then they will be willing and able to extend their working lives (p. 14). Recent trends in increased active life expectancy in the United States and other countries raise hopes along these lines. However, health status over the life course is also supported by the three-legged stool of the welfare state. Health disparities begin early in the life course and become accentuated with differential exposures to life course hazards and health maintenance systems. In the United States, where health and economic disparities are among the highest among advanced countries, the market dominates health care over the life course and is available primarily through employment. Those outside the insured employment system are disadvantaged and at risk of ill health (Landerman et al.). The price of formal care over the life coursefrom premature births through nursing home care at the end of lifeis rapidly increasing. In a world of diminishing informal support, the future of health maintenance and productive aging is less hopeful.

Health insurance systems are confronting crises of financing similar to those facing pension systems. Responses to these crises are familiar: increased privatization and healthcare rationing. Privatization shifts the system to the market, where efficiency criteria operate against universal health delivery and equal opportunity.

In short, interdependent demographic, market, and state forces have produced highly diverse life courses in advanced societies, including variable retirement patterns. The United States perhaps has the most variable retirement patterns because of stronger market and weaker state policies. However, all countries face the challenges of population aging, global markets, increased inequality, and family transformation that will require new views of the life course and new institutions to reconstruct it.

Angela M. ORand

See also Employee Retirement Income Security Act; Employment of Older Workers; Pensions; Population Aging; Social Security; Welfare State.

BIBLIOGRAPHY

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Blau, D. M. The Labor Force Dynamics of Older Married Couples. Journal of Labor Economics 16 (1998): 595629.

Clark, R., and Quinn, J. F. The Economic Status of the Elderly. Medicare Brief no. 4. Washington, D.C.: National Academy of Social Insurance, 1999.

Costa, D. The Evolution of Retirement: An American Economic History, 18801990. Chicago: University of Chicago Press, 1998.

Esping-Andersen, G. Social Foundation of Postindustrial Economies. New York: Oxford University Press, 1999.

Flippen, C., and Tienda, M. Pathways to Retirement: Patterns of Labor Force Participation and Labor Market Exit Among the Pre-Retirement Population by Race, Hispanic Origin and Sex. Journal of Gerontology-Social Sciences 55B (2000): S14S27.

Ginn, J.; Street, D.; and Arber, S., eds. Women, Work and Pensions: International Issues and Prospects. Buckingham, U.K.: Open University Press, 2001.

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Gustman, A., and Steinmeier, T. Retirement in a Family Context: A Structural Model for Husbands and Wives. National Bureau of Economic Research Working Paper no. 4629. Cambridge Mass.: NBER, 1994.

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Hayward, M. D., and Heron, M. Racial Inequality in Active Life Expectancy Among Adult Americans. Demography 36 (1999): 7791.

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Henretta, J. C.; ORand, A. M.; and Chan, C. Joint Role Investments and Synchronization of Retirement: A Sequential Approach to Couples Retirement Timing. Social Forces 71 (1993): 9811000.

Herz, D. Work after Early Retirement: An Increasing Trend among Men. Monthly Labor Review 118 (1995): 39.

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Landerman, L. R., et al. Private Health Insurance Coverage and Disability Among Older Americans. Journal of Gerontology-Social Sciences 53B (1998): S258S266.

Manton, K. G., and Land, K. C. Active Life Expectancy Estimates for U.S. Elderly Population: Multidimensional Continuous Mixture Model of Functional Change Applied to Completed Cohorts, 1982 to 1996. Demography 37 (2000): 113.

Mutchler, J. E.; Burr, J. A.; Pienta, A. M.; and Massagli, M. P. Pathways to Labor Force Exit: Work Transitions and Work Instability. Journal of Gerontology-Social Sciences 52B (1997): S4S12.

ORand, A. M., and Henretta, J. C. Age and Inequality: Diverse Pathways Through Later Life. Boulder, Colo.: Westview Press, 1999.

Quinn, J. F. Retirement Trends and Patterns in the 1990s: The End of an Era? Public Policy and Aging Report 8 (1997): 1015.

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Smeeding, T. M. Social Security Reform: Improving Benefit Adequacy and Economic Security for Women. Aging Studies Program Policy Brief no. 16. Syracuse, N.Y.: Maxwell School of Citizenship and Public Affairs/ Center for Policy Research, Syracuse University, 1999.

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Walker, A. The Future of Pensions and Retirement in Europe: Towards Productive Ageing. Hallym International Journal of Aging 1 (1999): 315.

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Workforce Issues in Long-Term Care

WORKFORCE ISSUES IN LONG-TERM CARE

The concept of a long-term care workforce is of relatively recent origin. Throughout much of the history of the United States, only a small proportion of the population was old and infirm, and dependent aged persons were almost always cared for by family members. Institutional care was virtually unknown, with the exception of almshouses for the truly isolated and destitute. The professional provision of long-term care as it is known today began with the passage of the Social Security Act in 1935 and solidified with the advent of Medicare and Medicaid in 1965 (Olson).

Since that time, the enormous growth in the number of nursing homes, as well as in home care and community-based services, has produced a large number of individuals who care for older persons who are chronically ill and disabled. The care recipients require assistance for months or years and are very unlikely to return to totally independent living. Although long-term care workers have become essential to society, developments since the 1990s have made work in such settings increasingly challenging. There is now considerable concern, both at the public and at the personal level, about the supply and the caring capacity of long-term care workers.

National challenges

At the beginning of the twenty-first century, recruitment and retention of a committed long-term care workforce has become a serious challenge, and one that is likely to persist for several decades. There are a number of reasons for increasing difficulties in this area.

First, the explosive growth in the elderly population has created an enormous need for long-term care workers. The population age sixty-five and older will expand by eighteen million persons by 2010, from 35.7 million to 53.9 million. The number of elderly persons with functional disabilities will increase in that time by 1.6 million, from 8.8 million to 10.4 million (Congressional Budget Office). The growth in the latter group is particularly critical, because it constitutes the demand for long-term care. Much of the anticipated need for additional frontline workers is due to this increase.

Second, the long-term care population is becoming more disabled and more complex to care for. The emphasis throughout the 1990s on transferring elderly people from acute to long-term care settings has had a major impact on nursing homes in particular. This trend toward earlier discharge means that more residents have acute illnesses from which they have not completely recovered at the time they are transferred to long-term care facilities. One of the results of this trend is that nursing homes are now using technologies that previously were used only in hospitals. The burden of care for this increasingly impaired population falls on long-term care workers.

Third, the labor force as a whole is growing at a slower rate than the elderly population that needs care. When one examines the pool of persons most likely to become long-term care workers, there are good reasons to expect a continuing shortfall in the caregiving workforce. Women are the dominant providers in health care, representing 78 percent of health care positions in the United States in 2000. Most critical, 93 percent of paraprofessionals and 95 percent of nurses are women (Franks and Dawson). Therefore, a meaningful statistic is the relationship between the size of the elderly population (who are likely to need care) and the number of traditional caregiversthat is, working-age women. Nationally, this caregiver ratio shows a striking trend. In 2001, census data indicate that the caregiver ratio is fifty-eight elderly persons to every one hundred females age twenty-five to fifty-four. In 2025, the ratio will be slightly over ninety-nine elderly persons to one hundred females age twenty-five to fifty-four. This is very likely to lead to increased shortages of long-term care workers (U.S. Bureau of the Census).

Fourth, restrictive immigration policies reduce the labor pool. New immigrants are relied upon heavily in urban areas to fill frontline long-term care positions. However, employment-based legal immigration is largely limited to skilled workers; unskilled workers can wait years for work permits. Coupled with the shortage of younger workers, restricted immigration will result in a limited supply of new workers.

Makeup of the long-term care workforce

There are five major job categories in long-term care.

Certified nursing assistant (CNA). CNAs work under the supervision of the nursing staff, and provide 60 percent or more of the direct care to nursing home residents. CNAs assist residents with activities of daily living, such as eating, bathing, dressing, and transferring from bed to chair. They may provide skin care, take vital signs, and answer residents call lights, and are expected to monitor residents well-being and report significant changes to nurses.

Home health aides (HHA). HHAs carry out a number of tasks that are similar to those done by CNAs, but do so in an impaired individuals home, under the supervision of a nurse.

Personal care aides (PCA). PCAs, who are not certified, provide patients with assistance in activities of daily living in their homes. Major tasks include feeding, dressing, and bathing.

Licensed practical (or vocational) nurses (LPN). LPNs must be supervised by a registered nurse, and primarily provide direct care after a training program of between twelve and eighteen months. LPNs often have some supervisory responsibility for CNAs in long-term care.

Registered nurses (RN). RNs can take several types of educational programs that may last different periods of time, but all graduates take the same licensing examination. Some RNs focus on direct care of residents, but most have supervisory responsibilities in the long-term care setting.

Because the major actor in the nursing home setting is the CNA, and because workforce problems center around this job category, this entry focuses most heavily on CNAs.

Characteristics of the long-term care workforce

The National Center for Health Statistics estimated that in 1998, approximately 1,434,000 full-time-equivalent employees (FTEs) worked in nursing homes. Of this number, around 950,000 FTEs were nursing staff: RNs, LPNs, and CNAs. CNAs make up nearly two-thirds of staff who provide nursing services, while RNs account for just 15 percent. This is illustrated as well by the staff-to-bed ratio in nursing homes. CNAs have a staff-to-bed ration of 33.9 per 100 beds, followed by LPNs (10.6) and RNs (7.8). Thus, the world of nursing home care is heavily dominated by paraprofessionals. In home health care, there are approximately 368,000 HHAs.

The need for additional paraprofessional workers in long-term care will increase dramatically by 2010. Among nursing assistants, a 23.8 percent increase is anticipated by 2008, and for home health aides, the growth is expected to be fully 74.5 percent (Bureau of Labor Statistics, Health Services).

Work as a CNA or HHA at the entry level usually does not require a high school education. CNAs must undergo at least seventy-five hours of training (some states have a higher minimum). The training program typically covers basics of geriatric care, such as nutrition, infection control, and body mechanics, as well as the techniques of personal care. Within four months of employment, the nursing assistant must pass a certification examination. Training for HHAs varies from state to state. For those who work in agencies that receive Medicare funding, a competency test is mandated that covers various areas of resident care. Federal law also suggests a seventy-five-hour training program for HHAs.

Motivation for long-term care work

Studies indicate that long-term care workers frequently derive important satisfaction from their jobs. For example, in a survey of approximately six hundred nursing assistants, respondents were asked why they chose nursing home work (Pillemer). They rated twelve possible reasons that have been found to be important to people in selecting jobs. The most frequently chosen reasons were those that related to the intrinsic worth of the job, and the sense that it was socially valuable and personally fulfilling. Three reasons were selected as important by the highest proportions of respondents: provides opportunity to help others (96 percent), makes respondent feel meaningful (93 percent), and the job is useful to society (84 percent). In addition to these other-centered reasons, the next most frequent reasons for working as a CNA had to do with rewarding aspects of the job itself: it offers a lot of contact with others (81 percent), is an interesting job (73 percent), and it gives the chance to do responsible tasks (72 percent).

In addition, frontline jobs in the long-term care field do not require extensive education and training, and are typically available to young people, displaced homemakers, new immigrants, people transitioning from welfare, and other persons with limited work histories. The jobs offer more varied and meaningful work than many positions in the hospitality, construction, and manufacturing industries (which also compete for these employees). Further, especially in home care, the jobs offer a greater level of autonomy than other comparable professions.

Problems in long-term care work

Although many long-term care workers are highly committed to their work and derive satisfaction from it, research has extensively documented the many difficulties of the job. These factors have been found to be related to high rates of perceived job stress and burnout, and lower levels of job satisfaction. In the contemporary tight labor market, these problems lead to high rates of turnover in all positions.

Estimates of turnover of nursing home staff are quite high, with annual CNA turnover at 97 percent, RN turnover at 52.5 percent, and overall staff turnover at 69 percent (Harrington et al.). Although estimates differ, turnover is also a problem in home care. For this reason, understanding and reducing employee turnover in long-term care settings has become a major undertaking for both researchers and practitioners. As in other health care settings, turnover and short staffing have been found to have many negative consequences, including reduced employee efficiency and lower morale among employees who stay on the job (Cohen-Mansfield). More important, such staffing problems lead to decreased quality of care for residents (Wunderlich et al.; Harrington et al.).

The following are some major causes of stress, burnout, dissatisfaction, and turnover among long-term care workers.

Excessive work pressure. In surveys, many nursing assistants say that they routinely do not have enough time to complete their basic tasks. This sense of time pressure takes the enjoyment out of their work. Nursing assistants report that when time is short, they are not able to do more personal, satisfying tasks, such walking with residents, talking to them, helping with grooming, and so forth. As caregiving work is reduced to the most difficult and least gratifying tasks, and staff feel that they do not have time to complete even these tasks, job stress and burnout increase.

Understaffing. Work pressure is exacerbated by chronic understaffing in many long-term care facilities. The pressure caused by staff shortages is very severe, and leads to stress and burnout. Conversely, adequate staffing has been found to be the major factor leading to high staff morale. Wilner (1994) found that a major source of dissatisfaction and stress was working with too few other nursing assistants, or with new staff who were not adequately trained. Nursing assistants were especially anxious about injury to themselves, to the new staff member, and to the residents in these situations.

Problems in supervision. Studies show that problems with supervisors are a major cause of job stress and burnout. Conflicts with supervisors are very stressful to frontline long-term care workers. Helmer and colleagues showed the extent of such dissatisfaction. Their survey of nursing assistants found that 71 percent wished administrators and nurses would show them more respect; only 37 percent felt they received sufficient recognition and appreciation for their work. Further, only 36 percent felt that management made them feel in on things.

Lack of appropriate training. Despite the view that frontline long-term care work is unskilled labor, the job is in fact both technically and interpersonally complex. As noted earlier, the training given to nursing assistants and home health aides is very limited. Further, it focuses almost exclusively on the technical aspects of care, although there is evidence that difficulties in dealing with the psychosocial aspects of nursing home work are causes of stress and burnout.

Wages. Funding for nursing assistants comes primarily from Medicaid and Medicare. In many cases, the wages offered keep some workers near the poverty level. In 1998, the mean hourly wage of CNAs was $8.32, and for HHAs it was $8.17. For the purposes of comparison, in the same year telemarketers earned an average of $9.40 per hour, and elevator operators an average of $14.77 (Bureau of Labor Statistics, 1998). Thus, wages for long-term care workers remain comparatively low, considering the difficult nature of the job. Further, some long-term care providers still do not provide CNAs with health benefits. When such benefits are offered, the premiums the CNAs must pay are often prohibitively high for them to participate.

Injury. It is acknowledged that CNAs are at high risk of injury. Indeed, rates of injury in nursing and personal care homes exceed that of private industry in total by a significant amount. CNAs are particularly prone to injury from heavy lifting (Wunderlich et al.).

Relations with family members

An area of significant research interest is the way in which family members of care recipients relate to long-term care workers. Clearly, cooperation is essential to optimal resident care. However, research indicates that structural barriers to cooperation between the two groups exist. In the most influential theoretical approach to this problem, Eugene Litwak noted fundamental differences between large-scale formal organizations and primary groups, such as families. In nursing homes, the potential for family conflict with staff is heightened because long-term care facilities represent the classic case of a formal institution seeking to take over primary group tasks, and to fit the performance of such tasks into a bureaucratic, routinized, organizational framework.

Consistent with Litwaks view, one line of research has pointed to discrepancies between staff and family perceptions of appropriate tasks for each group Although studies vary in their estimates of the extent of such differences, it is clear that ambiguity regarding the division of labor between staff and relatives exists, particularly in the performance of nontechnical tasks, and can lead to conflict (Duncan and Morgan).

Even when families relinquish the technical aspects of care to the staff, they nevertheless feel compelled to monitor the quality of service delivery. Stephens and colleagues found that over one-third of relatives reported feeling that they had to remind staff to do things for their resident, and that they needed to tell the staff how to care for the resident.

Research has also identified poor communication between staff and families as an important problem. Many residents, especially those with cognitive impairments, are unable to give accurate, factual information about their experience in the facility. There is often little sharing of detailed information about residents, and families frequently feel that there is no one to whom they can bring their concerns. Further, relatives are sometimes hesitant about offering suggestions and criticism, out of fear that such comments might negatively affect the care provided to the resident. Additional barriers to communication include the fact that staff work under intense time pressure, which limits their availability for conversations with families. In addition, nursing home staffand nursing assistants in particularreceive little or no training in communication skills (Pillemer et al.).

As a result of these problems, studies have found that both staff and family members were frequently annoyed, and sometimes very angry, during and after interactions with each other. Studies of nursing home staff have shown that problems relating to family members are a major source of stress.

Future directions

To upgrade the quality of the long-term care workforce, and to solve the problems of recruiting and retaining enough qualified workers, several options have been proposed.

Increasing minimum staffing requirements. One solution to staffing problems is to increase the number of caregivers in nursing homes. There is considerable consensus among researchers that higher staffing levels are positively associated with better outcomes for nursing home residents. This is particularly the case with RN staffing, but is also applicable to CNAs. Increasing staffing in nursing homes is likely not only to improve the quality of care but also to benefit staff morale, satisfaction, and retention by reducing the stress of providing care (Harrington et al.).

Increase and upgrade training. Although a body of rigorous evaluation research is lacking, there is evidence that training programs of various kinds improve the performance of CNAs and thus leads to improved outcomes for residents (Beck et al.).

Improve salaries and benefits. Many nursing homes and home health agencies have very devoted, long-term employees. However, some individuals do not consider long-term care work, or leave it after trying it, because the salaries are inadequate. Raising the salaries of workers and improving benefits is now a goal in many states.

Expand the range of roles. A number of experts suggest reexamining the official role of the frontline worker, and expanding what is now a monolithic job category into a career ladder of increasing responsibilities. In particular, new job categories can be developed in the nursing home, ranging from an entry-level resident attendant position, to several categories of CNAs. Workers can then can advance to positions of greater responsibility within the facility.

Karl Pillemer Mark S. Lachs

See also Gerontological Nursing; Home Care and Home Services; Long-Term Care; Nursing Homes.

BIBLIOGRAPHY

Beck, C.; Ortigara, A.; Mercer, S.; and Shue, V. Enabling and Empowering Certified Nursing Assistants for Quality Dementia Care. International Journal of Geriatric Psychiatry 14 (1999): 191212.

Bureau of Labor Statistics. Health Services. In Occupational Outlook Handbook, 200001 Edition. Bulletin 2520. Washington, D.C.: U.S. Government Printing Office, 2000.

Bureau of Labor Statistics. 1998 National Occupational Employment and Wage Estimate. http://stats.bls.gov

Cohen-Mansfield, J. Stress in Nursing Home Staff: A Review and a Theoretical Model. Journal of Applied Gerontology 14 (1995): 444466.

Congressional Budget Office. Projections of Expenditures for Long-Term Care Services for the Elderly. Washington, D.C.: U.S. Government Printing Office, 1999.

Duncan, M. T., and Morgan, D. L. Sharing the Caring: Family Caregivers Views of Their Relationships with Nursing Home Staff. The Gerontologist 34 (1994): 235244.

Frank, B. W., and Dawson, S. L. Health Care Workforce Issues in Massachusetts. Boston: Para-professional Health Care Institute, 2000.

Gabrel, C. S. An Overview of Nursing Home Facilities: Data from the 1997 National Nursing Home Survey. Division of Health Care Statistics, Advance Data no. 311. Washington, D.C.: National Center for Health Statistics, 2000.

Harrington, C.; Kovner, C.; Merzey, M.; Kayser-Jones, J.; Burger, S.; Mohler, M.; Burke, R.; and Zimmerman, D. Experts Recommend Minimum Nurse Staffing Standards for Nursing Facilities in the United States. The Gerontologist 40 (2000): 516.

Helmer, F. T.; Olson, S. F.; and Heim, R. I. Strategies for Nurse Aide Job Satisfaction. Journal of Long-Term Care Administration 21 (1993): 1014.

Litwak, E. Helping the Elderly: The Complementary Roles of Informal Networks and Informal Systems. New York: Guilford, 1985.

Olson, L. K. Public Policy and Privatization: Long-Term Care in the United States. In The Graying of the World: Who Will Care for the Elderly? Edited by L. K. Olson. New York: Haworth Press, 1994. Pages 2558.

Pillemer, K. Solving the Frontline Crisis in Long-Term Care. Cambridge, Mass.: Frontline Publishing, 1996.

Pillemer, K.; Hegeman, C. R.; Albright, B.; and Henderson, C. Building Bridges Between Families and Nursing Home Staff: The Partners in Caregiving Program. The Gerontologist 38 (1998): 499503.

Stephens, M. A. P.; Ogrocki, P. K.; and Kinney, J. K. Sources of Stress for Family Caregivers of Institutionalized Dementia Patients. Journal of Applied Gerontology 10 (1991): 328342.

U.S. Bureau of the Census, Population Division, Population Projections Branch. National Households and Families Projections. 2000. www.census.gov

Wilner, M. A. Working It Out: Support Groups for Nursing Assistants. Generations 23 (1994): 3940.

Wunderlich, G.; Sloan, F. A.; and Davis, C. K., eds. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate? Washington, D.C.: National Academy Press, 1996.

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Pillemer, Karl; Lachs, Mark S.. "Workforce Issues in Long-Term Care." Encyclopedia of Aging. 2002. Encyclopedia.com. 30 Jul. 2016 <http://www.encyclopedia.com>.

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Labor Supply

Labor Supply

BIBLIOGRAPHY

For economists, labor supply usually means the hours of work, usually per week, offered for pay or profit. This definition therefore excludes unpaid household work and voluntary work. Usually, the question of labor-force participation (the question of whether a person is working or looking for work) is treated separately. Research on both the theoretical and applied labor supply exploded in the 1980s and 1990s, with the work ranging from models of individual behavior in a static one-period model to dynamic multi-period models for a household. Simple theoretical models that gave a backward-bending supply curve (where labor supply first increased and then decreased with wage rates, for which little evidence exists) have given way to empirical labor-supply curves that are usually (but not always) positively sloped with respect to the wage rate. Beginning in the late twentieth century, much of the focus of research has been on labor supply as a whole, not on particular firms, industries, or occupations.

The concept of labor supply is defined for economies with a well-developed labor market; that is, a market where wage labor is employed. The concept of labor supply in less developed countries (LDCs) is less clearly defined, because culture, history, and institutions affect labor supply. In some LDCs, women are not involved in the formal labor market, and the labor activities that women perform may be limited by tradition, either for religious or cultural reasons. Because precapitalist conditions exist in LDCs, labor in these nations is often tied to a particular feudal lord, and the worker does not have the freedom to move from one employer to another, or from one location to another.

In LDCs, as the economy develops, labor moves from the agricultural sector to the industrial sector. W. Arthur Lewis, in his seminal 1954 paper Economic Development with Unlimited Supplies of Labour, put forward a dual-economy model in which the surplus agricultural labor (defined as labor with a zero marginal product) moved to the industrial (modern) sector, providing a nearly infinite supply of labor at a constant wage. This provided a boost to economic development because the industrial sector could expand with a surplus (i.e., a profit) being created with cheap labor. The rapid growth of the Chinese economy in the first decade of the twenty-first century provides an example of how surplus labor from agriculture can provide a boost to economic growth.

In general, there are important differences in labor supply for males and females. Biology, history, and society have led to women spending more time in housework, child rearing, and various other domestic duties. For various reasons, including discrimination, society appears to have accepted a gender segregation of roles in the labor market. For example, women work in the textile industry while men work in mining, and women work as primary school teachers while men work as lawyers. Fortunately, many of these stereotypes are breaking down slowly, at least in most Western countries.

The labor supply in a particular economy can increase through population growth (natural increase), immigration, an increase in people employed or looking for work, and through workers offering longer hours of work in each period. Although the labor supply of different educational or skill levels is considered in many models, the issue of the efficiency of labor services (i.e., how hard and diligently a person works) is usually ignored.

In most models of labor supply, the determination of the hours of work is derived from an assumption of utility-maximizing individuals who face given wage rates and prices and a time constraint. In all these models, it is assumed that there is a disutility from workthat is, it is assumed that people do not like working. There is a good deal of evidence, however, from psychologists, sociologists, and industrial relations experts that work provides an individual with a set of contacts, imposes a time structure on the waking day, provides social status and identity, and enforces activity (see Jahoda 1982). Further, an unemployed person often suffers from a level of despair that may lead to mental illness.

Standard neoclassical models are set up to analyze competitive capitalist economies with a well-developed wage-labor market. The utility function, which is unchanging over the life cycle, depends on leisure and consumption goods. An increase in the wage rate leads to a substitution effect (leisure becomes expensive) and an income effect (a person can purchase more leisure and goods). If leisure is a normal good, then these two effects work in opposite directions. The net effect of a wage rate change is therefore ambiguous. The introduction of income taxes and social security payments make the analysis more complex, since the budget constraint becomes nonlinear.

In a novel extension to the concept of labor supply, George Becker argued in a 1965 paper that individuals choose commodities that are produced by combining consumer goods with the individuals time. Hence, a consumer good that is purchased, such as meat, also needs time (e.g., cooking time, washing-up time) to form the commodity called dinner. The time used in cooking thus has an opportunity cost. Alternatively, the dinner can be purchased in a restaurant with less time spent in obtaining it. The choice of cooking at home or eating out depends on the opportunity costs of time. For a professional person, the opportunity costs of cooking a meal are generally too high. This approach is especially useful in analyzing nonmarket work done (mainly) by women.

In an early model, labor supply was dependent on current wages and (expected) future wages, such that people would offer to work less in the current period if future wages were expected to be higher. Robert Lucas and Leonard Rapping deal with the intertemporal substitution of labor in Real Wages, Employment, and Inflation (1969). In advanced models, labor supply is dependent on the planned time path of consumption goods and leisure, along with a choice of saving and wealth accumulation over an entire lifetime. A critical assumption in these dynamic models is of a utility function that is not affected by habits or learning (intertemporal separability over time), as this could make the wage rates depend on individuals behavior (see Card 1994). There are significant differences in the labor supply of males and females due to cultural and institutional factors. Typically, the female labor supply is significantly affected by the number of preschool children in the family.

Expanded models of labor supply allow for joint household decision making, with bargaining between husband and wife (see Vermeulen 2002). The aggregate supply of hours depends on the number of people who are willing to work (given wage offers and their reservation wage) and the hours offered per person. Individuals are assumed to work out a reservation wage, meaning a wage below which they are not willing to work because the opportunity cost of leisure is too high. This reservation wage is obviously influenced by an individuals age, education, experience, family commitments, social security benefits, and wealth status. Changes in the minimum wage are likely to lead to a change in the distribution of reservation wages, because the idea of fair wages will also change (see Falk, Fehr, and Zehnder 2005). Changes in reservation wages can also affect the aggregate supply of labor.

It is generally assumed that the individual can work as many hours at a given wage as she or he desires (either within a firm, choosing different offers from different firms, or with multiple jobs). It is also usually assumed that there are no institutional constraints (e.g., a specified work week for a full-time person), and that the nonavailability of work (i.e., involuntary unemployment) is not a factor. Most estimates of labor supply are based on people who are working. This creates a selection bias, because it excludes those who want to work but cannot find work or have refused the wage offered to them. However, an individual can influence his or her wage through an appropriate investment in human capital, such as acquiring new skills or additional education. In some labor markets (especially for highly skilled labor) an individual may be able to bargain for a package of wages, hours, and other perquisites.

Some empirical regularities have been seen in OECD (Organisation for Economic Co-operation and Development) countries in the post-war period. These include an increase in the number of women working, a decrease in the number of older males working, a fall in the average number of hours worked, and educated people working longer hours. Most of the research on this subject has focused on an econometric estimation of labor supply for males, females, and households. Econometric estimation has moved progressively from time-series data to crosssection data to panel data. Most estimates of labor supply find a small positive link between wages and hours workedknown as elasticity, the percentage increase in labor supply as a result of a one percent change in the wage ratealthough there is a large element of unexplained variance. A major interest has been the extent to which welfare benefits and changes in tax rates affect the labor supply. Policy changes in these and other areas could affect peoples decision whether or not to seek work. Again, because most labor-supply models are based on data on working people, the possibility of selection bias must be considered.

Labor supply is also important from a policy perspective. How people respond to changes in tax rates, social security payments, and other institutional features like minimum wages are all relevant. Much of the evidence is based on simple models of single-person (or unitary) households, and is thus subject to debate. The evidence on many of these issues is very controversial, especially the impact of minimum wage on employment. And as Richard Blundell and Thomas Macurdy point out, there is little evidence to support the view that welfare programs have a disincentive effect on the labor supply.

Even though there have been significant advances in the theoretical modeling of labor supply, and in econometric estimation techniques, there are still large gaps in our understanding of the impact of policy changes on labor supply. Models need to be extended to households in which people decide simultaneously whether to work and how many hours to work over a longer period, including their saving behavior, and with some allowance made for the existence of demand-constrained choices. The existence of persistent unemployment in most OECD economies suggests that a basic underlying assumption of labor supply models is unrealistic, namely that workers can choose whether to work and how many hours to work.

SEE ALSO Economics, Labor; Employment; Human Capital; Labor; Labor Demand; Labor Force Participation; Labor Market; Selection Bias; Wages

BIBLIOGRAPHY

Becker, George. 1965. A Theory of the Allocation of Time. Economic Journal 75 (299): 493517.

Blau, Francine D., and Marianne A. Ferber. 1992. The Economics of Women, Men, and Work. 2nd ed. Englewood Cliffs, NJ: Prentice-Hall.

Blundell, Richard, and Thomas Macurdy. 1999. Labor Supply: A Review of Alternative Approaches. In Handbook of Labor Economics, Vol. 3A, eds. Orley C. Ashenfelter and David Card. Amsterdam: North Holland.

Card, David. 1994. Intertemporal Labor Supply: An Assessment. In Advances in Econometrics, ed. Christopher Sims. Cambridge, U.K.: Cambridge University Press.

Card, David, and Alan B. Krueger. 1995. Myth and Measurement: The New Economics of the Minimum Wage. Princeton, NJ: Princeton University Press.

Chang, Yongsung, and Sun-Bin Kim. 2006. From Individual to Aggregate Labor Supply: A Quantitative Analysis Based on a Heterogeneous Agent Macroeconomy. International Economic Review 47 (1): 127.

Falk, Armin, Ernst Fehr, and Christian Zehnder. 2005. The Behavioral Effects of Minimum Wages. IZA Discussion Paper No. 1625. Bonn, Germany: Institute for the Study of Labor.

Jahoda, Marie. 1982. Employment and Unemployment: A Social-Psychological Analysis. Cambridge, U.K.: Cambridge University Press.

Killingsworth, Mark R. 1983. Labor Supply. Cambridge, UK: Cambridge University Press.

Killingsworth, Mark R., and James J. Heckman. 1986. Female Labor Supply: A Survey. In Handbook of Labor Economics, Vol. 1, eds. Orley C. Ashenfelter and Richard Layard. Amsterdam: North Holland.

Lazear, Edward P. 1995. Personnel Economics. Cambridge, MA: MIT Press.

Lewis, W. Arthur 1954. Economic Development with Unlimited Supplies of Labour. Manchester School of Economic and Social Studies 22: 139192.

Lucas, Robert E., Jr., and Leonard A. Rapping. 1969. Real Wages, Employment, and Inflation. Journal of Political Economy 77 (5): 721754.

Mortensen, Dale T., and Christopher A. Pissarides. 1999. New Developments in Models of Search in the Labor Market. In Handbook of Labor Economics, Vol. 3, eds. Orley C. Ashenfelter and David Card. Amsterdam: North Holland.

Neumark, David, and William Wascher. 1992. Employment Effects of Minimum and Subminimum Wages. Industrial and Labor Relations Review 46 (1): 5581.

Pencavel, John 1986. Labor Supply of Men. In Handbook of Labor Economics, Vol. 1, eds. Orley C. Ashenfelter and Richard Layard. 1986. Amsterdam: North Holland.

Senesky, Sarah. 2005. Testing the Intertemporal Labor Supply Model: Are Jobs Important? Labour Economics 12 (6): 749772.

Vermeulen, Frederic. 2002. Collective Household Models: Principles and Main Results. Journal of Economic Surveys. 16 (4): 533564.

P. N. Junankar

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