Most of us take a short break for coffee, a longer break for lunch, a longer break from late afternoon to the following morning, a longer break at weekends, a longer break for holidays, and then a very long break indeed when we get old.
There are two questions:
1. Why do we bunch our leisure?
2. Why do we take a great big, and increasingly big, bunch of leisure at the end of our lives? (We call it "retirement".)
People are supposed to be consumption-smoothers. There is supposed to be diminishing marginal utility of consumption, so you maximise your lifetime utility if you smooth your consumption over time. If we had high consumption with low marginal utility in some periods, and low consumption with high marginal utility in other periods, we could increase our total lifetime utility by reducing consumption when marginal utility is low and increasing consumption when marginal utility is high.
Why doesn't this same argument apply to the consumption of leisure?
If real interest rates were higher than your subjective rate of time preference, then you would choose a consumption path that is smoothly growing over time. You would consume more when old than when you were young. For all other consumption goods, some people act a bit like that, and others don't. Some people consume a bit more when old than when young, and others consume a bit less when old than when young. But when it comes to the consumption of leisure, we don't act at all like that. We consume roughly the same amount of leisure every year. And then we suddenly go on a massive consumption binge for the rest of our lives. Why?
As we have gotten richer over the last two centuries, we have chosen to spend a greater proportion of our lives consuming leisure rather than working. But I think I'm correct in saying that by far the biggest increase in our leisure has been in that big bunch of leisure at the end of our lives. Most people used to work until they died. Now most people stop working and then consume a decade or two of leisure before they die. Proportionately, the growth in leisure taken in retirement massively exceeds the growth of coffee breaks, lunch breaks, evenings, weekends, and holidays. The income elasticity of demand for retirement leisure massively exceeds that of all other forms of leisure. Why?
Non-convex (non-concave? whatever) production technology must be part of the story. There are fixed costs of commuting to work, so we work in bunches.
Non-convexities in the consumption of leisure must be another part of the story. There are fixed costs of commuting to good places to go canoeing, so we take leisure in bunches.
But why should these non-convexities have such a massively bigger effect for retirement? How do they explain the very big income elasticity of demand for that great big bunch of leisure we call "retirement"?
The obvious answer is that our productivity falls as we age. So it makes sense to consume more leisure when the opportunity cost is least. But there's also an obvious problem with that explanation. If our productivity at work falls as we age, maybe our productivity at leisure falls as we age too. Which will get worse more quickly: my ability to give an economics lecture; or my ability to portage a canoe?
Obsolescence of human capital?
Just some random thoughts. This is not my area at all. Obviously inspired by current talk of raising the age for eligibility for OAS/GIS. But also inspired by my thoughts for my own future.
Nick - powerpoint for your lectures, wheels for your canoe, and you'll be able to lecture and portage indefinitely ;-)
More seriously: why consider labour supply, rather than labour demand?
Our productivity falls as we get older, but loss aversion plus other psychological stickinesses makes it extremely difficult to adjust our salaries. A standard retirement age is just a nice, kind, gentle way of saying "your wage exceeds your productivity, you are the weakest link, good-bye."
Posted by: Frances Woolley | February 04, 2012 at 09:23 PM
Frances: "Nick - powerpoint for your lectures, wheels for your canoe, and you'll be able to lecture and portage indefinitely ;-)"
Sacrilege, in both cases! Next you'll be telling me I can always get a car with atx!
"Our productivity falls as we get older, but loss aversion plus other psychological stickinesses makes it extremely difficult to adjust our salaries."
Sticky wages for recessions, OK. Sticky wages for retirement too? Hmmm. Empirically, I wonder how retirement differs for the self-employed, or those on commission? My sample is overweight farmers (umm, I don't mean BMI), but I think they tend to retire more gradually, depending if there's a son or daughter to take over.
Posted by: Nick Rowe | February 04, 2012 at 09:40 PM
Which will get worse more quickly: my ability to give an economics lecture; or my ability to portage a canoe?
Consider those whose job involves manual labor
Posted by: foosion | February 04, 2012 at 09:46 PM
foosion: True. Professional athletes would be an extreme example, where we would expect their productivity at work to fall much more quickly than their productivity at leisure. And they do work very hard (I think) and then retire young. But over the years a smaller and smaller percentage of the population is engaged in physically demanding labour, and yet the consumption of retirement leisure has increased massively.
Posted by: Nick Rowe | February 04, 2012 at 09:55 PM
Nick - "Empirically, I wonder how retirement differs for the self-employed, or those on commission? "
Doctors are a large and well-studied group of the self-employed - they generally don't retire right at 65, but instead gradually wind down, see, e.g. this paper that looked at physician retirement decisions back in 2007, when there was still a standard retirement age in Ontario. Though as foosion says, manual labour.
Posted by: Frances Woolley | February 04, 2012 at 09:57 PM
Doesn't it matter that neither employees nor employers make decisions by calculating marginal cost and marginal revenue? Most measure costs and revenues using a benchmark flow rate of output that is adjusted periodically as conditions change. They don't rent labor on a daily basis, they re-negotiate contracts on a monthly to yearly (and in many cases longer) basis. Part time jobs tend to be lower paying and lower status because no one promotes a part-time employee. Not to mention that most obligations in our current society is paid in money so that whether or not an employee wants more leisure time now, he's going to also need money to pay for social obligations such as supporting children and putting them through school. I just don't think these analytical tools are very useful in analyzing things like this
Posted by: Nathan Tankus | February 04, 2012 at 10:15 PM
"Non-convexities in the consumption of leisure must be another part of the story. There are fixed costs of commuting to good places to go canoeing, so we take leisure in bunches."
Nick, ageing, dying, finite lives, are a pretty significant non-convexity. Aside from that, I can't imagine hiring someone who would only invest half a day or barely an hour + start up costs of 45 mins each day to earn a living by producing something, productivity would simply be too low with such a high fixed costs.
Posted by: Martin | February 04, 2012 at 10:20 PM
Nathan: "I just don't think these analytical tools are very useful in analyzing things like this"
Heresy! ;-)
"Part time jobs tend to be lower paying and lower status because no one promotes a part-time employee."
But why? The answer, presumably, is non-convexities. There are fixed costs, both for the employer and the employee. Those fixed costs affect marginal costs on the extensive margin (adding an additional worker/job) but not the intensive margin (adding an additional hour of work) and explain why there's so little part-time work.
Could these non-convexities also explain retirement, and the very high income elasticity of demand for retirement leisure?
(I wonder when Sandwichman will join this discussion? Watch this: "Lump of Labour Fallacy!" ;-) )
Posted by: Nick Rowe | February 04, 2012 at 10:31 PM
Martin: But if non-convexities like that were the whole story, why would we have weekends and holidays? And if we do have weekends and holidays, why wouldn't they have an income elasticity of demand as big as retirement?
Posted by: Nick Rowe | February 04, 2012 at 10:37 PM
Actually, are aging, dying, and finite lives non-convexities?
Posted by: Nick Rowe | February 04, 2012 at 10:40 PM
The real question seems to be who benefits from mortality improvements, plan sponsors or recipients? That is exactly the issue that Parliament is debating right now with the OAS issue.
Solve that issue and retirement planning becomes much more stable and predictable.
Posted by: Determinant | February 04, 2012 at 11:06 PM
you may be interested in this recent handbook from edward elgar:
http://www.e-elgar.co.uk/bookentry_main.lasso?id=13469&breadcrumlink=economics.lasso&breadcrum=Economics&sub_values=&site_Bus_Man=&site_dev=&site_eco=Yes&site_env_eco=&site_inn_tech=&site_int_pol=&site_law=&site_pub_soc=
"But if non-convexities like that were the whole story, why would we have weekends and holidays? " i think that's largely institutional and historical. remember 7 day work weeks were common before the labor fights of the 19th and 20th centuries (and are still common in some parts of the world).
"There are fixed costs, both for the employer and the employee." it's not just fixed costs. A cultural justification for being in high paying positions is hard work. A part time person doing work such as being in a position of authority completely undermines the socio-cultural justifications for those hierarchies. Even if the work could efficiently be completed by 2 or more co CEO's (or any other position of authority) it would be culturally unacceptable.
On the flip side of this, employees that are older then employers or managers culturally undermine their authority. I can attest to age discrimination in employment (my Mother has a masters in math education from NYU but despite the shortage of math teachers in the U.S, she has difficulty finding work. she has other friends who have encountered similar problems)
Posted by: Nathan Tankus | February 04, 2012 at 11:10 PM
Nathan: Interesting handbook on leisure. But from reading the table of contents, I can see nothing on retirement. Which is really surprising, since retirement is such a large percentage of total leisure, and has increased so much. (Though I suppose it might talk about retirement, and it's just not apparent from the table of contents?)
When you hear the word "leisure", or "work/leisure choice" do you think at all about retirement? I confess I didn't until recently. I thought about hours per day and days per week, and weeks per year. Never about years per life.
"i think that's largely institutional and historical. remember 7 day work weeks were common before the labor fights of the 19th and 20th centuries (and are still common in some parts of the world)."
I have heard the slogan "Unions brought you the weekend". I disagree. I think it was English farmers who created the weekend, by increasing productivity so much we could afford so many other things, like cars and weekends. But then I'm biased!
Posted by: Nick Rowe | February 04, 2012 at 11:26 PM
Discrimination is probably a large part of this. Productivity is not an individual product but a group one and if ostracized it doesn't matter what your productivity is. Since more senior managers are more senior they form obstacles for the less senior while cohorts compete with each other for a dwindling number of higher positions. It is often up or out and once out there often isn't any way back in.
Posted by: Lord | February 04, 2012 at 11:40 PM
"When you hear the word "leisure", or "work/leisure choice" do you think at all about retirement? I confess I didn't until recently. I thought about hours per day and days per week, and weeks per year. Never about years per life." the concept of forced leisure where someone doesn't want to retire but family members or employers (or, in the case of elderly CEO's, board members) force them has been bouncing around in my mind so i have for a while associated retirement with leisure.
"I have heard the slogan "Unions brought you the weekend". I disagree. I think it was English farmers who created the weekend, by increasing productivity so much we could afford so many other things, like cars and weekends. But then I'm biased!"
This assumes that 7 day workweeks involved lower labor costs. I'm not so sure, especially given the transition to more capital intensive, higher skilled work. I think it's more likely that the work that needed to be done became more and more capital intensive was a more important factor (rather chicken or the egg when you think about it).
Posted by: Nathan Tankus | February 04, 2012 at 11:50 PM
I said "sticky wages" as I read, and I didn't even peak at comments.
Personally, I kinda get a panic attack when I think about retirement. How many crossword puzzle can one do before swallowing the muzzle of a pistol? Deeply depressing. I say go ahead and cut my wages and slash my retirement benefits, just please, for pity's sake, don't put out to pasture.
Also, for those of us who work with our brains and who manage to stay relatively fit despite sitting on our can all day will find ourselves in the odd position of our bodies having plenty of mileage left when we are finally put out to pasture. At least a farmer's body is telling him it's time to pack it in when he retires. With any luck I'll still be jumping out of bed, ready to go, only nobody will want me because I'll be too obsolete, stupid, and inflexible. F'ing great.
Posted by: Patrick | February 05, 2012 at 01:14 AM
Lord: "It is often up or out and once out there often isn't any way back in."
So far as managerial jobs are concerned that's the truth of the matter I think. But where does that leave economists who want to think in terms of profit-maximization with well-behaved production functions?
Posted by: Kevin Donoghue | February 05, 2012 at 07:07 AM
Nathan: "employees that are older then employers or managers culturally undermine their authority"
Interesting point. If that's true, standard retirement ages should be more common in more hierarchical societies, ones where respect for elders is more deeply ingrained. That's a testable hypothesis; I wonder if it works. Also it suggests that standard retirement ages should be more common in teams, where people work together, so interpersonal interactions matter more. Another odd thing in a lot of European countries: younger retirement ages for women than for men.
Kevin: "But where does that leave economists who want to think in terms of profit-maximization with well-behaved production functions?"
Throw in imperfect information, gradual revelation of information through work effort, signalling plus some other rigidities and frictions and it's easy enough to build a model of the labour market that has discrimination, promotion from within, insiders/outsiders, etc.
Posted by: Frances Woolley | February 05, 2012 at 07:25 AM
Patrick: I assume you are a young guy! Don't worry, it may all start to feel more attractive as you get older. There's always something to do, if you want to do something (like blogging). My fear is more that I might degenerate if I didn't have to do something.
The abolition of mandatory retirement for Ontario profs was a natural experiment. Despite salaries (usually) continuing to rise with age, most profs still retire, at around 66-67, IIRC. (Frances will remember better.) So far, most/many are still choosing to retire, rather than being forced out, AFAIK. (The abolition of mandatory retirement for profs, given tenure and the salary-age structure, is still a problem, but that's another topic.)
Posted by: Nick Rowe | February 05, 2012 at 07:27 AM
Nick: "most profs still retire, at around 66-67" - our colleague, Chris Worswick, has studied retirement age of profs in Quebec, where there is no standard retirement age, and finds that typically most retire around 70. But there are a small number of people who just don't ever want to retire, and keep on working until they're 75, 80, ... And that pulls up the average.
Also, timing of retirement is affected by asset/pension returns. Defined contribution plans can, potentially, pay off big time if you retire right at the top of the market, so retirement decisions are quite closely tied to past, present and expected future market performance.
Plus the retirement intentions of one's nearest and dearest matter too...
Posted by: Frances Woolley | February 05, 2012 at 07:58 AM
" A standard retirement age is just a nice, kind, gentle way of saying "your wage exceeds your productivity, you are the weakest link, good-bye."
Why cant it just be the PROPER way to say "Thanks for all you did for us, now take some time and let us youngins keep you reasonably comfortable after all we wouldnt be here if not for you"
Posted by: Gizzard | February 05, 2012 at 09:55 AM
It would seem that retirements only became necessary after mental and physical activities were artificially segmented out amongst individuals More of our physical consumption and activity occurs while we are relatively young, and retirement was needed for hard physical work. However the averages in retirement years were drawn from everyone, with the result that those who had mental work retire earlier than they want to, physical workers later than they need to. Whereas, it is possible to keep one's body healthy with physical and mental work through the course of a lifetime, gradually decreasing the intensity of both: retirement as it is currently constructed might not be needed any more. Plus, a reintegration of physical and mental work for all individuals would allow a return of the elder in the commmunity.
Posted by: Becky Hargrove | February 05, 2012 at 10:13 AM
Gizzard "Why cant it just be the PROPER way to say "Thanks for all you did for us..."
If it was just to say thank you, why not allow people to take, say, every seventh year off as a "sabbatical" for rest and relaxation, or allow people to take that time when they have young families or parents needing elder care? Why concentrate those extra years of leisure at the end?
Posted by: Frances Woolley | February 05, 2012 at 10:41 AM
"Why doesn't this same argument apply to the consumption of leisure?"
The diminishing marginal utility of leisure is indicated by boredom. Retirement is not a condition of becoming more and more bored. (Hopefully. ;)) People take action to avoid boredom. Retirement means that one is not constrained by a job in one's choice of action. It means a measure of freedom.
In traditional Hindu society there are kama, karma, dharma, and moksha. Kama is pleasure, karma is acton, dharma is duty, and moksha is spiritual liberation. Having produced a family (kama), worked (karma), and provided for the family in various ways (dharma), at the end of life it was proper to free oneself from the bounds of these three and to seek spiritual liberation (moksha). Freedom from worldly pursuits might involve material privation, and might mean becoming a beggar (bhikhu).
I think that there is a problem with trying to reduce such things as leisure and retirement to a single dimension.
Posted by: Min | February 05, 2012 at 12:16 PM
Min: Hmmm. Actually, I have to say that does indeed resonate, even if I can't figure out how to solve for the first order conditions. "Moksha" eh? Shall have to remember that.
Posted by: Nick Rowe | February 05, 2012 at 12:32 PM
Nick Rowe: "I have heard the slogan "Unions brought you the weekend". I disagree. I think it was English farmers who created the weekend, by increasing productivity so much we could afford so many other things, like cars and weekends."
But just because we could afford those things does not mean that workers would get them. Increasing productivity may have been necessary, but that does not mean that it was sufficient.
And didn't European workers have more leisure during the Middle Ages? Didn't English workers have more under Alfred the Great?
Posted by: Min | February 05, 2012 at 12:53 PM
Min: "And didn't European workers have more leisure during the Middle Ages? Didn't English workers have more under Alfred the Great?"
I've heard things like that. Don't know if it's true. For a long time Malthus reigned (temporary episodes like the Black Death aside). But my guess is that those "facts" don't include retirement leisure. Which is the puzzle I'm raising here.
Posted by: Nick Rowe | February 05, 2012 at 01:28 PM
As well as falling productivity leading to falling wages, increasing wealth and income from it diminishes the value of work, and decreasing life leads to increasing time value. Falling wages lead to less demand for work but rarely is there an option to reduce effort because that would further reduce productivity and wages. Work is work, but work without sufficient income to enjoy it is worse, and lack of work without sufficient income to enjoy it isn't leisure but still may be preferable to the former. Some are wealthy but still prefer to work, some prefer leisure, some aren't that wealthy but still prefer time to long and low paying work, and some are so poor they cannot say no to even long and low paying work. Even high paying work can end up low pay if the gaps between jobs and the search and accommodation effort required become high. Who would move for a six month project for example. Even if wages don't fall, they may not be high enough or stable enough to cover rising costs of employment such as a second home.
Posted by: Lord | February 05, 2012 at 01:37 PM
I'm with Patrick on the non-appeal of prospective retirement. My mental template for retirement is King Lear. On the other hand, that may mean some future employer (a state-controlled Chinese global hospital chain, perhaps?) will have to haul me kicking and screaming out of the office, which would be inefficient.
A social norm (and current public funding policy) of funding retirement at 65 is, absent sufficient personal wealth, a bit like guaranteeing everyone that they will eventually win the lottery (and in PV terms, it is). True, there are practical people who do good work right to the well-planned end at 65, but many of us also know people who gamed the final years, knowing that the HR headache of firing an "old" person in some settings is not worth the cost.
Posted by: Shangwen | February 05, 2012 at 01:51 PM
Shangwen "the HR headache of firing an "old" person in some settings is not worth the cost"
But with no standard retirement age, it is worth firing a 60 year old - because they might be there until 80. Hence the end of a standard retirement age for university professors means the end of tenure - utterly predictable, lots of people figured this out at the time, but given no one went public with it, I guess understandably. I'd be interested in your views on mandatory testing of older doctors and other licensed professionals - I know it happens in Ontario, I don't know how widespread it is elsewhere, how effective do you think the peer evaluations are? Does anyone ever fail?
Posted by: Frances Woolley | February 05, 2012 at 02:30 PM
Retirement as a concept developed with the rise of life annuities in 18th Century England. Retirement is possible because retirement income P = A/i and can continue forever (it's an infinite series). Of course in the real world we get pooling and mortality credits in there, plus interest rate fluctuations. But we defer retirement so we can build up enough capital to provide for a life annuity, either purchased directly from a life insurer, provided by a DB pension or DIY through a RRIF.
Young people don't have the capital to afford a life annuity purchase. The cost decreases with age as the ability to purchase increases.
Posted by: Determinant | February 05, 2012 at 03:50 PM
Haven't read the comments, so replying cold:
Maybe minutes of liesure are like baseball cards, stamps, or maybe even wealth (up to a point): they deliver increasing marginal utility.
The whole is greater than the sum of its parts?
cf. Charles Karelis: The Persistence of Poverty
Posted by: Steve Roth | February 06, 2012 at 12:29 AM
Nick: I think this is about uninsurable human capital shocks. As long as you have the ability to generate income you'd better use it.
Posted by: K | February 06, 2012 at 08:07 AM
K: Hmmmm. Good theory. I didn't think of that.
Steve: Yep, that could create bunching of leisure.
Determinant: OK, so retirement wasn't as easy before the invention of life annuities (given uncertain lifetimes). So maybe people always wanted to bunch their leisure at the end of their lifes, but couldn't before life annuities were invented.
Posted by: Nick Rowe | February 06, 2012 at 11:47 AM
As far as retirement for the self-employed, my anecdotal evidence is that self-employment is what retirement means for many people, at least amongst the narrow professional sampling that I interact with at work. Starting in their 50s, the engineers and architects that I work with trickle away, and hire their expertise out as needed. They charge loads of money on an hourly basis - depending on who, they need to work anywhere from 2 to 5 days to make as much as I earn in a month - but don't work a whole lot.
Posted by: Neil | February 06, 2012 at 01:00 PM
What if holidays and retirement are hold-overs from a different time when leisure decisions were imposed and not market driven? We could be simply in the transition phase on our way to an equilibrium that smooths out our work and leisure time. Think about labour innovations like flex time. Since this is changing cultural norms one would expect the change to happen very slowly over several generations.
Posted by: Mike | February 06, 2012 at 01:04 PM
Min: "And didn't European workers have more leisure during the Middle Ages"
Maybe (although I suspect 12th century woman might have disagreed with that proposition). Then again, if you want to work 1 day a week, you too can enjoy lots of leisure, along with the living standard of your average 12th century peasant.
Posted by: Bob Smith | February 06, 2012 at 02:44 PM
Mike: "What if holidays and retirement are hold-overs from a different time when leisure decisions were imposed and not market driven?"
For example, consider the sharp rise in university enrolment over the past 4 decades (which continues to this day, despite rising tuition fees). Now, to be sure, some of that is driven by the rising returns to education, but let's face it, university life isn't exactly demanding. It's a lot more fun than toiling in a factory, or a 7-11 or in some desk job. Moreover, you can do a lot of things when you're young that you can't (or shouldn't) do when your older. Here's a socially acceptable way for young people to enjoy some leisure, a way that's either financed by the government (through subsidies) or by way of loans against future earnings (whereas, previously, those who couldn't pay up front often wouldn't have been able to tap capital markets to pay for their "education"). If you've got to work a few more years at the back end to be able to afford retirement, well, who wouldn't jump at that opportunity?
Posted by: Bob Smith | February 06, 2012 at 02:53 PM
Neil: if your anecdotes generalise (and my hunch is they might), that suggests there is some sort of big difference between the employed and the self-employed. Either Frances' sticky wages, or some sort of fixed cost/non-convexity that doesn't apply to the self-employed, or something I haven't thought of.
Mike: Maybe. Just a very slow transition to equilibrium. But cultural norms need some sort of explanation. Maybe there's some sort of need to coordinate with others around us??
Bob: "Then again, if you want to work 1 day a week, you too can enjoy lots of leisure, along with the living standard of your average 12th century peasant."
Almost certainly much better! But what's interesting is that nearly all of us don't choose to do this. We have chosen to consume a bit more leisure (except retirement), and a helluva lot more other goods.
Of course, it might also be that our work is a lot less nasty than for the 12th century peasant. If our work were the same as their work, we might choose a lot more leisure.
As an undergrad, I certainly worked less hard than I did at school and as a grad student. And I actually went to lectures! Yep. When I get worried about the future of "bricks and mortar" universities, I remind myself that courses are perhaps only a small part of the reason why many students want to go to university.
Posted by: Nick Rowe | February 06, 2012 at 04:32 PM
Nick:
The rise of life annuities was contingent on the creation of the UK gilt debt market, which in the late 18th Century was far and away the most liquid, transparent and credit-worthy debt market in the world. By comparison Spain routinely defaulted on its debt.
Retirement as a concept is tied to the rise of both white-collar work and the rise of factories due to the Industrial Revolution. Before then people expected to work until they died. If you were a farmer your retirement plan was your family. Industrialization changed all this.
The first real pension plan in the UK was the UK Civil Service Plan which dates from 1785.
The aftermath of Napoleonic Wars furthered the need for pensions. The Royal Navy reached a height of 800 ships of the line in commission in 1815 and in 1816 the traditional peacetime rundown had reduced this to 100. Officers were placed on half-pay, again traditional and were expected to seek the next available opportunity for service and full pay.
This created a huge glut of officers and offered little room for promotion for the junior ranks. Eventually the Admiralty recognized it could not tolerate so many officers seeking appointments and crowding out the necessary youth to keep the Royal Navy staffed sustainably. Superannuation for senior captains to officially retire them and get them off the active list was the method chosen to relieve the glut. This was a further step in pension thought.
In fact much of the model for pensions in the English-speaking world originates with the UK Government, specifically the UK Home Civil Service and HM Armed Forces.
Posted by: Determinant | February 06, 2012 at 04:44 PM
Determinant: that reminds me of the book Frances lent me: "Lark's Rise to Candleford". English village, late 19th century?. Only one family had a pension plan (aside from their kids). A childless couple.
Posted by: Nick Rowe | February 06, 2012 at 05:16 PM
"As an undergrad, I certainly worked less hard than I did at school and as a grad student. And I actually went to lectures!
I look back now at school (and not just as an undergrad) as a blissful time of relaxation and frivolity. Of course, I also hate my former self. Not only did he live a sweet life, but he stuck me with the tab for it! Damn you, young Bob, you freeloader, damn you!
Posted by: Bob Smith | February 06, 2012 at 07:05 PM
The 'lumpy' switch in leisure consumption upon retirement is largely a measurement issue of incorrectly assigning time spent in home production as leisure. See Aguiar and Hurst for more. Consumption and leisure are surprisingly smooth as people transition into retirement.
Posted by: Andy | February 09, 2012 at 12:07 PM
This reminds me of the yiddish joke about why men die before their wives (-because they want to) and the story about the couple happily married 25 y celebrating their 40th anniversary.
We're typically married to our jobs and although many hit the wall after roughly 30 years mobility constraints due to aging prevent the dissatisfied from seeking a more attractive situation.
We don't bunch our leisure time, in general. Our employers do.
I wandered over here from another site and apologize for not using lingo that includes the words elasticity and marginal utility.
Posted by: guest vs intruder | February 10, 2012 at 05:13 AM
guest vs intruder: "We don't bunch our leisure time, in general. Our employers do."
"We" includes employers. Employers are people too! The way we work is jointly determined by employers and employees - demand and supply. Why do employers want to bunch the work time of their employees? Why do employers and employees jointly determine a pattern of work/leisure that has bunching?
Posted by: Nick Rowe | February 10, 2012 at 07:17 AM
Rogerson and Wallenius have a research line which aims to explain life cycle (as opposed to intra-day) labour supply. They assume fixed costs of going to work.
Posted by: giulio | February 10, 2012 at 08:36 AM
Andy: "The 'lumpy' switch in leisure consumption upon retirement is largely a measurement issue of incorrectly assigning time spent in home production as leisure."
That sounds very strange to me. Do people at 65 suddenly start spending 35 hours per week doing home repairs and stuff? Maybe they do. Even so, it's strange that the mix of home production vs market production suddenly jumps like that. Presumably some sort of fixed costs.
giulio: ah. Good to hear some economists are working on this. But if this fixed costs are like commuting costs, that would motivate sabbaticals as much as retirement. But yes, those fixed costs must be part of the story. Can they be the whole story?
Posted by: Nick Rowe | February 10, 2012 at 09:02 AM
The reason is that companies do not want old fellas'... and they do not want old fellas because they are not consider to have superpower and superknowledge as it is the general rule in almost all cultures (except for us). Maybe here economics pushes social normal which pushes mythological structures in cultural symbolism which fixes our "culture" so that our so.called desire for leisure when we are old is learnt pretty early. In other words, leisure when you are old is the myth of "the deserved rest after hard work", we learn it when we are young, and probably it has its roots in the social norms developed due to the fact that companies do not want old fellas.
Posted by: enricalacalle | February 10, 2012 at 09:11 AM
WHY DON'T WE SMOOTH OUR LIESURE?
1) We do. we have an absurd amount of liesure in historical terms.
2) Because when we do smooth it, we simply give a discount (opportunity transfer) to others.
Posted by: Curt Doolittle | February 10, 2012 at 10:39 AM
Why do we bunch our leisure at the end of our lives? In the U.S., maybe it's because when we're young we don't have any time or money left over after making all of our compulsory intergenerational transfer payments.
Posted by: Ohpcenter | February 10, 2012 at 11:30 AM
Nick Rowe: No argument that employers are people too, but if we're going to generalize here, there are many more employees, who do not have the luxury of setting their vacation days. Corporations are people, too, including those working in Chinese factories for Nike and Apple. It is a fanciful world, even when considering the US labor force exclusively, in which employees set their vacation parameters by sitting down with their bosses, irrespective of the fact that unionized labor is constantly under assault here. Employers in the US want to bunch the work of their hired help because they want to extract as much labor from them as they can. If you give a month off a year, there isn't any other way to do it. There may be places in this country where bosses and their hires jointly determine the parameters of time off, say in an organic food co-op in Seattle, or in niche situations in which demand markedly exceeds supply - in the professional world- but these are exceptions.
Posted by: guest vs intruder | February 10, 2012 at 08:43 PM
How much is consumption of big middle-class lifestyle expenditures throughout a person's life actually smooth? Paying for education, buying a car, putting a down payment on a house, paying for a wedding, and having kids are all big expenditures that people generally would like to do as soon as they can afford it if they are going to choose to do them at all. I would expect big luxury expenditures to increase when people get older (big vacations, lakeside cottage, etc.) Smoothing leisure consumption would mean a delay in getting into the middle class lifestyle for young people, assuming that pay is more or less dependent on hours worked.
Posted by: AlexB | February 12, 2012 at 01:46 PM
With conundrums like this it is always good to think more simply. There are obviously many factors at play, and I would include the following -
1. As a starting point, we continue to enjoy weekends because we like to have a coincidence of leisure and coincidence of work hours. After all, most leisure and work activities are more enjoyable or productive with others.
2. Considering the idea of a coincidence of leisure, we have the same type of problem at a broader level. If our friends are all busy working long and hard trying to get ahead in their 20s and 30s, we may as well do it too. So why not enjoy more leisure with your friends when they are older.
3. People are opting to wind down into retirement much more these days - so the optimising is happening.
4. Government pensions have a lot to do with it. Many people are pretty bad at saving, and get stuck in the working grind for decades.
5. Supporting children can be competitive/costly, or at least appear to be. Hence, we parents feel the need to work almost as much as possibly.
Anyway, my view is that things are changing slowly and people are doing the rational thing of spreading leisure time now that workplaces are more flexible and we are wealthier in general.
Posted by: Rumplestatskin | February 19, 2012 at 07:13 AM