The gendered impact of eliminating mandatory retirement

On March 6th, the Higher Education Quality Council of Ontario released a report on the sustainability of university expenditures. One of the issues highlighted in the report was financial cost of eliminating standard retirement at age 65. As Simona Chiose reported in the Globe, Ontario professors "who are 66 and older have an average salary of $185,000, compared with $113,000 for the youngest cohorts." Hence retaining older profs instead of hiring younger ones is expensive.

One thing the HEQCO report did not discuss, however, was the gendered impact of removing the standard retirement age. During the debate over mandatory retirement, many of those in favour of eliminating the standard retirement age, such as Rhys Kesselman, made the argument that:

...women who have entered the labour force relatively late, after raising children or marriage breakdown, as well as recent immigrants may wish to work until later ages than typical non-immigrant male workers. These groups may have to work until a later age to qualify for larger pension benefits based on years of service, or they may need additional work years to save for their retirement. These concerns are of particular salience to women workers with their longer life expectancies.

Three years ago I wrote a post arguing that those "who thought the end of mandatory retirement would disproportionately benefit women and promote gender equity were mistaken." Now, ten years into the no-mandatory-retirement experiment, it is time to revisit the evidence, and see if that conclusion still stands.

I use one fact in my estimations: people very rarely start jobs as Canadian university professors in their 50s or later. Yes, there is the occasional Michael Ignatieff, stopping over at University of Toronto on his way to other things. But these star hires are exceptional. Generally speaking, it is possible to count the number of 55-59 year old university professors, wait ten years, count the number of 65-69 year old professors, and arrive at an accurate estimate of the percentage of academics who choose to hold onto their positions.

The figure below shows the percentage of 55-59 year old male and female professors who were still working full-time ten years later, and the same figure for professors 60 and over:

Even ignoring gender differences in mortality rates - that, ten years on, more of the men might be dead, and thus unable to work -we still find that a greater percentage of men still in harness ten years on.  

No longer having a standard retirement age has further gendered impacts in terms of who is displaced by the lack of new faculty positions opening up.

Because relatively few women were hired into faculty positions thirty, forty or fifty years ago, and because men stay on the job longer, most  full-time professors over 65 are male. However 43 percent of doctoral students are female. If some of the older faculty were to be replaced by new doctoral students, the result could be a more gender-balanced academy.

Those who advocated eliminating the standard retirement age talked about encouraging longer working lives, thus framing the debate in terms of the quantity of labour supplied. Yet, even when there was a standard retirement age of 65, professors were able to continue to work - to research, to publish, to teach courses on a contract instructor basis. What changed with the abolition of mandatory retirement was the wage rate those over 65 could command. In Canada there are currently 2,559 professors between 65 and 69, and another 1231 over 70. With the average salary of a full professor in Canada being $160,250 a year, that's quite a wage bill.

Note:  Download spreadsheet with calculations and charts here. 

Comments

[John Chant]

Great post, Frances.

The change from defined benefit pension to defined contribution also strengthened the tendency for people to stay on. Defined benefit pensions (usually?) specified maximum years of service. If people worked beyond the maximum, their net benefit would be the differences between their salary and their pension - 30% of salary if pension is 70% of final salary.With a defined contribution scheme pensions build up if faculty keep on working.

Of course, some arrangement could be negotiated. But still a sessional type appointment would be unattractive for many.

[Frances Woolley]

John, it's nice to hear from you, thanks for your comment.

You're absolutely right. With a defined contribution pension plan, pension=f(years in retirement/years contributing). Another year of employment changes both numerator and denominator thus has a powerful effect.

A couple of other things about pensions. Depending upon how the pension plan is structured, an academic star has a real incentive to retire when their pension plan benefit/contribution ratio maxes out (say around 65) and then move to another university and start accumulating another pension. So this is one of the ironies of ending the standard retirement age - it hasn't always allowed universities to hold onto their star performers.

With defined contribution pension plans, retirement decisions depend very much on how the market it doing. I suspect we're probably seeing a relatively high retirement rate right now because of how strong the market has been. If we have a couple of serious bear market years (which is not unlikely) people may well decide to stick around rather than retiring when the plan is not doing well.

[Joseph]

What an important post

I wonder if making wages pyramid shaped instead of steadily upwards would be a possible solution? Or at least reducing the rate of increase after age 65 or a given number of years of service? I suspect this runs a serious risk of being age discriminatory but there is also something odd about the way that years of service continue to increase salary in academia. In other contexts, people seem to max out (beyond cost of living increases) after a decade or so, unless they are promoted.

In terms of late entry into the professoriate, a "years of service cap" on wage increases wouldn't hurt any women doing a second career. But your point about late career entry being rare is excellent.

[Frances Woolley]

Joseph - "I wonder if making wages pyramid shaped instead of steadily upwards would be a possible solution?" Or just generally an inverse u shape, so increasing and then decreasing with age? It always puzzles me that this doesn't happen, given that there's lots of evidence that people's productivity starts to decrease as they get older. I think it's one of those things that might seem logical and rational, but doesn't work from a behavioural economics perspective - loss aversion means that people really *hate* to get their pay cut. So, yup, the gap between pay and productivity just widens and widens as people get older and older.

My colleague Steve Saideman just wrote a good post where he talks about this (warning: possibly II think it's good because he says nice things about me). He argues that retirement at age 65 doesn't really make sense any more (and I'm sympathetic to this position), but after 70 or 75 more than a few folks seem to be behind the times - not up on the literature, etc. His post is here: http://saideman.blogspot.ca/2018/03/aging-profs-when-will-they-retire.html.

[Majromax]

> It always puzzles me that this doesn't happen, given that there's lots of evidence that people's productivity starts to decrease as they get older.

Is a senior professor's value to the university a function of their current productivity, or is it governed by other factors? A professor who literally does nothing may still improve a department's reputation or prestige for the association, and one who ostensibly runs a lab but practically delegates all the important tasks might win a disproportionate share of grants.

If this reputation is in fact significant, then a professor's "salary" is partially a payment for their labour and partially a payment to rent their reputational quasi-capital.