This article reviews the economic literature on the work and retirement decisions of older women. Economic studies generally find that married women respond to the financial reward for work (for example, wages) in making their work and retirement decisions, but that they do not respond to unearned income and wealth (for example, the value of lifetime Social Security benefits). Unmarried women are found to respond to all types of financial variables. Most economic studies find that the family plays only a limited role in the work and retirement decisions of women. The retirement status of the husband does influence the wife's retirement decision, but the health status of the husband does not. The presence of dependents in the household, regardless of whether they are children or parents, is not found to influence work and retirement among women. The relevance of these results to Social Security policy is discussed.
There are a number of reasons to be cautious about the results. The literature to date is small; it is based on data that are deficient in some respects, and it contains studies that have methodological problems. These problems are discussed and prospects for future research are explored.
Since 1940, the labor-force participation rate of women (the percentage of women working or looking for work) has more than doubled, rising from 27.9 percent in 1940 to 57.4 percent in 1991 (Ferber 1993, p. 34). Women now make up approximately 45 percent of the U.S. labor force, and most of the projected growth in the labor force over the next several years will be accounted for by women (Fullerton 1989, p. 7). In recent years, women's earnings have risen relative to men's (Hill and O'Neill 1990), and today, for women, payment for market work totals over a trillion dollars (Department of Commerce 1993, p. 166).
The increased importance of women to the labor market is not a phenomenon restricted to young and middle-aged women. Women are an increasingly important part of the older labor force (aged 55 or older). In 1964, women made up 33 percent of this labor force (Department of Labor 1965, p. 74). By 1992, this percentage had grown to 43 percent (Department of Labor 1993, p. 174). The labor-market experience and earnings of older women are substantial. On average, women reaching age 55 have worked over half of their adult lives (Hill and O'Neill 1990, p. 16). Market earnings for women aged 55 or older exceeded $119 billion in 1992 (Department of Commerce 1993, pp. 132-133).
Because older women are important to the labor market, and because their importance will almost certainly grow, it is necessary that researchers, policymakers, and others come to an understanding of the factors that shape the labor-force decisions and experiences of these individuals. Of primary importance is an understanding of the most fundamental labor-market decision older individuals make: the labor-force participation decision. This decision, the converse of which could be referred to as the retirement decision, has profound consequences for the individual and society. An individual's decision to leave the labor force leads to the loss of an important source of income (earnings), and thus affects the individual's well-being at the time and later in life. At the societal level, this means that poverty patterns can be related to labor-force participation patterns. Also at the societal level, labor-force participation patterns affect national output and the financial status of important government programs, such as Social Security.
In an effort to contribute to an understanding of the factors that shape the labor-force decisions of older women, I present in this article a review of the economic literature on the work and retirement decisions of older women. Such a review is useful in that consistent findings across studies are documented and available for policy analysis. Also, by establishing what is known and what remains to be done, such a review helps to provide a foundation for future studies. …