Lucking Out on Later Retirement

Despite the new law, few workers want to stay past 65

Last April, Congress took a flying leap in the dark. Responding to pressure from politically powerful oldsters, it raised the mandatory retirement age from 65 to 70, although so little study had been done that estimates of the economic and social consequences were only horseback guesses. The move alarmed businessmen, who feared that retaining aging workers would clog the channels of promotion and reduce the hiring of young people, especially women and blacks. But when the law finally went into effect on New Year's Day, the worries had substantially diminished. Many employers now think the law will have little effect at all, beyond raising the spirits and incomes of those work-ethic veteran employees who decide to hang around.

The big question all along has been: How many employees turning 65 would choose to keep working? It will not be fully answered until the law has been in effect a year or two, but the experience of companies that changed their policies earl--or never did force retirement at 65--indicates that the numbers will be small. As companies have made retirement benefits more generous, the trend for decades has been toward earlier, not later retirement. For example, at Republic Steel Corp., which has never had mandatory retirement, less than 1% of the 40,000 workers stay on past 65; the average age of retirees is below 62.

Production workers, in particular, are expected to continue laying down their wrenches and torches as soon as they can, for an understandable reason: the labor is physically wearing. The Oil, Chemical and Atomic Workers union has fought hard to negotiate pension plans specifying a "normal" retirement age of 60, and that is the actual average age of its members who retire.

Office workers, who sit at desks in pleasant buildings, may stay on in larger numbers, but not all that much larger. Less than 15% of Du Pont's employees, both blue-collar and whitecollar, elect to keep working until they reach 65. Says Employee Benefits Manager Leonard J. Bardsley: "This trend continued through 1978 even when they knew of the change in the law." Pitney-Bowes, Inc., abolished mandatory retirement last April 1. Since then, 105 of its workers have retired on or before their 65th birthday, and only ten have chosen to keep working more than a few months past that age. Singer Co., which long has had a mandatory retirement age of 68, finds so few workers wanting to stay around after 65 that it has not bothered to count them.

Business opposition has also been dulled by some special provisions in the law. The statute permits companies to continue forcing retirement at 65 for "bona fide" executives and people in "high policy-making positions," provided they have served in those jobs for at least two years and qualify for pensions and other retirement benefits totaling $27,000 a year.* And most companies will indeed compel executives to retire at 65. Their stated and valid reason is that new blood and new ideas are especially vital at the top. An unspoken but powerful reason is that every board member dreads telling a 65-year-old chairman: "Joe, you just can't cut it any more." It is much easier to say: "Joe, we would love to keep you, but a policy is a policy."

Also, a worker who stays on until 70 need not be paid a higher pension than he would have collected if he had retired at 65. Thus companies' pension costs will not rise; they may even drop, since a worker who retires at 70 will draw a pension for fewer years. The cost of providing life and supplementary medical insurance for older workers may rise, but that will be offset by guidelines that the Department of Labor will issue within three months. They will declare that an employer will not have to pay any more to provide benefits for a worker above 65 than for one below that age; if the same employer contributions buy fewer fringes for the senior employees, so be it. Says one Labor Department official: "We are trying to make it as reasonable as possible for employers to hire and keep on older workers." Salary costs, to be sure, will increase, since workers normally achieve their peak earnings in the last years of their careers. But if few workers stay on after 65, as now seems likely, the effects will be minimal.

About the only vexing problem will be dealing with the employee who wants to keep working after 65 but is failing to do the job. Under the law, he or she can be retired but can then sue, claiming that age was the only reason for the dismissal; the employer will then have to convince a jury that other factors were involved. As a result, bosses are planning to keep a closer watch on their older workers. Paradoxically, they may warn, demote or even talk into early retirement a 63-year-old, say, who is slipping. In the past, an employer could close his eyes to that worker's failing performance in the knowledge that the worker would be gone in two years anyway. Now, says Frank D. Sweeten, vice president of Sperry Rand, "that two years becomes seven years, and we have to take a harder look at performance." Some employers would like to transfer to less demanding jobs those good workers who are slowing down, but are concerned that the employees will consider it a slight. James M. Seamon, vice president of Nalco Chemical Co. in Oak Brook, Ill., asserts: "We have to change people's thinking around to help them feel that accepting a job with lesser responsibility means no loss of face or social standing or personal prestige."

Aging employees have been conditioned throughout their working lives to think of 65 as the normal retirement age. Their attitude may change as the new law stays on the books. If inflation rages on, many more people may choose to keep working after 65 because they fear their pensions will be inadequate. At San Francisco's Bechtel Corp., which employs white-collar people almost exclusively, a startling 70% of those approaching 65 have chosen to keep working, largely because they are apprehensive about the economy's future. Bechtel's experience is an anomaly, but it may become less rare in an inflationary age. At present, however, any extra cost to business is clearly outweighed by the law's humanitarian benefits in enabling those few peppy veterans to maintain their pride in work after 65, and by the economic value of their experience to employers.

* Another exception: tenured members of college faculties can be forced to retire at 65 until 1982; after that, they also can stay on until 70.

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