This paper looks at the influence of financial factors on the labour market transitions of Canadian older workers. Also, in contrast to previous studies, the analysis focuses on transitions between full-time work, part-time work, and retirement. Sequential annual observations of employment and retirement choices are examined for samples of full-time and part-time workers, drawn from the Survey of Labour and Income Dynamics (SLID), 2001–2006. Measures of potential pension wealth and one-year and peak pension accruals are imputed using data from the Survey of Consumer Finances, 1973–1997, and the SLID, 1997–2006. Regression results indicate that financial factors influence workers to move from full-time to part-time jobs and support the evidence found in previous studies that retirement is usually a process, not a single event. Also, an increase in pension accruals increases the probability of working full-time for lower-income earners only. Among nonfinancial factors, a negative health shock increases the probability of working part-time or retiring for full-time workers but has little effect on the labour market transitions of part-time workers. Finally, these results suggest that policies to encourage phased retirement are unlikely to have a significant labour market effect since bridge employment is already a common transition process among older workers. 1. Introduction Factors explaining the labour market transition of older workers into and out of retirement are not fully understood and more complex in reality than standard life-cycle theory would predict. For many older workers, the retirement decision is not one single event but rather a process as they transit from career employment to bridge employment ([1] defines “bridge employment” as paid work received by an individual after receiving a pension) or part-time work before full retirement. There are also a significant proportion of people who return to work after supposedly having fully retired. There are several empirical papers that examined the labour force participation decisions of older workers (see, e.g., [2–7]), focussing on the impact of public and private pensions on retirement decisions but these studies ignored, for the most part, the transition dynamics into retirement. In addition, retirement wealth (pension and personal savings) is a key factor in the retirement decision but it is not available in Canadian longitudinal surveys, which makes empirical retirement models difficult to estimate. This paper examines the relative importance of financial factors as determinants of older
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