The Evolution of Retirement: An American Economic History, 1880-1990
EH.NET BOOK REVIEW Published by EH.NET (December 1998)
Dora L. Costa, The Evolution
of Retirement: An American Economic History,
1880-1990. Chicago:
University of Chicago Press, 1998. Xiii + 234 pp. $40.00
(cloth), ISBN:
0-226-11608-5.
Reviewed for EH.NET by Brian Gratton, Department of History, Arizona State
University.
“In the words of King Macbeth, let us die in harness.” Sigmund Freud
(1910)
As historians drift off into a postmodernist Land of Oz, social
scientists have emerged as the only scholars treating a number
of
critical issues. The academy’s tragicomedy has its good points, and
Dora Costa’s analysis of declining labor force participation among the
elderly displays several of these. First, Costa restates an axiom that,
however obvious on the face of it, needs reemphasis: free money from the
state encourages able-bodied persons to exit the labor force. This
reminder cautions us against giving too much credit to ageism and other
cultural forces in the history of older persons. Attitudinal factors
were all the rage, not only among the first historians of old age, but
also among the reformers who eventually built the Social Security
system. Whether such factors were decisive in causing change is another
matter.
Second, Costa presents a strong case for pure income effects in
reducing labor force participation during the twentieth century.
Indeed, income effects can be observed in household and family
arrangements
as well, since pension income raised the probability that
the elderly lived separately from their children. Third, she provides a
very useful critique of other explanations, including a novel and
insightful argument that health problems cannot be used to explain
secular declines in labor force activity.
All this is built upon a marvelous and still emerging data set that
links Civil War pension records to those in the United States Census and
other sources. The
data set permits Costa to carry out analyses that
are much better specified than those heretofore used and represent an
important advance in the quality of evidence available to scholars (as
one presumes they soon will be). The rich body
of evidence nonetheless
also constitutes a problem. The central analytic difficulty in the book
is that the bulk of the analysis of a 110 year period (1880-1990) rests
upon data drawn from a very peculiar pension system for a very
particular set of men in 1900 and 1910. The evidence is doubly
difficult to interpret since it pertains largely to individuals already
receiving pensions, many of whom qualified by age, and perhaps by lack
of labor force participation. Costa treats this problem in an ingenious
way for 1900 and 1910 regressions, but relying on these findings to
contemplate such themes as current leisure activities among the elderly
is a stretch. Chapters still more remote from the lab or force decision,
like that on the political economy of pensions, are largely derivative.
Still, the core chapters represent really important work, and the
strong findings for pension effects add to our understanding of the
importance not just of income, but of pension income, in changing human
behavior. Like many other economists, Costa argues that Social Security
itself was of minor importance. However, Old Age Insurance effects are
notoriously difficult to mea ure. The denigration of Social Security
effects also rises from a failure to take other literatures seriously.
Costa is more sensitive than most historical economists to those outside
the fraternity, but still fails to recognize certain
very useful
findings in social history. Imprecise as they may be about the details,
historians like William Graebner convey an essential truth when they fix
upon the Social Security Act as a turning moment in our society, and one
which encouraged an utterly new view of the life cycle. The problem
begins with historical economists’ insistence on using the term
retirement for changes in labor force participation, a habit that has
cost them many an intelligent reader
. (Costa’s rendition is especially
convoluted [7].).
Two last points: 1) there was no decline in earnings with age
among employed workers in the industrial period (12,16,33); 2) the
author exhibits wonderful taste in the epigrams at the beginning of each
chapter. Her book demonstrates that the elderly have paid no attention
to Freud or to Shakespeare.
(Costa is currently Associate Professor of Economics at the
Massachusetts Institute of Technology and a faculty research fellow of
the National Bureau of Economic Research.)
Brian Gratton
Department of History
Arizona State University
Brian Gratton is the author of “The Poverty of Impoverishment Theory:
The Economic Well-Being of the American Elderly, 1890-1950,” Journal of
Economic History, (March 1996), 56(1):39-61.