Public policy interventions affect the ability of older workers both to continue to work safely and to exit from the workforce. This chapter describes these interventions. The first section provides a description of the general legal regulation of employment. There are three basic components to this general context in the United States: first, the current status of the common law employment-at-will doctrine; second, the status of rights to collective organization and negotiation; and third, the patchwork nature of regulation of employment that results in variance among jurisdictions as well as holes in coverage for important groups of workers and firms.

Following this general contextual overview, the second section describes the more specific laws that govern older workers’ ability to remain safely in the workforce and to design appropriate exit strategies from the labor market. These laws mandate (or fail to mandate) key interventions that directly affect aging workers. This inquiry is divided into three general areas: occupational safety and health protections designed to encourage or mandate safe workplace practices; antidiscrimination laws that protect designated subgroups of workers from less advantageous treatment; and mandated interventions that regulate or encourage leaves of absence and accommodations at work (influencing the ability of workers with chronic illness or disability to move into and out of the workforce).

The final section very briefly describes the availability of nonwage benefits for older workers that affect their decisions regarding when and

how to exit the labor market. Government intervention in this area consists of both the direct provision of social benefits and the legal regulation of private benefit programs.

Certain elements of relevant public policy are simple to articulate. For example: age-based discrimination against workers over age 40 is illegal; all workers who participate in the Social Security system have some guaranteed health insurance, disability and retirement income protections, at least after specified periods of participation in covered employment. Beyond this, the terrain becomes more difficult. There are few special legal protections for aging workers. In general, employment policies must be age-neutral (although actuarially derived age-based benefit designs are generally permissible). That is, employers are required to treat older workers in the same manner as otherwise equivalent younger workers would be treated. The key question is whether the laws that mandate intervention in employment provide adequate protection to workers as they age, so that they can continue to work safely or so that they have the necessary economic security to exit at the appropriate time from the workforce. As noted in other sections of this report, the answer to these questions is not the same for all workers, in all industries. Moreover, there has been remarkably little study of the effectiveness of these mandated interventions in relation to older workers’ health and safety needs.

The employment-at-will doctrine is at the core of the U.S. legal code governing the private sector employment relationship. Originally articulated in a 19th-century legal treatise, this doctrine allows an employer to discharge an employee “at will” (Wood, 1877). The employer is under no obligation to articulate a reason for the discharge. This is most often described as the right of an employer to discharge someone for a good reason, a bad reason, or no reason at all. In the pure application of the doctrine (as it existed in the early 20th century), an employer could legally discharge an employee because the employee was unproductive, too old, African American, an immigrant, a woman, disabled, simply because of dislike, or based upon any stigma or prejudice.

Within the context of dominant American common law, the at-will relationship between worker and employer results in a contractual relationship that can be terminated by either party without notice at any time. As a practical matter, this means that an employer may also change the specific elements of the bargain with a worker without notice: If the employee continues to work, he or she is generally deemed to have accepted the new

terms. Unwillingness of employees to work, or work for the proffered terms, would therefore be the sole restraint on the employer’s managerial control.

Obviously, this is no longer true. The terms of this at-will “agreement” can be, and have been, modified in several ways: by legally enforceable individual contracts;¹ by common law limitations on the at-will doctrine that have been developed by the courts;² by collective agreements; and by legislation at the state or federal level. Nevertheless, the at-will doctrine remains the default rule for private employment in almost every American jurisdiction: If there is no specific applicable exception to the rule, then the default rule applies. In contrast, almost all public sector employees have considerably more protection from both constitutional guarantees and civil service laws.

In unionized workplaces, employers are required to bargain with representatives of the employees in a bargaining unit. For the covered employees, almost all of the resulting collective bargaining agreements set wages and benefits, establish progressive disciplinary procedures, require employers to have “just cause” to discipline or terminate an employee, and establish rights to job allocation and retention based, at least in part, on seniority.

Several areas of bargaining are of particular concern to aging workers. Wages and benefits tied to longevity and skills may tend to encourage workers to remain in the workforce. Disciplinary provisions and protections against arbitrary discharge shield older workers from dismissals that may be tied to both age-related stigma and minor loss of productivity attributable to aging. Safety and health contract provisions and union safety committees established through collective bargaining result in more attentiveness to risks and increased enforcement of occupational safety and health requirements (Weil, 1991). There is, however, no literature that suggests that unions exercise the right to bargain over health and safety by seeking heightened protections for older workers. Union safety committees, often established under collective bargaining agreements, may, however,

assist aging workers in adapting appropriately to job demands. This may be particularly effective when the union is assisting older workers, due to the just-cause contractual requirements and the privileges associated with greater seniority.

Seniority systems may be the most effective protection for older workers. Employers that choose among workers based upon seniority are likely to retain workers as they age, even if their work capacity declines. Seniority also enables older workers to obtain transfers to preferable positions that become vacant based upon bidding procedures. In addition, seniority is viewed as superior to any rights to accommodation of disabled workers when vacant jobs are filled (U.S. Airways, Inc. v. Barnett, 122 S. Ct. 1516 [2002]). As long as older workers are capable of doing their jobs, they will be protected by seniority systems from reassignment demands made by disabled employees who may be less senior or less qualified.

In fact, however, few workers are protected in this way. First, and most importantly, only about 9 percent of the private sector workforce is covered by collective bargaining agreements. Particular subgroups of disadvantaged workers, most notably immigrants, are even less likely to be unionized.

In addition, there are significant limitations to the degree of protection offered by union contracts to aging or disabled workers. The general principles of seniority do not benefit disabled or aging workers based upon age or disability directly, and most arbitrators will uphold the right of an employer to discharge an employee who is medically unfit to continue working (Gross and Greenfield, 1985). Although seniority in general benefits older workers, this is not always true: Older workers are not necessarily the most senior, and individuals in need of special health and safety protection may not always be the oldest workers. Moreover, unions owe a duty of fair representation to all members of a bargaining unit; any effort to create advantage for one subgroup raises the potential specter of a claim that a relatively disadvantaged group will sue the union. Finally, unions are often unable to represent the interests of current retirees effectively; any issue for people who have already retired (as opposed to active workers) is not a mandatory subject of bargaining for employers (Allied Chemical and Alkali Workers of America, Local Union No. 1 v. Pittsburgh Plate Glass Co., Chemical Division, 404 U.S. 157 [1971]).

In looking at the legal interventions that are of concern to aging workers, it is also important to recognize the patchwork nature of all employment regulation. Independent contractors and self-employed workers are excluded from almost all protective employment laws and collective bargaining agreements. Also excluded are people who do not report their

wages—who work “under the table.” Most protective statutes exclude small employers, although the specific size of covered employers may vary (e.g., most federal antidiscrimination laws cover employers with 15 or more employees; the Age Discrimination in Employment Act, 29 U.S.C.A. §621 et seq., requires 20 employees; the Family and Medical Leave Act of 1993, 29 U.S.C.A. §1601 et seq., requires 50 employees). Some statutes include a workforce connection test that requires the employee to have worked for a covered employer a certain amount within a specified time period (e.g., the Family and Medical Leave Act). Eligibility for some social insurance requires labor market participation over specified periods of time (e.g., Social Security, Unemployment Insurance). Private benefits may only be available to full-time permanent employees. The result is that many contingent or part-time workers are excluded from the interventions that are discussed here.

Enforcement of laws also varies. Reports of noncompliance with basic labor legislation, including overtime, child labor, and occupational safety have been common (Kruse and Mahony, 2000; Conway and Svenson, 1998). As noted above, enforcement has been reported to be more effective in unionized than in nonunionized workplaces, but few private sector workers are unionized.

Tension between federal and state regulation further complicates the terrain. States control both the common law governance of the employment relationship and the compensation programs for occupational injuries and illnesses (with some limited exceptions such as the federal Black Lung and the Energy Employees Occupational Illness Compensation programs). The federal government controls private sector unionization rights and generally preempts the right of states to govern private employee benefit plans (including pension and health). Federal mandates set floors for legal interventions involving status-based discrimination and occupational safety and health. The result is that in key areas of interest to aging workers, the legal rules may vary depending upon the state in which the worker lives and works. In addition, legal rights are often asserted under state laws. Little attention has been paid in the legal and sociolegal literature to this trend.

The following provides a brief overview of the existing laws and legal interpretations that may directly affect the work and health outcomes for aging workers. Laws and public policy merely set the minimum standards for employers. Noncompliance by employers with these requirements is always possible; more protective voluntary or collectively bargained programs also occur. Attention to areas of mandated intervention means that areas in which there is no mandated intervention are less prominent in this

discussion. These include, for example, the lack of any national standard that governs ergonomic risks in workplaces; the lack of any requirement for job accommodation for individuals who do not meet the high standard for disability set out in the Americans with Disabilities Act (ADA); and the lack of seamless social benefits, including health insurance.

The Occupational Safety and Health Act (OSHA), 19 U.S.C. §651 et seq., is the primary intervention to promote health and safety of workers under U.S. law. OSHA covers the vast majority of private establishments in general industry, but it excludes all public sector employers. Federal employees are covered by presidential Executive Order 12196, which extends the broad health and safety protection to the federal sector, with the exception of the military. In addition, many states have specific laws that extend OSHA or equivalent health and safety protection to state and local public employees. Employers and workers in the mining industries are covered by the Mine Safety and Health Act (MSHA) of 1977, 30 U.S.C. §801 et seq., a law that generally provides more protective coverage for workers in these industries than is available under OSHA.³ A variety of other laws that are less well known provide some health and safety coverage to workers in specified industries.

The stated purpose of OSHA is to “assure as far as possible every working man and woman in the Nation safe and healthful working conditions” (29 U.S.C.A. §651[b]). Similar language requires the Occupational Safety and Health Administration to set health standards at levels that most adequately ensure, to the extent feasible, on the basis of the best available evidence, that “no employee will suffer material impairment of health or functional capacity.” Employers are obligated to comply both with standards and with the general duty clause that creates an obligation for every employer to “furnish to each of his employees employment and a place of employment that are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees” (29 U.S.C. §654[a][1]).

This statutory language suggests either that workers are due protection from health hazards on an individualized basis or that every standard should provide protection for every worker, even those at greatest risk. Judicial

interpretations of the statute, however, put a heavy burden on the agency to prove that a standard is “reasonably necessary and appropriate to remedy a significant risk of material health impairment” (Industrial Union Dept., AFL-CIO v. American Petroleum Institute, 448 U.S. 607 [1980]). In the promulgation of any standard designed to regulate physical agents or toxic substances, OSHA must “make a threshold finding that a place of employment is unsafe—in the sense that significant risks are present and can be eliminated or lessened by a change in practices” (Id.). There is no precise definition of “significant” in the case law, but the Supreme Court has noted that all workplaces need not be without risk for all persons. Standards involving health risks therefore reflect a generalized assessment of risk and, conversely, an acceptance of some degree of risk for some individuals.

The health and safety standards successfully promulgated under OSHA do not vary exposure limits based upon the age, gender, or physical capacity of workers. Instead, the standards set limits on exposures or safety standards that are the same for all workers, with the theoretical goal of protecting all workers to the extent required by the statute. The standards, however, have not been based on the special needs of workers whose risk is substantially heightened by personal characteristics.

As noted in Chapter 6, reported injuries have declined steadily and substantially in recent years, but questions have been raised regarding the accuracy of these data. Due to funding limitations, the Occupational Safety and Health Administration has never been able to employ a sufficient number of enforcement officers to conduct regular field inspections of most workplaces (Shapiro and McGarity, 1993; Shapiro and Rabinowitz, 2000). Unlike MSHA, which requires quarterly worksite inspections, OSHA includes no such requirement. As a result, the agency has moved increasingly to voluntary compliance.

The Occupational Safety and Health Administration has also encountered significant barriers to the promulgation of new or revised permanent health standards (Shapiro and McGarity, 1993). Critical health hazards remain unregulated under OSHA. Attempts to promulgate regulations have met with high levels of judicial scrutiny as well as congressional resistance. As noted elsewhere in this report, work-related musculoskeletal disorders are common and debilitating for older workers. Due primarily to direct congressional action, including invocation in 2001 of the Congressional Review Act to stop a final published regulation, OSHA has been unable to issue a standard that addresses these risks. Instead OSHA has attempted to use what is known as the general duty clause to regulate serious hazards that can cause work-related musculoskeletal disorders in some workplaces (Pepperidge Farm, 17 OSH Cases 1993 [Rev. Comm’n 1997]; Beverly Enterprises, 19 OSH Cases 1161 [Rev. Comm’n 2000]). The general duty clause both depends on discretionary enforcement activity and fails to pro-

vide specific notice to employers regarding their obligations to reduce hazards that can cause work-related musculoskeletal disorders.

There is evidence that workplace injuries decline following OSHA inspections (Scholz, 1990). It is nonetheless debatable whether the aggregate declines in reported injuries can be attributed to the regulatory and enforcement activities that are authorized under OSHA. No studies directly support this broader conclusion.

It is also impossible to measure the normative effects of laws on behavior. But to the extent that voluntary compliance is not assured, compliance with OSHA’s mandate cannot be certain. As the cohort of current workers ages, the number and percentage of workers with aging-related physical impairments will also rise. On the other hand, there will also be increasing heterogeneity within these aging cohorts. It is not clear what the implication of these trends is for health and safety regulation. Ultimately, the critical question regarding older workers is this: To what extent do current regulations provide adequate protection to prevent morbidity in aging workers and to protect aging workers who remain in the workforce? Finding the right balance is difficult: Specific protections aimed at workers at greater risk, including in some cases older workers, are likely to result in increased exclusion of these workers from the workforce; increased general protection may be too costly or too extensive to survive legal challenges. In fact, little is known regarding the effectiveness of the laws governing health and safety to protect this population.

The Age Discrimination in Employment Act (ADEA), 29 U.S.C. 621 et seq., specifically prohibits any discrimination by employers with 20 or more employees against workers who are 40 years old or older. Generally, mandatory retirement policies are unlawful unless public safety is implicated. As recently as the early 1970s, about half of all American workers were covered by mandatory retirement provisions that required them to leave their jobs no later than a particular age, usually 65. In 1978, the earliest age for mandatory retirement was raised from 65 to 70, and in 1986 mandatory retirement was outlawed entirely, except for a range of jobs that most commonly involve public safety. In addition, under the Older Workers Benefit Protection Act of 1990 (amending the ADEA), an employer may not legally reduce or terminate an employee’s fringe benefits because of the employee’s age. In addition to the federal law, state fair employment practice laws often have provisions similar to those in the ADEA that may cover smaller employers.

The ADEA and related laws are designed to prevent discrimination against people over 40, not to provide special protections to people as they age. The problem these laws were designed to correct was a problem of exclusion, rooted in stigma, stereotypes, and economic incentives to exclude more expensive workers. Studies prior to the enactment of the laws suggested that older workers who lost their jobs were less likely to be reemployed than younger workers and that durations of unemployment were longer (Miller, 1966). Explicit employment rules mandated retirement at particular ages or prevented hiring of workers over an established age. A review of the literature exploring the reasons for exclusion may be found in Neumark (2001). The age discrimination laws created no rights to training, job redesign, accommodation, or reassignment for aging workers with specific needs.

The extent to which these laws may or may not assist aging employees in prolonging their working lives is not well studied. One review of the literature analyzing the effectiveness of the ADEA suggests that age discrimination laws may marginally increase employment rates for workers over 60, but that there is little evidence of a positive effect on hiring. The increased employment rate appears to be likely due to a reduction in retirement, resulting in a net increase in employment (Neumark, 2001).

Age discrimination claims filed under the ADEA with the U.S. Equal Employment Opportunity Commission (EEOC) grew 34 percent between 1989 and 1993 and nearly 200 percent over the 1980 to 1984 period (Jolls, 1996; Patel and Kleiner, 1994). These claims accounted for approximately 25 percent of the caseload of the EEOC from 1984 to 1988, peaked at approximately 27 percent in 1992, declined somewhat during the 1990s to a low of 18.3 percent in 1999, and rose again to 23.6 percent in 2002. The absolute numbers of claims has also increased, so that the total number of age-related claims filed reached its highest level of 19,921 in 2002 (EEOC, 2003). The majority of these cases involve claims of job loss, often involving group layoffs, brought by people not protected by seniority systems.

Not all of these claims of discrimination ultimately succeed, however. To qualify for protection, workers must be able to demonstrate that they are as qualified for employment (in every respect) as a younger worker who is treated more beneficially. The worker must be able to show that direct age discrimination—not longevity or lack of skills or health impairment—was a factor in the adverse employment decision that she or he is challenging (Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133 [2000]). Employers can defend these actions by showing that the decision was based on any factor other than age; that relative youth was a bona fide occupational qualification for the job; or that the older individual was unable to meet the demands of the job.

There is substantial evidence that older workers tend to earn higher wages, and that the ADEA legitimizes this practice (Jolls, 1996). Not surprisingly, job loss leads to significant earnings losses for older workers (Chan and Stevens, 2001; Haider and Stephens, 2001). ADEA cases that do not involve mass layoffs are most likely to be filed by relatively privileged workers, predominantly white males from managerial, professional, or white-collar backgrounds in order to challenge discharges, layoffs, and involuntary retirement (Eglit, 1997). In general, litigation over discharges is successfully pursued predominantly by employees who have been relatively economically privileged (Summers, 1992; Neumark, 2001). Moreover, in the majority of employment discrimination cases filed, employees who do prevail are unlikely to regain employment. The persistent consistency of these litigation results suggests that the ADEA is not likely to be a useful tool for aging workers in nonmanagerial employment who are most likely to confront health and safety risks at work and who want to remain employed.

The Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12101–12213 is, in contrast to the ADEA, specifically designed to provide special protection to workers who meet the Act’s definition of disability and who can achieve success at work if they can overcome stigma and prejudice or are provided “reasonable accommodation.” State laws generally provide equivalent protection. The ADA defines “disability” as:

1. a physical or mental impairment that substantially limits one or more major life activities of an individual, as, for example, walking, talking, seeing, hearing, or caring for oneself;

2. a record of such an impairment; or

3. being regarded as having such an impairment (42 U.S.C. § 12102[2]).

For those workers who qualify under the disability definition, the ADA’s definition of reasonable accommodation is quite broad and includes:

The ADA is intended to encourage employers to accommodate disabled workers by undergoing an individualized process of determining the needs of the employee, identifying the essential functions of jobs, and providing necessary, reasonable accommodation to the disabled employee. If a disabled person cannot perform the essential functions of his or her own job, that employee may be entitled to reassignment to another vacant job. Since reported work disability increases substantially with age, the ADA provides a potential source of significant protection for aging workers.

A series of U.S. Supreme Court decisions have clarified the scope of employers’ obligations under this statute. In 1998, the Court held that individuals who are HIV positive qualify as “disabled” and therefore are entitled to protection under the law (Bragdon v. Abbott, 524 U.S. 624 [1998]). The following year, the Court rejected claims from individuals claiming disability discrimination in three cases. Although none of these decisions specifically involved older workers or work-related issues, all three have some bearing on the development of the law under the ADA.

In two of these cases the court concluded that “a person whose physical or mental impairment is corrected by medication or other measures does not have an impairment that presently ‘substantially limits’ a major life activity” (Sutton v. United Airlines, 527 U.S. 471 [1999]; Murphy v. United Parcel Service, 527 U.S. 516 [1999]). In Sutton, the court rejected the claims of individuals whose myopia was corrected with lenses. In Murphy, UPS had terminated the employment of a worker with hypertension. The Court applied the ruling in Sutton and held that Murphy did not meet the definition of disability set out in the statute. Therefore, his termination was legal. Under these decisions, older workers with chronic disease, including hypertension and diabetes, may not be considered “disabled” within the meaning of the ADA, unless they can demonstrate that they continue to be substantially impaired in the performance of a major life activity despite treatment.

Second, in Albertson’s, Inc. v. Kirkingburg, 527 U.S. 555 (1999), the plaintiff was rejected for reemployment after undergoing a return-to-work physical following an absence for an unrelated work injury. The examining physician determined that he did not meet required vision standards due to monocularity. The Supreme Court rejected any per se rule that would hold

that monocularity constituted a disability within the meaning of the ADA, but suggested that some monocular individuals might meet a more individualized inquiry regarding whether their impairment substantially limited a major life activity. In all three of these cases, the Court emphasized the need for individualized inquiry into the nature and extent of the plaintiffs’ impairments. In Albertson’s, the Court also held that the employer could rely on Department of Transportation safety rules for visual acuity to justify exclusion of the returning employee, foreshadowing the decision in the next critical case (Toyota Motor Manufacturing, Kentucky, Inc. v. Williams, 534 U.S. 184 [2002]).

In this first decision to specifically address the claims of an individual with work-related injuries, the Court held that the definitional terms in the ADA “need to be interpreted strictly to create a demanding standard for qualifying as disabled.” (In this case, the plaintiff claimed that she was substantially limited in performing manual tasks, housework, gardening, playing with her children, lifting, and working due to muskuloskeletal injuries sustained at work. In sending the case back down to the lower courts, the Supreme Court made several observations regarding disability that may significantly limit the ability of the ADA to provide legal protection to aging workers with physical impairments. Noting that the severity of impairment due to carpal tunnel syndrome can vary, the court held:

Employers may also raise safety concerns as a defense against a disabled worker’s claim for continued employment. Special health and safety

protection for these workers might have been available as a part of the accommodation requirement under the ADA and related fair-employment practice laws at the state level. But employers have successfully argued that there is a tension between the legal obligation to continue the employment of employees who are disabled and the obligation to provide a safe workplace for all employees, mandated by OSHA. Employers can defend themselves from liability under the ADA if they can show that the work sought by the person with a disability is a direct threat to the safety of employees and if alternative accommodation would not eliminate the safety concern. The statute defines direct threat to mean “a significant risk to the health or safety of others that cannot be eliminated by reasonable accommodation” (42 U.S.C. § 12113[b]). The EEOC regulations provide that the significant risk must be a “significant risk of substantial harm” to either the individual worker or to others, based on an assessment of “the individual’s present ability to safely perform the essential functions of the job” (29 C.F.R. § 1630.2[r]).

Where the work is viewed as potentially dangerous to the employee, the employer may be relieved of its obligation to continue to employ the aging worker at all. EEOC regulations specifically allow an employer to exclude a susceptible worker from a job that may put him or her at significant risk. In Chevron U.S.A. Inc. v. Echazabal, 536 U.S. 73 (2002), the U.S. Supreme Court relied on OSHA to uphold this regulation. In this case, Chevron’s doctors said that the plaintiff Echazabal’s liver disease (hepatitis C) would be exacerbated by continued exposure to toxins at the oil refinery. Chevron argued that its obligation under OSHA to provide a safe workplace was controlling, and that therefore Chevron should not be required to continue the employment of a disabled employee in a job that put him at significant risk. The Supreme Court, in a unanimous decision by Justice Souter, concluded:

While this decision endorses the general principle that employers have an obligation to provide a safe and healthy working environment for each and every worker, it also underscores the fact that public policy does not guarantee job security to individual workers with underlying chronic illness who are at risk at work. This recent Supreme Court decision has potentially significant importance to the continuing employment of older adults with chronic conditions. Under Chevron, if a worker poses substantial safety risks to self or others, and the employer does not have an open job to which the disabled worker can be reassigned, the employer may terminate the employee. In fact, under general employment law, an employer is free to terminate any worker, including an aging worker, who is at risk or who poses a safety threat to himself or herself. The Chevron decision endorses this practice in the case of individuals with disabilities.

The disability discrimination statutes require employers to accommodate the needs of disabled workers through job redesign or reassignment. To the extent that these interventions are effective, the ability of aging workers to remain in the workforce will obviously be enhanced. Job accommodation has unquestionably been shown to successfully extend a worker’s working life for a period of years (Burkhauser, Butler, and Kim, 1995; Daly and Bound, 1996; Strunin, 2000). Despite the narrow reading of the ADA by the courts, ADA advocates maintain that the changing treatment of disabled employees may simply not be mirrored in the visible litigation of claims, but rather is lodged in changing norms that encourage employers to accommodate workers.

On the other hand, the impact of the Supreme Court decisions has been far-reaching. Individuals who cannot meet the Court’s strict interpretation of the meaning of “disability” are not entitled to any protection under the act. In litigated ADA cases in the lower courts, it has been difficult for workers to meet the burden of showing that they are qualified disabled persons under the ADA. Judges have tended to dismiss ADA cases at a high rate (Colker, 1999, 2001). Individuals with common occupational disabilities are often unable to prove their entitlement to protection under the act (Rabinowitz, 2002). Workers who need accommodation at work but who

are outside the scope of the definition of disability as adopted by the Supreme Court have no claim under the ADA.⁴

Current research also suggests that employment of people reporting disabilities that affected their ability to work did not rise during the 1990s (Burkhauser, Daly, and Houtenville, 2001). This was the economic boom period that followed the effective date of the ADA. Some researchers have further suggested that the ADA has actually contributed to the failure of the labor market to absorb disabled workers during this period (Bound and Waidman, 2000; DeLeire, 2000).

Although the ADA has been the subject of considerable evaluation, no study has focused on its effects for older workers. EEOC charges show a much higher correlation between claims filed under the ADEA and claims under the ADA: A higher percentage of ADA claims have companion age-discrimination claims than other discrimination suits. This is not surprising; the majority of these claims involve challenges to job terminations. More study is needed to explore the effectiveness of the ADA and the correlation between age and disability discrimination claims.

The strongest public policy endorsement of workplace accommodation is unquestionably found in the ADA and related state statutes. The ADA suggests that employers are required to provide a broad range of accommodations to workers with qualifying disabilities. But many aging workers, including many with health impairments, are not disabled within the meaning of the ADA. Older workers are not per se entitled to accommodation or reassignment simply because they have age-related health impairments, unless those impairments are sufficiently severe to create qualifying disabilities. One must therefore ask: To what extent is there public policy endorsement of accommodation of older workers outside of the ADA?

In addition to ADA policy, there appears to be a general public endorsement of light duty and return-to-work programs for occupationally injured employees. Outside of the disability discrimination laws, however, specific requirements regarding effective job redesign are fuzzy. In workers’

compensation programs, there is often little oversight by public agencies of attempts to accommodate injured workers.

Transfers to different jobs are an alternative mechanism for guaranteeing that a worker with physical limitations can remain at work. Both the health and safety laws and workers’ compensation programs provide legal bases for reassignment. OSHA/MSHA rules, as well as ADA guidelines, suggest that this is an appropriate way to provide safe work for aging workers. For example, under the Mine Safety and Health Act, coal workers with evidence of developing pneumoconiosis have a permanent right to transfer from dusty jobs. The implementation of this section has been fraught with difficulty, but it is a process that has been successfully used by older coal miners to transfer from heavy jobs with dust exposure to lighter jobs with less dust (Spieler, 1989; 30 U.S.C. §843[b]; 30 C.F.R. §90). OSHA rules at this point only provide for transfers for workers suffering from respiratory disease due to cotton dust exposure (29 C.F.R. §1910.1043) and for temporary transfer for individuals with acute health problems (e.g., 29 C.F.R. §1910.1025 [lead]; 29 C.F.R. §1910.1028 [benzene]). Temporary transfers are of little benefit to aging workers with progressive or chronic conditions.

Workers’ compensation programs do not specifically mandate job transfers. Many programs are, however, designed to encourage employers to provide light duty assignments to injured workers. To the extent that this encourages appropriate return to work and job reassignment, this may be of considerable value to older workers.

Regarding leaves of absence, older workers may need to leave work for a period of time or may need particular job accommodations at work in order to remain in the active workforce and to continue to work safely at their jobs.

In addition to the ADA’s allowance for leave as a reasonable accommodation, the Family and Medical Leave Act (FMLA), 29 U.S.C. §§2601-2654, provides that employees who meet minimum work duration requirements and whose employers employ more than 50 employees are entitled to take 12 weeks of unpaid leave in each calendar year; the leave can be continuous or intermittent. Leave is granted if the employee needs to care for a family member with a serious health condition or if the employee needs time off because of his or her own serious health condition. The employer must guarantee reinstatement to the prior job at the end of the leave, unless the employee is a high-level manager. Rabinowitz (2002) provides a full description of the FMLA in the context of occupational safety and health concerns. In addition, workers with job-related injuries may be entitled to time off from work while they are collecting workers’ compensation benefits. Not all states guarantee that an individual on workers’ compensation is entitled to return to work after the injury, however. Moreover,

in most states, once an injured employee has recovered as much as she or he can, if she or he is unable to perform the pre-injury work, most states will not require an employer to reinstate the employee.

Accommodation and return to work have been a driving force in the cost-containment strategies in the management of workers’ compensation programs. Most state workers’ compensation programs require injured workers to accept an offer to return to work and may provide for termination of temporary wage replacement benefits if the worker refuses a return to work offer.

It is not clear whether the current policy governing leaves is either consistent or adequate to meet the needs of aging workers. There has been no evaluation of these rights that focuses on this issue.

Differentials in health status and disability correlate with education and socioeconomic status. Those with less education are more likely to be employed in more physically demanding occupations and less able to adapt to their disability by shifting to less physically demanding employment. For workers who are disabled, there are several important policy questions. To what extent are people forced to work due to their need to maintain income despite excessive health risks of the available work? How do we define “excessive” health risks in this situation? To what extent are they enabled to exit the workforce because there are adequate wage replacement programs that cushion their exit? What is the appropriate balance between providing more protective working environments in order to allow for continued work and enabling labor market exit through the availability of income replacement schemes? Do we know the extent to which some subsets of workers are essentially abandoned, unable to continue to work but unable to access income replacement schemes?

As noted above, the current federal policy regarding workplace regulation makes no special provision for accommodation of workers based on age when combined with disability, and it specifically permits the termination of a worker if the employer can show that the worker is at significant personal risk in the job. Implementation of health and safety preventive policy does not directly address the needs of older workers. The ability of a worker to exit the workforce due to the availability of income replacement is therefore critical to the well-being of workers who are at risk at work.

The programs that provide labor market exit cushions are of two types. First, there are direct income replacement programs that provide cash pay-

ments to workers who cease work due to age or disability.⁵ These include the Social Security disability and old-age programs, workers’ compensation, Supplemental Security Income, and private disability insurance plans. Unemployment insurance benefits may also provide a temporary cushion after an older worker loses a job and before she or he becomes discouraged and chooses to exit the labor market permanently. Second, there are benefit plans that provide essential nonwage benefits. The key benefit for older and disabled workers is health insurance.

Each of these programs is complex and cannot be comprehensively described here. Below is a very brief overview of key aspects of some of these relevant programs.

SSDI provides benefits to employees who have participated in the Social Security system and who are totally disabled. Notably, growth in the SSDI rolls in the 1990s appears to correlate with the lack of expansion in the employment of people with disabilities (Bound and Waidman, 2000). To qualify, workers must establish that they are totally disabled for at least 12 months; eligibility cannot begin until six months after onset of total disability. There is a special, more lenient eligibility standard for manual workers over 55 years old with limited education, providing a safety net for the most at-risk aging workers. Although SSDI is a critical cushion for many workers, its eligibility requirements suggest that it is most often utilized by workers who have lost their jobs and are unable to reenter the labor market successfully. Benefits are lower for lower wage earners or for earners with fewer quarters of earnings; this means that people who have not been consistently in the workforce may be ineligible or receive lower benefits. As a result, female workers receive lower benefits than males.

Workers’ compensation programs provide cash and limited medical benefits to workers who are injured or made ill by their work. These systems are state based and controlled and vary substantially from one state to another. In general, they provide: weekly benefits while a worker is

recovering from an acute injury (most commonly, these temporary benefits are capped as to both duration and weekly payment amounts); temporary partial disability benefits to workers who return to work at reduced wages (similarly capped); permanent partial disability benefits that are paid for either wage loss or impairment and may be paid after the worker has returned to work; and permanent total disability benefits to workers who are permanently unable to return to work. Medical benefits are provided for the compensable injury or illness only.

There has been very limited study of the adequacy of workers’ compensation benefits for older workers. While frequency and duration of benefits associated with injuries may rise with age, earnings replacement rates for permanent disability appears to decline, at least for the post-injury period that has been studied (Biddle, Boden, and Reville, 2001). Further, tightened eligibility standards, reductions in permanent disability benefits, and changes in rules regarding compensability (particularly exclusions of disabilities that have ambiguous or complex etiology) may seriously and adversely affect the benefits of older workers with underlying chronic conditions (Burton and Spieler, 2001). Workers’ compensation rarely provides a safety net for workers who need to exit the workforce permanently. Awards of permanent total disability are quite rare, averaging 6 per 100,000 workers in the 42 states for which data are available (National Council on Compensation Insurance, 2002). The decline in these long-tailed benefits in most state programs further aggravates the economic problems of aging, disabled, displaced workers who are unable to find alternative employment due to a combination of disability and stigma.

Recent review of the literature suggests that workers’ compensation fails to replace long-term earnings losses of injured workers. Further, the availability and level of benefits vary substantially among states (Mont et al., 2002; National Academy of Social Insurance, 2003). The combined data suggest that state workers’ compensation systems are not designed to provide long-term economic security to aging workers with occupationally caused health conditions. It is likely that many of these workers seek benefits from the SSDI and SSI systems, but data are not available to explore this question fully.

SSI provides limited cash benefits to individuals who meet strict needs tests and who can show disability sufficient to meet the standards for SSDI. Disabled individuals with limited historical attachment to the workforce may collect limited SSDI benefits and additional SSI benefits. For those who qualify only for SSI because they are not qualified under the work requirements of the Social Security program, medical benefits are generally ob-

tained through a state’s Medicaid program, which provides medical benefits to the indigent. SSI cash benefits are substantially lower than SSDI or workers’ compensation benefits.

The SSOA program provides monthly benefits to older workers who have worked a sufficient number of quarters during their lifetime in covered employment, or to their spouses and dependent children. As in the SSDI program, benefit amounts are dependent on wages earned, with higher replacement rates for lower waged workers. The SSOA program is most frequently cited as the program responsible for preventing poverty among older Americans.

Social Security is now the main source of cash income of households headed by someone 65 or older. The program provides slightly more than 40 percent of the total cash income received by the aged. Among aged households in the bottom 60 percent of the elderly income distribution, Social Security provides over three-quarters of the total cash income. Until 1941, Social Security provided no income at all to the aged. Today the program replaces about 42 percent of the final wage earned by a full-career single worker who earns the average wage and claims a pension at age 65. If the worker has a nonworking dependent spouse, the benefit replaces 63 percent of the worker’s final wage. Benefits are clearly large enough to be economically significant in influencing the choice of retirement age.

Most workers can choose to collect Social Security starting at age 62, and many do. One reason that many people must retire in order to collect a Social Security check is that the program imposes an earnings test in calculating the annual pension. Workers who are at least 62 but less than the age for unreduced pensions and who earn more than $11,280 a year lose $1 in annual benefits for every $2 in earnings they receive in excess of $11,280. Until recently, workers between 65 and 69 lost $1 in benefits for every $3 in annual earnings in excess of $17,000. At one time the earnings limits were much lower, discouraging pensioners from work and possibly encouraging them to postpone claiming a pension until they were confident their earnings would remain low.

Social Security old age pensions are no longer growing more generous. Workers who retired between 1950 and 1980 retired in an environment in which Social Security benefits were rising, both absolutely and in relation to the average earnings of typical American workers. Most workers received pensions that were higher than those they would have obtained if their Social Security contributions had been invested in safe assets.

The maturation of the Social Security program meant that fewer workers who retired after 1985 received windfalls from the program. The Social

Security amendments of 1977 and 1983 brought an end to a four-decade expansion and liberalization of benefits. In fact, the amendments trimmed retirement benefits in order to keep the program solvent.

Congress has changed Social Security rules and the pension formula to make work more attractive later in life. The amount of income a recipient can earn without losing any Social Security benefits has been increased, and the benefit loss for each dollar earned over the exempt amount has been reduced. For pensioners between 65 and 69, the earnings test has been eliminated altogether. In the 1977 and 1983 Social Security amendments, Congress also increased the reward that workers receive for delaying initial benefit receipt past the normal retirement age (NRA). Instead of penalizing work after the NRA, Social Security is becoming more age-neutral. When this formula change is fully implemented, for workers attaining age 62 after 2004, the adjustment for delayed benefit receipt will be approximately fair for retirements up through age 70. It is nearly so today. There will be no retirement penalty for delaying retirement beyond the normal retirement age.

No law requires any employer to provide a pension plan. For private employers who choose to provide them, the funding and governance of the employer-sponsored pension plans are regulated under the Employee Retirement Income Security Act (ERISA) and tax code provisions. Over the past decade, there has been a sharp increase in the relative importance of defined-contribution pension plans and a continuing decline in the importance of defined-benefit plans. Defined-contribution plans specify only the amount that is contributed and set general rules regarding the withdrawal of money from the plan. In contrast, defined-benefit plans set out the specific amounts that will be paid to the beneficiary at particular ages and create financial incentives for workers to retire. Defined-contribution plans are age-neutral by design, and therefore they have none of the age-specific work disincentives that are common in traditional defined-benefit plans. As a growing percentage of workers reaches retirement age under defined-contribution plans, there will be less reason for workers to leave their jobs to avoid a loss in lifetime retirement benefits. On the other hand, the ability of workers to leave their jobs will be affected by the performance of the stock market or other assets held in the plan. Thus, the recent downturn in the value of assets has created pressure on many workers to remain in the workforce because of reduced retirement income potential.

Many employer-sponsored pension plans are structured similarly to Social Security pensions. Workers who are covered under a defined-benefit plan earn pension credits for as long as they work for the employer that

sponsors the plan (sometimes up to a maximum number of years). The longer they work under the plan, the higher their monthly pension. Most defined-benefit plans are structured to encourage workers to remain with the employer for a minimal period—say, 10 years—or until a critical age—say, age 55. Workers who stay for shorter periods may receive very little under the plan. On the other hand, workers who stay in the job too long may see the value of their pension accumulation shrink. This would happen if the plan offered benefits to workers starting at age 55 but then failed to significantly increase the monthly benefit for workers who delayed retirement after age 55. This is effectively a pay cut, which might seem illegal under U.S. age discrimination laws but is perfectly legal as long as the pay cut is reflected in reduced lifetime pensions rather than reduced money wages. Many employers find this kind of pension formula to be an effective prod in pushing workers into early retirement.

Although not a program that provides wage replacement for nonworking people, the EITC can provide significant income enhancement to low-wage earners. The EITC provides direct cash benefits to low-wage earners, with the amount of the benefit dependent on earnings (such that the amount increases with wages at the lower end and then declines to zero). Older workers who are unable to continue in full-time work but who do not end their participation in the labor market may derive significant benefit from this program. Nevertheless, as can be seen in Table 7-1, the number of income tax returns in which EIC is claimed declines with age.

Unlike most other industrialized countries, the United States does not provide universal health insurance to its citizens. Instead, most working-age Americans receive health insurance coverage as part of an employer’s compensation package. In 1995, 72 percent of American workers between ages 18 and 64 had health insurance coverage under an employer-based plan, either through their own employer or through the employer of another family member. Some workers obtain insurance through publicly provided Medicaid or privately purchased health plans, but 18 percent of American workers were left uninsured.

Some employers offer continuing health insurance to their workers, even after they leave the firm. In 1995, of those full-time employees in medium and large firms who had health insurance on their jobs, 46 percent also had retiree health coverage before age 65, and 41 percent had retiree coverage at ages 65 and older. The percentage of the labor force employed

by firms offering such protection is shrinking, and many employers now require their retired workers to pay for more of the cost of these plans (Fronstin, 1997). Health insurance is particularly important for workers who are past middle age but not yet eligible for Medicare, because many of them face high risk of incurring heavy medical expenses. Workers with health insurance on the job who would lose it if they retire have an obvious incentive to remain on the job, at least until age 65 when they become eligible for Medicare. Those with postretirement health benefits have less incentive to remain employed, although how much less depends on how the insurance costs after retirement are shared between the employee and employer.

ERISA does not regulate coverage, payment provisions, or funding of private health insurance plans and preempts the rights of states to regulate these matters in many instances. As a result, the specifics of self-funded health plans are not highly regulated. ERISA’s rules governing employer-provided benefit plans are restricted to the following: Plan administrators must meet fiduciary responsibilities to beneficiaries; plans may not deprive beneficiaries of promised benefits under the plan; employers may not terminate employees in order to deprive them of rights under a plan; and states

may not in general regulate ERISA plans. State health insurance laws may create specific requirements for insured health plans, but these laws are inapplicable to self-funded ERISA plans. The ADA prohibits the singling out of specific disabilities for limitations on coverage, but it does not prevent actuarially based plan designs that limit coverage more generally (EEOC guidance). Private health insurance also plays a hidden role: It creates incentives for some workers to stay at their jobs due to the lack of insurance coverage if they were to exit, and it creates incentives for employers to terminate older workers who may add substantially to the cost of employer-based group health plans.

Although older workers are among those most likely to have health insurance, the consequences of lack of insurance in this age group create significant risks for both economic loss and downwardly spiraling health. Moreover, if a worker needs to exit the workforce before reaching age 65, she or he may be presented with a considerable dilemma. Current accounting rules require employers to fully prefund the future costs of any health insurance promises made to future retirees. As costs for health care have increased for people over 50, the cost of this coverage in the private market has risen, and the availability of coverage has declined. Attempts to intercede in the small group and individual market, theoretically mandated under the Health Insurance Portability and Accountability Act (HIPAA), have been largely unsuccessful.

For those workers who qualify, the federal Medicare program provides health insurance to everyone over 65 years old and to SSDI recipients after two years of income replacement eligibility. The plan provides full hospitalization coverage, less comprehensive outpatient coverage, and no coverage for prescription drugs consumed outside of hospitals or for chronic long-term care. Although it provides critical coverage to those in the retirement age group, Medicare fails to protect workers who must exit the workforce prior to the presumptive retirement age. The two-year waiting period after qualification for SSDI means that workers with disabilities may have periods during which they have no access to health insurance.

Finally, for the very poor, or for those who have depleted their savings, Medicaid will provide coverage for both personal health services (including prescription drugs) and long-term care. Medicaid eligibility is determined under state rules, although states receive federal assistance (at varying levels based upon poverty incidence). Because of the strict income and assets eligibility requirements for Medicaid eligibility in many states, Medicaid is a program that is primarily beneficial to workers after they have been forced to deplete savings as a result of job loss and adverse health events. Medicaid eligibility accompanies eligibility for SSI income benefits.

Table A-21 in Appendix A summarizes the availability of different sources of health insurance to age cohorts over the age of 45. Not surpris-

ingly, due largely to the availability of government programs that cover 97 percent of those 65 and older, 99 percent of these individuals are covered by some type of insurance. Private insurance coverage declines as workers age: 80 percent for individuals 45 to 54, 76 percent for those 55 to 64, 61 percent for those 65 and older (for whom private insurance is generally a supplement to government programs). Employment-based coverage similarly declines over time: 75 percent for those 45 to 54, 68 percent for those 55 to 64, 34 percent for those 65 and older. The critical observation from the standpoint of the health and safety of older workers is that close to one-third of workers over 55 do not have health insurance provided by their employers. As chronic health conditions increase with age, the lack of health insurance (and the accompanying barriers to access to health care) may significantly impact the ability of these workers to remain in the workforce.

There is considerable evidence that health insurance coverage before and after retirement has an important influence on individual retirement decisions. Gustman and Steinmeier (1994) found, for example, that the effects of insurance plans are similar in nature to those of employer-sponsored pension plans. If workers can become eligible for retiree health benefits only after a delay, the availability of the plan tends to delay workers’ retirements until they gain eligibility. After eligibility has been achieved, the availability of retiree health benefits encourages earlier retirement than would occur if no benefits were offered. Quinn estimates that men and women in career jobs in 1992 were 8 to 10 percentage points less likely to leave their jobs over the next four years if they would lose health insurance coverage by doing so (Quinn, 1999). Inferring the overall effect of health insurance incentives on retirement patterns is not straightforward, however. A number of components of employee compensation, including wage rates, pension coverage, health insurance, and retiree health benefits, tend to be highly correlated with one another. This makes it difficult to distinguish statistically between the separate effects of each component of compensation. Nonetheless, the rising importance of health insurance coverage to older Americans suggests that the evolution of the public and private health insurance system may have had a sizable impact on retirement patterns.