Retirement and the Sectors: Do Private and Public Personnel Differ in Their Retirement Decision?

• DOI: 10.1177/0734371X19850886
• Published date: 01 December 2020
• Author: Racheli Levi,Dana R. Vashdi,Eran Vigoda-Gadot
• Date: 01 December 2020
• Subject Matter: Articles

https://doi.org/10.1177/0734371X19850886

Review of Public Personnel Administration

2020, Vol. 40(4) 691 –716

© The Author(s) 2019

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DOI: 10.1177/0734371X19850886

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Article

Retirement and the Sectors:

Do Private and Public

Personnel Differ in Their

Retirement Decision?

Racheli Levi1, Dana R. Vashdi1,

and Eran Vigoda-Gadot1

Abstract

Retirement is a field of growing interest in both the public and the private sectors. Given

the aging workforce in Western countries, understanding the factors that contribute

to an employee’s decision to retire is an area of increasing interest to political,

economic, social, and organizational scholars. Most retirement studies concentrate

on a narrow set of factors, examining their impact on retirement in isolation of the

broader context. Drawing from public management theory, and based on theories

of person–organization fit (POF), we examine whether and when private and public

personnel differ in their retirement decision. Findings indicate that previously shown

relationships between individual-level financial status and the decision to retire are

contingent on employment sector. The results of this research extend knowledge

regarding the normative influence of mechanisms driving retirement and demonstrate

the broader implications of sector on retirement decision-making.

Keywords

retirement decision, public sector, private sector, person–organization fit, attraction–

selection–attrition

The retirement decision-making process is an area of increasing interest to political,

economic, social, and organizational scholars in both the public and private sectors

(Beehr & Nielson, 1995; Wang & Shultz, 2010). As the generation of the baby

boomers is reaching retirement age, an escalating number of people living in the

1Division of Public Administration and Policy, School of Political Sciences, The University of Haifa, Israel

Corresponding Author:

Racheli Levi, The University of Haifa, Haifa 31905, Israel.

Email: for.racheli@gmail.com

850886ROPXXX10.1177/0734371X19850886Review of Public Personnel AdministrationLevi et al.

research-article2019

692 Review of Public Personnel Administration 40(4)

developed world are leaving the workforce. In addition, smaller cohorts born toward

the end of the 20th century are reaching the age of occupational work, leading to a

lower replacement rate and high expenditure on pensions and health. Based on Toosi’s

(2006) study, by 2020, nearly 24% of the total U.S. workforce will be 55 years or

older, up from just under 13% in 2000, leading to an increasing number of employees

who will transition into retirement in the next decade. Similar demographic trends are

expected in the European Union (EU) between 2000 and 2050, in that people in retire-

ment (aged 65 years and above) will outnumber (up to twice as much) those working

(Organisation for Economic Co-operation and Development [OECD], 2011).

While retirement-related issues in the public and private sectors are characterized

by key similarities, certain issues may be more associated with the public sector, espe-

cially regarding the structure of the pension plans (i.e., defined-benefit [DB] plans vs.

defined-contribution [DC] plans) and financial pressures (Ali & Frank, 2019; Clark,

Pathak, & Pelletier, 2018). These issues may affect the decision to retire in a manner

different from what might be expected in the private sector, yet studies actually exam-

ining the differences between sectors regarding retirement behavior are scarce. Thus,

a major goal of our study is to address a simple question: Do private and public sector

personnel differ in their retirement decision? Our theoretical and rational arguments

are based on the person–organization fit (POF) and the attraction–selection–attrition

theories (ASA; Schneider, Goldsstein, & Smith, 1995). Specifically, we examine the

impact of the employment sector on the decision to retire. We further ask how the sec-

tor might serve as a “situational opportunity and constraint” (Johns, 2006, p. 1), affect-

ing the well-studied relationship between financial resources and the retirement

decision (Gruber & Wise, 1999; Kim & Feldman, 2000; Quinn & Burkhauser, 1990).

In the following sections, we review existing literature on sector comparative

research and build hypotheses regarding the impact sector has on the retirement deci-

sion. After presenting our analysis and findings, we discuss the theoretical and practi-

cal implications of this study.

The Decision to Retire: A Look From the Sectoral Bridge

Public management research and theory has given much attention to differences

between public and private sector employees, their attitudes, perceptions, behavioral

intentions, and actual behaviors. According to accumulated knowledge, it is quite

accepted that public and private employees are essentially different in many of those

aspects (e.g., Buelens & Van den Broeck, 2007; Fottler, 1981; Gkorezis & Petridou,

2012; Houston, 2000; Perry & Rainey, 1988; Rainey, Traut, & Blunt, 1986). In con-

trast, a review by Baarspul and Wilderom (2011), covering 28 employee-level, public–

private sector comparisons challenged this assumption. Their study revealed that no

consistent pattern of unequivocal significant differences exists to support the widely

held notion that public personnel are different from their private counterparts. Almost

every individual-level variable showed mixed results and did not demonstrate a clear

link between sector and employee variations. However, not one of the 28 studies they

reviewed focused on differences between the sectors in individual’s actual behavior;