Mandatory retirement

Mandatory retirement also known as enforced retirement is the set age at which persons who hold certain jobs or offices are required by industry custom or by law to leave their employment, or retire. Typically, mandatory retirement is justified by the argument that certain occupations are either too dangerous (military personnel) or require high levels of physical and mental skill (air traffic controllers, airline pilots). Most rely on the notion that a worker's productivity declines significantly after age 65, and the mandatory retirement is the employer's way to avoid reduced productivity. However, since the age at which retirement is mandated is often somewhat arbitrary and not based upon an actual physical evaluation of an individual person, many view the practice as a form of age discrimination, or ageism. Economist Edward Lazear has argued that mandatory retirement can be an important tool for employers to construct wage contracts that prevent worker shirking. Employers can tilt the wage profile of a worker so that it is below marginal productivity early on and above marginal productivity toward the end of the employment relationship. In this way, the employer retains extra profits from the worker early on, which he returns in the later period if the worker has not shirked his duties or responsibilities in the first period (assuming a competitive market).