Early Retirement Incentives and Employee Performance in a Restructuring Organization

Abstract

As downsizing becomes more prevalent in organizations in the 1990s,

understanding employee behavior in response to workforce reduction

programs becomes critical. This study examined the effects of financial

incentives and performance on retirement behavior, occurring under a voluntary

early retirement incentive program at the University of California

First, using retirement decision models, we examined the effects of

financial incentives on the probability of retirement. The major component

of the incentive package was five year's service credit. Results of regression

analyses suggest that increasing service credit by one year is associated with

an increase in retirement probability of about three percent.

Second, we studied the relationship between research performance and

retirement probability. The evidence indicates no signXicant relationship be -

tween career publication activity and retirement probability. However, a significant

and negative relationship was found between recent publication ac -

tivity and retirement. This suggests that professors who recently slowed

down on their research were more likely to retire. The negative relationship

between research performance and retirement probability was in part affected

by the University's promotion system, which rewards those who

continues to publish their research.