How older workers are supporting America's labor market
Last year the US labor force participation rate in the US stabilized, bucking its downward trend and surprising some economists.
The labor force participation rate of people in work or actively looking for work has been around 63% for the past few years, down from 66% at the start of the Great Recession, according to data from the US Bureau of Labor Statistics.
The decline is assumed to be because of a large number of Baby Boomer retirements. However, a recent analysis by the Federal Reserve Bank of Atlanta notes the retirement rate actually “ticked down” between the fourth quarter of 2015 and the fourth quarter of 2016. The share of workers age 61 and older transitioning into retirement slowed last year for the first time since 2012. These older workers were the biggest single driver helping to prop up labor force participation.
Delayed retirement “completely offset the effect of [an] aging population,” wrote Ellyn Terry, the bank’s economist. The labor force participation rate was 62.8% in the fourth quarter of 2015 and 62.7% in the fourth quarter of 2016, according to the report. The data show that although actual retirements lowered the labor force participation rate by 0.15 points in the fourth quarter of 2016 compared with the fourth quarter of 2015, delayed retirement boosted the labor force participation rate by 0.15 points during the same period.
“The overall share of the population that is working or actively seeking work has been essentially flat during this period, which is striking because there is a powerful demographic trend—an aging population—that is pulling it down with tremendous force,” says Terry.
Even as workers retire at a later age than previous generations, they report wishing to stay in a job longer than they currently can. About 60% of retirees in a 2016 Transamerica Center for Retirement Studies survey reported retiring earlier than planned. Just 7% reported retiring later.
Writing for IZA World of Labor on Late-life work and well-being Carol Graham says “Flexible work time and retirement options are a potential solution for the challenges of unemployment, aging populations, and unsustainable pensions systems around the world…Late-life workers, meanwhile, have higher levels of well-being than retirees.”
Hans Bloemen has written about abolishing the exemption from job search requirements for older workers in OECD countries. He says, “Evidence shows that abolishing the exemption from job search requirements for older unemployed people leads to an increase in the flow of older workers out of unemployment and into jobs.” However, he observes that this can also cause adverse effects leading to exit from unemployment into states of inactivity, such as disability.
Read more articles on: