The gray-wave continues to flow through the workforceNew research from the Employee benefit Research Institute identifies the considerable influence of the Baby Boom generation on the overall population of workers.
WASHINGTON – New research from the Employee Benefit Research Institute (EBRI) shows that the baby-boom generation has created a wave of sorts moving through the American labor force for the last four decades. As boomers have entered each age demographic, that group has become the largest component of the population and of the labor force. Now, as the last of the Baby Boomers enter their mid 50s, and as they are living longer than prior generations, their impact on the age of the American population and labor force is unmistakable.
“While the portion of the total labor force ages 55 or older continued to increase since 2007, the uptick has been primarily attributable to the continued aging of the baby boom generation into these ages, and not to an increasing percentage of older workers remaining in the labor force.,” said Craig Copeland, author of the new report, “Labor Force Participation Rates by Age and Gender and the Age and Gender Composition of the U.S. Civilian Labor Force and Adult Population,” available here.
Copeland notes that the next large wave of workers, millennials, have not yet all reached working age, but as they do, and as Baby Boomers continue to remain in the labor force, employers and plan sponsors will face interesting challenges created by a large older population, a large younger population and comparatively fewer workers in between.
Excerpts from the EBRI Aging Report
The key findings relating to age and the labor force:
Labor force participation (LFP) rates of specific ages:
- For Americans ages 55 or older, the LFP rate increased from 1991 to 2012, at which point it leveled
- The oldest Americans (ages 65 or older) had the largest percentage increases in LFP rates since 1991,
even after the leveling off post-2012
- For those ages 25-54, LFP rates have been steady to slightly declining since 1991
- For those ages 24 or younger, LFP rates declined significantly throughout the 1990s to 2010, at which
point the rates leveled off
The age distribution of the ages 16 or older population and labor force over the 1991-2017 period:
- From 1991 to 1994, those ages 55 or older experienced a slight decline in their share of the
population and labor force, but after 1994 their share of the population and labor force grew
- From 1991 to 1997, those ages 35-54 represented an increasing share of the population–and until
1996 of the labor force–before a significant decline in their share of the population and labor force
- Those ages 16-34 represented a declining share of both the population and labor force until their
shares leveled off in the most recent years
While the portion of the total labor force ages 55 or older continued to increase since 2007, the uptick has
been primarily attributable to the continued aging of the baby boom generation into these ages, and not to an
increasing percentage of older workers remaining in the labor force. Before 2007, the increasing share of
workers ages 55 or older was due, both to increases in the labor force participation rates for these ages and to
the large baby boom generation beginning to reach these ages.
From the employer perspective, the increase in the share of individuals ages 55 or older in the population and
in the labor force means that employers have been, and will continue to be, challenged to provide benefits that
meet the needs of these older workers, while still meeting the needs of younger workers who are starting to
grow as a share of the labor force.
The key findings relating to gender:
The male LFP rate declined from 1991-2017, while the female LFP rate increased through 1999, then held
nearly steady until 2008 before falling.
For those ages 16 or older, the gender distribution of the population and the labor force shifted in opposite
directions over the 1975-2017 period:
- The percentage of the population represented by women decreased by about 1 percentage point (52.8
percent in 1975 to 51.7 percent in 2017). Conversely, the share of the population that was male
increased by about 1 percentage point (47.2 percent in 1975 to 48.3 percent in 2017)
- From 1975-1999, the female share of the labor force increased by 6.1 percentage points (40.6 percent
to 46.7 percent). However, from 2000-2017, the female share of the labor force held relatively steady
reaching 46.9 percent in 2017. There was a corresponding decrease in the percentage of the labor
force that was male
- The increased share of females in the labor force occurred across all ages, with the youngest workers
(ages 16-24) being almost equally divided between genders
Implications for the future:
- The share of the labor force that is ages 55 or older will continue to grow in the short term because of the size
of the baby boom generation, but will begin to shrink as the next generation of workers reach age 55
- The share of the labor force represented by workers ages 25-34, which has been increasing slowly, will
continue to increase–likely more quickly–as the baby boom generation workers leave the labor force
- Many employers are likely to be faced with a bimodal labor force distribution across the ages–larger numbers
of both older and younger workers with fewer numbers of workers at ages in between–which presents
different (and possibly incompatible) compensation and benefit challenges
The upward trend in labor force participation by older workers during the 1990s and into the 2000s has commonly been perceived as being a result of the need for either continued access to employment-based health insurance; for more years of earnings to accumulate savings in defined contribution (401(k)-type) plans; or for making ends meet due to not having had access to other means of support in retirement outside of Social Security. However, financial incentives have not been the only drivers of this higher percentage of older workers participating in the labor force. Many older Americans have had an increased desire to work longer, particularly among those with higher educational levels for whom more jobs are available that are meaningful and can be performed well into older ages (less physically demanding occupations).
The labor force participation rate increase among those ages 55 or older from the late 1980s through the late 2000s coincided with a higher incidence of more highly educated people reaching these ages. The share of workers ages 55 or older with bachelor’s and/or graduate degrees increased from 1987 through 2012 (19.4 percent in 1987 to 36.0 percent in 2008 to 36.7 percent in 2012).8 However, the increase in the percentage of workers who are college graduates reaching this age cohort has leveled off at the same time as the labor force participation rate leveled off (36.6 percent in 2014). Yet, in 2015 and 2016, there was an uptick in college graduates reaching 37.6 percent in 2015 and 38.1 percent in 2016, potentially portending another increase in the labor force participation rate of those ages 55 or older after 2017.
Regardless of the cause of this increase in the labor force participation rate among those ages 55 or older from the 1990s—2000s, its impact has been profound on the age distribution of the labor force. In particular, two results are clear. First, the labor force participation rates of younger workers began to decline in the late 1990s when the rates for older workers began increasing. Second, the relative number of older workers (ages 55 or older) in the labor force to younger workers increased steadily from 1993 to 2017. Consequently, these concurrent trends raise a couple of important the questions: Are older workers filling the void in the labor force or are they displacing opportunities for younger workers?10 Will older workers be able to continue to find employment going forward as the percentage of younger workers is increasing?
Furthermore, some younger age cohorts are increasing in size at the same time as older Americans continue to work. Consequently, employers–particularly those in the private sector–will be faced with tough challenges on how to manage their workforce and provide employee benefits to serve the needs of the many workers that are close to retirement age and the growing share of workers just starting out, while also retaining the experience of workers in the middle.
Read the entire Aging Report here.
The Employee Benefit Research Institute is a private, nonpartisan, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and financial security issues. EBRI does not lobby and does not take policy positions. The work of EBRI is made possible by funding from its members and sponsors, which include a broad range of public, private, for-profit and nonprofit organizations. For more information go to www.ebri.org or visit the web site of EBRI’s affiliated American Savings Education Council at www.asec.org