Academic journal article Monthly Labor Review

Older Workers in the 21st Century: Active and Educated, a Case Study

Academic journal article Monthly Labor Review

Older Workers in the 21st Century: Active and Educated, a Case Study

Article excerpt

Older adults in the next century will have higher levels of educational attainment and may surpass the labor force participation rates of today's older cohorts; Wisconsin's labor market illustrates why

Will the massive baby-boom generation spend its "golden years" at leisure in the next century or will this group continue working well past the standard retirement age? Federal budget deficits and projected funding shortfalls for Social Security and medicare lead many to worry about their retirement years. Besides possible cuts in government programs for the elderly, growing numbers of employers have been terminating traditional defined benefit pension plans which provide a fixed income during retirement.(1) In tandem with low personal savings rates, these cuts could cause a swell in the number of older persons in the labor force by forcing many baby-boomers to continue working well beyond the ages at which their parents left the labor force.

Widespread discussions on expected growth in the older labor force (defined in this article as workers age 55 and older) have occurred for quite some time, however, this article takes on another aspect of this phenomenon. It focuses on anticipated change in the distribution of the older population on one demographic characteristic--education. As younger and more highly educated cohorts age and replace today's older population, the educational composition of the 55-and-older age group will inevitably change. The effect of this change on our future labor force has not been sufficiently explored, but is bound to have significant implications for both the quality and quantity of the future labor force.

Another factor to consider is that Social Security and pensions replace a smaller portion of income for workers in skilled occupations than for workers in unskilled jobs. As a result, the "opportunity cost" of leaving the labor force rises, on average, with increased years of schooling. In other words, a typical college-educated worker sacrifices more income by retiring than does a worker who failed to finish high school. Higher education thus creates a financial incentive to remain in the labor force, through these higher opportunity costs. In addition, intangible benefits such as enhanced job satisfaction, and tangible factors like cleaner and safer working environments, serve to bolster labor force participation among well-educated older persons.

The analysis in this article uses Wisconsin data to illustrate the affect of education on the older labor force, but the broad conclusions could be considered for the Nation as well. We first present a brief comparison of population and labor force composition for Wisconsin and the United States. Next, we examine the recent trend in labor force participation among older adults, and disaggregate the overall participation rate by level of education. The results of our Wisconsin analysis are presented next, followed by a discussion of other factors besides education which may be expected to influence the labor force attachment of older adults. A discussion of data sources and methodology is presented in the appendix.

Wisconsin versus the Nation

Despite the State's image as "America's Dairyland," only 1 in 20 Wisconsin workers (4.5 percent) were employed in agriculture in 1990, according to the decennial census. This share was nevertheless discernibly higher than the comparable figure for the Nation as a whole, 2.5 percent. The manufacturing sector is likewise more dominant in Wisconsin than in the Nation at large. Manufacturing firms employed 24.5 percent of Wisconsin workers, compared with 17.7 percent of all U.S. workers. Employers in the service sector, on the other hand, accounted for 29.9 percent of 1990 total employment in Wisconsin, compared with 32.7 percent nationwide.

In comparison with the Nation as a whole, Wisconsin's population has relatively little diversity in either race or Hispanic origin. …

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