Academic journal article Monthly Labor Review

Gauging the Labor Force Effects of Retiring Baby-Boomers

Academic journal article Monthly Labor Review

Gauging the Labor Force Effects of Retiring Baby-Boomers

Article excerpt

As aging baby-boomers begin retiring, the effects on the overall economy and on certain occupations and industries will be substantial, creating a need for younger workers to fill the vacated jobs, many of which require relatively high levels of skill

As the oldest baby-boomers begin retiring in the next several years, the implications for the workforce could be enormous. The current tight labor market situation could be exacerbated, hindering prospects for economic growth and putting a greater burden on those remaining in the workforce, perhaps forcing them to work longer hours. Especially in occupations with functions less conducive to technology-driven productivity innovations--many of the jobs in health services and educational services, for example--service may suffer and needs could go unmet unless older workers can be retained or other sources of 'workers can be found. Even in occupations where technological innovations have produced relatively large productivity gains--many of the more complex machining jobs in manufacturing, for example--the learning curves often are steep, meaning that new workers need to enter these occupations soon, so they can become proficient in the necessary skills by the time the baby-boomers begin leaving the labor force. This article looks at the occupations and industries likely to be most affected when the oldest baby-boomers begin retiring.

The aging labor force

The baby boom began in 1946 and continued through 1964. During those 19 years, 76 million people were born. The sheer magnitude of the number of births during this period has had a major impact on many aspects of our economy over the last 50 years. It also has largely determined the size and age composition of the labor force for the past 30 years. In 1978, when baby-boomers were aged 15 to 32, they made up approximately 45 percent of the labor force. Now, in large part reflecting the aging of the baby-boomers, the percentage of workers aged 45 and older will increase from 33 percent of the labor force in 1998 to 40 percent in 2008, adding nearly 17 million workers to this age group. Over the same period, those aged 25 to 44 will decline as a percentage of the labor force--from 51 percent to 44 percent, resulting in 3 million fewer workers in this age bracket. Consequently, the median age of the labor force will rise from 38.7 in 1998 to 40.7 in 2008.(1)

As the age of the labor force increases, a greater number of people will leave the labor force due to death, disability, or retirement. Of the 25 million people projected by the Bureau of Labor Statistics to leave the labor force between 1998 and 2008, 22 million will be aged 45 years or older and thus will be leaving mostly to retire. The total number of people who left the labor force the previous decade was 19 million. Over the 1998-2008 period, the oldest baby-boomers will be aged 52 to 62. After 2008, as more and more baby-boomers reach retirement age, the impact of their retirements will continue to grow.

Three methods are often cited for determining the average age of retirement. The first method uses a simple model to estimate the average annual number of net exits or withdrawals occurring over a given period within a particular age cohort. Using this "cohort method," Murray Gendell concluded that, from 1990 to 1995, the average age of retirement in the United States was 62.2 years for men and 62.7 years for women.(2) The second method relies on determining the average age for first withdrawal of a Social Security pension check. The Social Security Administration states that in 1998 the average age for first withdrawal of a pension check was 63.8 years for men and 64.0 years for women. However, about 50 percent of men and 53 percent of women made their initial claims at age 62.(3) Finally, a third method of estimating the average age of exit from the labor force involves examining labor force participation rates among older workers by single years of age. …

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