When Robin McLane’s generation hit public schools in the 1950s, there were never enough classrooms or teachers to accommodate the bulge, she said. So she’s not surprised about the latest shock that boomers are delivering to the U.S. economy.
People all around me, relatives and friends, are either retiring, or they’re finding it’s very difficult to find work anywhere from 55 on, said McLane, 65, of Portsmouth, N.H., who retired as a high school literacy specialist in June. For me, I was ready to move on.
The share of Americans in the labor force, known as the participation rate, is hovering around an almost four-decade low as the population ages and discouraged job seekers give up looking for work. Federal Reserve research shows retirees are at the forefront of the recent exodus, which blunts the effect of policy aimed at boosting the economy and workforce.
In the two years ended 2013, 80 percent of the decrease in labor force participation was from retirement, according to calculations by Shigeru Fujita, a senior economist at the Federal Reserve Bank of Philadelphia. And while the number of discouraged workers rose sharply during and after the recession, the group’s ranks have been roughly unchanged since 2011.
That tilts the debate on whether the participation rate can fully rebound alongside the improving economy, as retired workers are unlikely to re-enter the workforce, said Michelle Girard, chief U.S. economist at RBS Securities, in Stamford, Conn. A tighter supply of workers means wage pressures would build faster than otherwise, something Fed Chairman Janet Yellen may watch as a leading indicator of inflation, Girard said.
Even when the employment situation improves and the job prospects improve, it’s unlikely that this group is going to be enticed back into the labor market, Girard said. The implication is, well, if they’re out for good, you may not have as much slack in the labor market as you think.
The labor-force participation rate for all ages was 63 percent last month, within 0.2 percentage point of its lowest level since March 1978, according to Labor Department data.
Workers who are marginally attached to the labor force – people not looking for work who would still take a job if one were available – have a 62 percent transition rate into the workforce, separate Fed research shows. In contrast, those who have dropped out, do not want a job and are not looking for one have a 5 percent transition rate.
The term baby boomers refers to the cohort of people born in the U.S. from 1946 to 1964, when a dramatic increase in birth rates followed World War II.
The sheer size of the boomer generation is overshadowing the fact that participation rates for older workers, although lower than other age groups, have been steadily rising during the past two decades.
Workers 55 and older are projected to make up 25.6 percent of the labor force in 2022, versus 20.9 percent in 2012, according to a Bureau of Labor Statistics report. U.S. residents in that age group had a participation rate of 40.3 percent last year, compared with 81 percent for those 25 to 54, considered prime working years. For Americans 65 and older, the rate is 18.7 percent, up from 12.5 percent two decades ago.
While some Americans may choose to retire, others may be driven into it by unemployment following the deepest recession since the Great Depression, a report from the center this month showed.
Some 44 percent of older Americans stopped looking for work a year into their job hunt, and those with access to a faster exit through Social Security benefits or pensions quit searching even sooner.