“When I’m 64”

How Aging U.S. Baby Boomers Have Begun to Carry That Weight

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By Nicole Maestas, Julie Zissimopoulos, Susann Rohwedder, and Linda G. Martin

Nicole Maestas leads the RAND Economics and Statistics group, and Julie Zissimopoulos is a RAND senior economist. Both are professors of economics at the Pardee RAND Graduate School. Susann Rohwedder, associate director of the RAND Center for the Study of Aging, is also a research fellow with the Network for Studies on Pensions, Aging, and Retirement, an independent organization located at Tilburg University in Tilburg, the Netherlands. Linda Martin is a RAND senior fellow and an adjunct professor in the Johns Hopkins Bloomberg School of Public Health in Baltimore, Maryland.

As U.S. baby boomers near retirement, America’s economic growth and the solvency of the Social Security Trust Funds appear to be at serious risk. But older American workers are retiring at later ages than they have in the past and will likely continue to do so in the future. This changing work pattern will help ease the downward pull on economic growth and the financial strain on Social Security and Medicare.

The end of the 20th century witnessed a profound change in retirement behavior.

The trend toward delayed retirement could also be good news for the cognitive capacities of aging baby boomers. Cross-national data from 13 developed countries have shown a correlation between delayed retirement and the delayed onset of cognitive declines, with both delays being more characteristic of older Americans than of older Europeans.

Despite these positive signs, the percentage of Americans aged 50 to 64 who report the need for help in daily personal care activities, such as getting into or out of bed or getting around inside the home, has risen significantly over the past decade as boomers have poured into this age bracket. This trend is in sharp contrast to the disability decline found among Americans aged 65 and over. The reason for the setback among boomers is not clear, although many who report the disabilities say they are due to health problems that began in their 30s and 40s.

Figure 1 — Through 2030, the U.S. Labor Force Will Keep Growing Older, Especially as Baby Boomers Keep Working

Age Distribution of the U.S. Workforce in 1990 Age Distribution of the U.S. Workforce in 2010 (projected) Age Distribution of the U.S. Workforce in 2030 (projected)
SOURCE: Authors’ tabulations of U.S. Bureau of Labor Statistics figures for civilian noninstitutional population, as reported in “A New Look at Long-Term Labor Force Projections in 2050,” Monthly Labor Review, November 2006, pp. 19–39, Mitra Toossi, and at www.bls.gov/emp/ep_data_labor_force.htm

The Long and Winding Road

The end of the 20th century witnessed a profound change in retirement behavior. For more than a century, the labor force participation rate of U.S. men over age 65 had fallen steadily, from 75 percent in the late 1800s to just 16 percent in 1990. But at the end of the 20th century, this rate began to rise. Meanwhile, the rate of older women participating in the labor force rose as well, following a remarkable upsurge in participation among younger women over many decades.

The age distribution of the U.S. workforce has shifted dramatically in the past 20 years, a shift that will continue in the next 20 years. Figure 1 shows snapshots of 1990, 2010, and 2030 based on real and projected data from the U.S. Bureau of Labor Statistics. The figure highlights three features of population and workforce change over this time span.

The first is the striking shift in the age distribution. In 1990, it had a pronounced triangular shape; but by 2030, it will become almost rectangular. The primary force behind this change is the postwar birth of the baby boomers between 1946 and 1964. The triangular shape in 1990 arose from the bulge of boomers in the younger age groups, as indicated in the figure. The bulge is still evident in 2010, with boomers occupying the middle age groups, but it is less evident in 2030 as the boomers age.

The population grows older as the large boomer cohort ages; the aging effect is compounded by rising life expectancy and lower birth rates in subsequent cohorts. Life expectancy among those 50 and older in developed countries rose by 0.2 years per calendar year in the 20th century and continues to lengthen at a good clip. Although fertility and mortality are the principal forces shaping the age distribution of the workforce, immigration also plays a role. Because immigration inflows mostly augment the bottom half of the age distribution, they help to slow population aging.

The second feature apparent in Figure 1 is a sharp slowdown in labor force growth, indicated by the gold bars. Labor force growth between 2010 and 2030 is projected to be 10.5 percent — less than half the growth seen between 1990 and 2010. The slowdown in labor force growth will lead to a corresponding slowdown in U.S. economic growth per capita unless there is an offsetting influence, such as an increase in labor productivity, workforce participation, or immigration.

Figure 2 — Since 1990, the Workforce Participation Rates Have Risen for U.S. Men and Women Who Are 65 and Older

Workforce Participation Rates Have Risen for U.S. Men Who Are 65 and Older Workforce Participation Rates Have Risen for U.S. Women Who Are 65 and Older
SOURCE: U.S. Bureau of Labor Statistics data reported in “A Century of Change: The U.S. Labor Force, 1950–2050,” Monthly Labor Review, May 2002, pp. 15–28, Mitra Toossi; in “A New Look at Long-Term Labor Force Projections in 2050,” Monthly Labor Review, November 2006, pp. 19–39, Mitra Toossi; and at www.bls.gov/emp/ep_data_labor_force.htm
NOTE: Dashed lines denote projections.

Tempering the drag on labor force growth is the third feature evident in the figure: a notable rise in employment among the elderly. Figure 2 charts the historical and projected labor force participation rates by age and sex from 1950 to 2030. For men aged 55 to 64, the rate of decline slowed in the 1980s and then flattened. For men 65 and older, the rate of decline also slowed in the 1980s, and then, remarkably, the trend reversed in the 1990s. The Bureau of Labor Statistics assumes a flattening of the trend by 2010 for men 65 to 74 and by 2020 for men 75 and older.

Just as important is the rise in labor force participation among women. Between 1950 and 2000, the participation rates for all women between the ages of 25 and 64 roughly doubled. Although the rate for women 65 and older remained low, it began rising between 1990 and 2000, and it is projected to rise further through 2020 and then flatten.

The above projections assume that recent labor force participation trends will taper off. However, if participation keeps rising after 2020 at the same rate as before — and there is good reason to think it might keep rising — then the ratio of nonworkers to workers, also known as the economic dependency ratio, would be far lower in 2030 than expected. That is, instead of 62 nonworkers aged 16 and older per 100 workers in 2030 there would be just 53 nonworkers per 100 workers. In short, the economic impact of population aging on America’s future standard of living depends a great deal on the evolution of labor force participation among older workers.

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