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How Population Age Shifts Will Affect the US Labor Market

In the decade ahead, the Bureau of Labor Statistics predicts the fastest growth rates among 75+ workers alongside a decline in the number of workers ages 55 to 64.

Population trends can have big impacts on the labor market. Today we are on the cusp of experiencing a significant one.

Many countries experienced a mid-twentieth-century surge in their birth rates—a trend commonly referred to as the baby boom. The US led the way with years of sustained population growth, and these effects are still felt today as this historically large cohort has aged. But the story continues with the next twist. Starting in the 1960s and into the 1970s, the trend shifted, with a notable decline in the US birthrate.

One implication for the labor market is that in the past decade, the workforce has seen a substantial increase in older workers. But as this large cohort of workers inevitably moves into retirement, a considerably smaller one will succeed it, influencing workforce composition, dynamics, and labor supply. These population shifts are now reflected in Bureau of Labor Statistics (BLS) forecasts of the older worker population in the decade ahead.

Changing population structures

There were 76 million births in the US between 1946 and 1964. After that, with birth rates declining, only 55 million people were born in the US between 1965 and 1980. Over the past few decades, the share of older workers in the labor force grew steadily as the large population of workers born between 1946 and 1964 aged into the 50+ worker population. Augmenting this trend is that a growing percentage of the people in this age group has remained in the workforce longer than previous generations had, often well past the age of 65.

Thus, the continued aging of this large cohort has meant a rise in the number of 65+ workers. The BLS forecasts that this group of workers will continue to have higher labor force participation rates (defined as the percentage of the civilian population either working or actively seeking work) over the next decade, further fueling the growth in 65+ workers. In particular, the BLS predicts that the worker age group with the fastest growth rates will be those ages 75 and older, especially women.

Not every segment of the older worker demographic is projected to rise. The BLS forecasts a decrease in the size of the 55- to 64-year-old worker population in this same period, reflecting the smaller size of the age cohort born between 1965 and 1980 moving into this category. Even if the next wave of workers entering the 55- to 64-year-old age group continues the trend of historically high labor force participation rates among older workers, their smaller overall numbers foretell a decline in workers in that age group over the next decade. Interestingly, this 55- to 64-year-old age group will be smaller than both the preceding cohort and the younger ones that will follow.

Workforce implications

The continuing increase of the 65-plus older worker population will likely have several implications for the overall workforce. Because labor force participation rates for other age groups are expected to either hold steady or decline and because today’s older workers have higher education and credentialing rates than those of previous generations, employers are likely to be more motivated to try to retain skilled older workers for longer. Organizations may respond by tailoring benefits and work arrangements to appeal more to workers ages 65 and older. Leadership development and training opportunities for older workers are another area of potential for employer focus.

Companies that seek to retain older workers should ensure that upskilling and promotion opportunities are available to workers of all ages. Declining populations or labor force participation rates among younger workers may lead to talent shortages. Retaining older workers can help employers address this challenge.

For more jobs data: Find the latest employment data in the AARP Public Policy Institute's (PPI) Employment Data Digest, PPI's monthly review of job trends for those ages 55 and over. Visit the AARP website's work and jobs section for articles on work and unemployment and job search resources. Visit the lifelong learning section for education resources and research.

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