At roughly 75 million strong, the Baby Boomer generation continues to shape the nation’s economic growth patterns with respect to workforce productivity and overall labor.
The share of U.S. population age 60 and above is expected to rise by 40% between 2010 and 2050 and is likely to alter the size and productivity of the national labor force, according to a recent study by the National Bureau of Economic Research.
Using population and labor force data and economic output from the Bureau of Economic Analysis from 1980 to 2010, the study constructs 10-years rates of growth in population, labor force and productivity by state. The study findings estimate the contribution population aging will have on the nation’s overall economic growth.
From 1980 to 2010, the share of the population age 60 and over rose by 17%. This implies that GDP per capita was 9.2% lower than it would have been in the absence of population aging, corresponding to a 0.3 percentage point decrease in the annual rate of growth, during a period when this rate averaged 1.8 percentage points.
The share of the older population is expected to rise by 21% from 2010 to 2020, and by 11% from 2020 to 2030. This suggests aging will lower the growth rate by 1.2% per year this decade and 0.6% next decade.
Researchers Nicole Maestas, Kathleen Mullen and David Powell found that a 10% increase in the share of population aged 60 or above can decrease growth in GDP per capita by 5.5%. They characterize GDP per capita into two component parts: GDP per worker, and the employment-population ratio. The authors estimate worker productivity declines by 3.7% and the population ratio shrinks by 1.7% in response to a 10% increase in the older population. By deduction two-thirds of the slowdown in economic growth resulting from an aging population is due to slower productivity growth and one-third is related to slower growth in the labor force.
DECLINES IN PRODUCTIVITY
Researchers said their results are contrary to the common belief that population aging will affect growth primarily through its impact on labor force. The study concludes that the aging population is directly associated with slower earnings growth because aging leads to declines in the productivity of all workers across the board. This is interpreted by the authors to mean older workers influence young workers in the labor force. More productive older workers are likely to have a positive impact on the economy, while underperforming seniors drag down the productivity overall.
The study’s “findings foretell a further slowdown in productivity growth reflecting not only compositional differences in the workforce but also real productivity losses among individuals across the age spectrum. At the same time, greater investment in human capital development through the life cycle coupled with policies and practices that encourage employment at older ages could prevent these losses to some degree.”
The aging U.S. population remains young compared to the United Kingdom and Japan whose populations are among some of the oldest in the world. But economists have looked at those aging countries to try and infer the impact an aging workforce will have on the United States. While many U.S. workers are remaining in the labor force into their retirement years, slower birth rates over the last few decades could be problematic for the country in the years to come.
The Brookings Institute illustrates the impact this way: While there were 10 workers for every person older than 64 in the world in 1970, the expected number in 2050 is only 4, creating pressures for pension systems, entitlements and other social programs.
Experts with the Brookings Institute cite two suggestions to try and mitigate the impact of the aging population on the workforce and overall economic growth:
• Remaining in the workforce longer; and
• Working less overall hours and then phasing into retirement.
Phasing into retirement allows for tax revenues to be paid for longer and it reduces the dependence on pensions which is important for fiscal and economic stability. Brookings also cites positive physical and cognitive health benefits for those seniors who remain engaged in the workforce past 65.
EMBRACING SENIOR WORKERS
Steve Morrow, store manager for Allen’s Foods in Bella Vista, said he has employed senior citizens to work in his grocery store since it opened more than 17 years ago.
“I have had workers into their middle 80s. One gentlemen worked for me until he was 89 before he retired a second time. I have seniors for grocery carryout, sacking and cashiers because they have an incredible work ethic. Today on the schedule I have six workers that range from ages 79 to 65 and that’s just about everyday here at Allens,” Morrow said.
Danny Rocker, is a 69-year-old who works four evenings a week and a full day Saturday. Morrow said Rocker is once retired from a career in customer service and he loves the social aspect of his part-time job at Allens.
“He doesn’t need a career, but he can augment his retirement income by continuing to work,” Morrow said. “Every new hire gets to shadow Danny on carryout. He’s a great resource.”
Morrow, 59, said he’s thinking about the next few years of his own life. He said years ago when someone retired they might have a $20 home phone bill and an $18 cable bill as there was no internet. Today, phones with data plans, home internet and cable are likely to cost nearly $300 and that adds to the monthly expenses of the retired.
“My grandfather retired at 62 and they gave him a gold watch and bid him a happy retirement. Today we aren’t ready to hang it up at 62, 65 or later in some cases,” Morrow said. “Here in Bella Vista we still have a lot of retirees and after playing golf for a couple years it’s not unusual for some to return to work at least part-time. Sometimes it’s economic and sometimes it’s just social, but there are more working seniors today and that’s good for my business.”