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The aging of the population raises concerns about the Nation's ability to support future
retirees, whose numbers will soar once members of the "baby-boom" cohort begin reaching old age in coming years. If current employment patterns persist, there will be fewer workers in the future available to produce goods and services, threatening standards of living for Americans of all ages. As long as job demands do not force many older workers into retirement, increasing employment among older adults could relieve these demographic pressures. This article explores the ability of the labor force to accommodate older adults by examining recent trends in job demands among older workers.
Once the oldest baby-boomers reach age 65 in 2011, the population will begin to age rapidly. The U.S. Census Bureau predicts that between 2000 and 2040, the number of Americans ages 65 and older will more than double, to 77 million, while the number of prime working-age adults, between the ages of 25 and 54, will increase by only 12 percent.1 As a result, the number of prime working-age adults per elderly American will fall over the next 40 years from 3.5 to 1.8. The number of dependent children will also grow relatively rapidly over the next 40 years, compounding the pressures on working adults. In 2040, the number of Americans under 18 and ages 65 and older, who have been less likely to work, will exceed the number of prime working-age adults by 21 percent. In 2000, by contrast, prime working-age adults outnumbered dependent children and elderly adults by 14 percent.
The growing imbalance between working age adults and elderly persons is reducing the number of workers who can finance retirement benefits for older Americans. Both Social Security and Medicare are funded primarily on a pay-as-you-go basis, with payroll taxes on workers financing benefits received by retirees. According to the latest official projections, outlays will begin to exceed revenues for Medicare in 2011 and for Social Security in 2018.2 More fundamentally, the aging of the population reduces the number of workers available to produce the goods and services that the economy needs. Without dramatic increases in productivity or changes in
employment patterns, the looming worker shortage will reduce per-capita output and lower living standards.3
Higher employment rates among older adults could relieve these pressures, by increasing the labor force and reducing claims on retirement benefits. The average retirement age has been
falling over most of the past centurydespite improvements in health and life expectancy that
could allow individuals to work until older ages4although the trend seems to have leveled off and even reversed in recent years.5 Congress has increased the age at which retirees qualify for full Social Security benefits, which could encourage older workers to remain in the labor force. The legislation slowly raises the normal retirement age from 65 to 67 (for workers born after 1959, who will reach age 67 after 2026). Some experts have proposed that Congress increase the normal retirement age to 67 more quickly,6 increase it to age 70,7 or tie the retirement age to changes in life expectancy.8 Others have advocated removing some of the legal impediments to work at older ages.9 For example, many older workers prefer to reduce their work hours gradually, but Federal law prohibits employers from paying retirement benefits to active employees, even if they work only part time.
Job demands also encourage early retirement. Studies have found that workers in blue collar jobs tend to retire before workers in white collar jobs,10 and that workers in physically demanding jobs are less likely to remain in the labor force after the initial receipt of Social Security benefits.11 Other studies have found that physical job demands and stress are important predictors of early retirement.12
The decline of the manufacturing sector over the past half century and the growing computerization of the workplace have likely reduced physical job demands, potentially enabling more older adults to remain at work. Between 1950 and 2000, the share of jobs in the goods-producing sectorwhich includes the construction and mining industries as well as manufacturingfell from 41 percent to 20 percent; virtually all employment growth between 2000 and 2010 is expected to come from the services-producing sector.13 In addition, the share of workers using computers increased from 24 percent in 1984 to 54 percent in 2001.14
In fact, fewer jobs appear to require physical strength now than they did in the past. Between 1950 and 1996, the share of workers in jobs that required them to lift more than 50 pounds occasionally and 25 pounds frequently fell from 20 percent to less than 8 percent.15 These estimates, based on job data from the 1977 edition of the Dictionary of Occupational Titles matched with worker data from the Current Population Survey, understate the true decline in the number of demanding jobs. They do not account for the possibility that jobs classified as physically demanding based on 1977 job ratings became less strenuous in later years. An important limitation of this research, however, is that it provides no direct evidence on how job demands faced by older workers have changed over time.
Although the physical demands of work appear to be declining, there is some evidence that jobs are now more time-consuming and stressful than they used to be.16 These nonphysical demands may push some older workers into retirement, even when their jobs do not require physical strength or stamina.
Notes from this section
ACKNOWLEDGMENT: The author gratefully acknowledges valuable comments from Cori Uccello on an earlier draft of the article. The opinions expressed here are those of the author and do not necessarily reflect the views of the Urban Institute, its board, or its sponsors.
1 See U.S. Census Bureau, U.S. Summary: 2000, on the Internet at http://www.census.gov/prod/2002pubs/c2kprof00-us.pdf (visited June 15, 2004); and U.S. Census Bureau, "Projections of the Total Resident Population by 5-Year Age Groups and Sex with Special Age Categories: Middle Series, 2025 to 2045," on the Internet at http://www.census.gov/population/projections/nation/summary/np-t3-f.pdf (visited June 15, 2004).
2 Board of Trustees, OASDI, 2004 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds (Washington, DC, OASDI Board of Trustees, 2004); and Board of Trustees, Medicare, 2004 Annual Report of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (Washington, DC, Medicare Board of Trustees, 2004).
3 Henry J. Aaron, Barry P. Bosworth, and Gary Burtless, Can America Afford to Grow Old? Paying for Social Security (Washington, DC, Brookings Institution Press, 1989).
4 Dora Costa, The Evolution of Retirement: An American Economic History 1880-1990 (Chicago, University of Chicago Press, 1998).
5 Joseph F. Quinn, "Retirement Trends and Patterns among Older American Workers," in Stuart H. Altman and David Shactman, eds., Policies for an Aging Society (Baltimore, Johns Hopkins University Press, 2002), pp. 293-315.
6 See Gary Burtless and Joseph F. Quinn, "Retirement Trends and Policies to Encourage Work among Older Americans," in Peter P. Budetti, Richard V. Burkhauser, Janice M. Gregory and Allan Hunt, eds., Ensuring Health and Income Security for an Aging Workforce (Kalamazoo, MI, The W.E. Upjohn Institute for Employment Research, 2001) pp. 375-415.
7 See National Commission on Retirement Policy, Can America Afford to Retire? The Retirement Security Challenge Facing You and the Nation, on the Internet at http://www.csis.org/retire/ncrpbroc.pdf (visited June 15, 2004).
8 See 1994-1996 Advisory Council on Social Security, Report of the 1994-1996 Advisory Council on Social Security Volume 1: Findings and Recommendations, on the Internet at http://www.ssa.gov/history/reports/adcouncil/report/toc.htm (visited June 15, 2004).
9 See Rudolph G. Penner, Pamela Perun, and Eugene Steuerle, Legal and Institutional Impediments to Partial Retirement and Part-Time Work by Older Workers (Washington, DC, The Urban Institute, 2002).
10 Alan L. Gustman and Thomas L. Steinmeier, "A Disaggregated, Structural Analysis of Retirement by Race, Difficulty of Work, and Health," Review of Economics and Statistics, August 1986, pp. 509-13; and Cori E. Uccello, Factors Influencing Retirement: Their Implications for Raising the Retirement Age, AARP Public Policy Institute Paper No. 9810 (Washington, DC, AARP, 1998).
11 Karen C. Holden, "Physically Demanding Occupations, Health, and Work After Retirement: Findings from the New Beneficiary Survey," Social Security Bulletin, November 1988, pp. 3-15.
12 Randall K. Filer and Peter A. Petri, "A Job-Characteristics Theory of Retirement," Review of Economics and Statistics, February 1988, pp. 123-28; and Mark D. Hayward, William R. Grady, Melissa A. Hardy, and David Sommers, "Occupational Influences on Retirement, Disability, and Death," Demography, August 1989, pp. 393-409.
13 Jay M. Berman, "Industry Output and Employment Projections to 2010," Monthly Labor Review, November 2001, pp. 39-56; and Lois M. Plunkert, "The 1980s: A Decade of Job Growth and Industry Shifts," Monthly Labor Review, September 1990, pp. 3-16.
14 Leora Friedberg, "The Impact of Technological Change on Older Workers: Evidence From Data on Computer Use," Industrial and Labor Relations Review, January 2003, pp. 511-29; and Steven Hipple and Karen Kosanovich, "Computer and Internet Use at Work in 2001," Monthly Labor Review, February 2003, pp. 26-35.
15 Social Security Administration, Increasing the Retirement Age: Effect on Older Workers in Physically Demanding Occupations or Ill Health (Washington, DC, U.S. Social Security Administration, 1986); and Eugene Steuerle, Christopher Spiro, and Richard W. Johnson, Can Americans Work Longer? Straight Talk on Social Security and Retirement Policy No. 5 (Washington, DC, The Urban Institute, 1999).
16 See James T. Bond, Ellen Galinsky, and Jennifer E. Swanberg, 1997 National Study of the Changing Workforce (New York, Families and Work Institute, 1997); National Institute on Occupational Safety and Health, Stress at Work, on the Internet at http://www.cdc.gov/niosh/stresswk.html (visited June 15, 2004); and Juliet B. Schor, Overworked American: The Unexpected Decline of Leisure (New York, Basic Books, 1992). Other evidence, however, indicates that hours of work have not changed much since the mid-1970s; see Phillip L. Rones, Randy E. Ilg, and Jennifer M. Gardner, "Trends in Hours of Work Since the Mid-1970s," Monthly Labor Review, April 1997, pp. 3-14.
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