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Key Workforce Challenges: Aging Workforce and Looming Retirements
by Nick Beleiciks, Gail Krumenauer
Published Jun-9-2014

 
The aging workforce and looming baby boomer retirements were an almost forgotten issue during the recession. Falling home values and decimated nest eggs forced many older workers to delay their retirement plans for a few years. Now the oldest of the baby boomers are reaching full retirement age and leaving the workforce. Their retirements could leave holes in the workforces of some industries, occupations, and counties. Effectively replacing the coming wave of retirees is one of the key workforce challenges facing Oregon.

Will Oregon Have Enough Workers?
 
There's been a dramatic shift in the age structure of Oregon's population as the baby boomers have aged (Graph 1). The oldest members of the generation began turning 65 years old a few years ago. The oldest working boomers are reaching the full retirement age of 66, the earliest age at which they can receive full retirement benefits from Social Security. If they are like previous generations, most boomers will probably want to retire as soon as they are financially able to.

Looking at the size of the workforce by age group, Oregon appears to have enough younger workers to fill in behind the first wave of retirements. Oregon's workforce has about 337,500 workers ages 55 and older. Right behind them are the approximately 351,000 younger baby boomer workers between the ages of 45 and 54. The next cohort of nearly 348,000 Generation Xish workers in the 35 to 44 age category is smaller, but the nearly 361,000 Generation Yish workers between the ages of 25 and 34 will help bolster the workforce.

Opportunities will be created for younger workers as employers promote to replace retirees. It is likely that workers will be promoted more quickly than in the past and employers will have to work harder when hiring and training new workers, in order to replace the experience and institutional knowledge they're losing to retirement.

Graph 1
Oregon's 55 and over projected to grow by 141 percent from 1980 to 2020
Looming Retirements Will Require Replacement Workers
 
Looming retirements mean there is going to be continued need for so-called replacement workers, even during periods of slow job growth. Projections by the Oregon Employment Department indicate that Oregon will have about 259,000 job openings due to economic growth between 2012 and 2022. However, there are going to be an additional 392,000 replacement job openings from workers permanently leaving their occupations, mostly due to retirements.

Projected growth and replacement job openings by broad occupational group are shown in Graph 2. Service occupations will have the most openings through 2022, but of the 136,000 expected openings, 63 percent will be due to replacement needs. In fact, most job openings in nearly all occupational groups will be from replacements as more workers enter retirement. Only the construction and extraction occupational group is expected to have more openings due to growth than due to replacement openings.

Graph 2
Oregon projected occupational openings 2012-2022
Health Care and Social Assistance May See the Most Retirements
 
Oregon appears to have enough workers to replace the retiring baby boomers - but does the state have enough workers with the right skills and experience to fill their shoes? This could be particularly problematic in fast-growing industries like health care. New jobs created in growing industries paired with fewer experienced workers to replace those who retire could create hiring difficulties for some employers.

The pace of coming retirements will vary depending on the industry sector and we can get an indication of the impacts by looking at the number and percent of workers ages 55 and over in each sector (Table 1). For instance, utilities and mining have a high concentration of older boomers, but they employ a relatively small number of workers and will require relatively few replacement workers.

The industries that stand out in sheer size and share of workers 55 and over are health care and social assistance (both private and public) and educational services (again, both private and public). Employers in these and in all other industries need to plan for how they are going to attract replacement workers, especially for jobs that require significant training.

Table 1
Utilities has the Highest Share of Workers 55 and Over,
Health Care and Social Assistance Will Need the Most Replacement Workers 
  Workers of All Ages Workers Ages 55 and Over Percent  Ages 55 and Over
All Industries 1,612,470 337,451 21%
Utilities 7,175 2,282 32%
Mining, Quarrying, Oil and Gas Extraction 1,619 486 30%
Educational Services 142,105 40,836 29%
Real Estate and Rental and Leasing 24,836 7,108 29%
Public Administration 73,769 20,672 28%
Agriculture, Forestry, Fishing and Hunting 42,725 11,711 27%
Transportation and Warehousing 52,216 14,262 27%
Other Services 61,950 15,898 26%
Health Care and Social Assistance 231,044 56,307 24%
Wholesale Trade 72,995 16,601 23%
Manufacturing 170,554 38,368 22%
Management of Companies and Enterprises 33,591 7,335 22%
Professional, Scientific, and Technical Services 79,097 16,718 21%
Finance and Insurance 57,004 12,026 21%
Construction 73,776 14,762 20%
Administrative, Support and Waste Services 91,596 17,064 19%
Information 33,932 6,290 19%
Arts, Entertainment, and Recreation 26,888 4,981 19%
Retail Trade 185,246 33,330 18%
Accommodation and Food Services 150,346 18,384 12%
Private and public average employment for 1st Quarter 2013 and prior three quarters.
Source: U.S. Census Bureau, Local Employment Dynamics
Rural Areas Have Older Workforces
 
The workforces of rural counties tend to have a high share of older workers. In counties outside metropolitan areas, more than one out of four (28%) workers has reached age 55. That represents over 44,000 workers in rural Oregon who are probably hoping to retire sometime this decade. The question is: will there be enough workers in rural areas to replace them?

The extreme examples are Wheeler and Wallowa counties, where one-third of workers are 55 or older. Wheeler County has about 307 payroll workers at private businesses or working for state and local governments in the county, and about 105 are in the 55 and over age group. The next youngest age group of 45 to 54 year olds has 73 workers, and the 35 to 44 group has just 52. It may be a challenge to keep the same level of economic activity going in Wheeler County unless new workers can be attracted into the area.

Although older workers are a smaller share of the workforce in more urban areas, there are a lot more of them. Multnomah County alone has more workers over the age of 55 than all of rural Oregon combined. No area of the state will avoid the effects of retiring boomers.

Figure 1
Share of county workforce age 55 and over
Boomers Will Take Important Knowledge With Them
 
Employers that have one or two (or one or two hundred) key employees who are approaching retirement age should consider the skills that will walk out the door with that final punch of the time clock. While equivalent degrees and education can be hired through other workers by offering the right wage, specialized knowledge about a certain business, product, or service can only be gained with hands-on experience, and that experience leaves when a long-time employee retires. Employers need to find replacements and instill them with company-specific know-how before the baby boomers decide it's time to retire en force. Doing so will be one of Oregon's key workforce challenges.