An Aging Population and Growing Older WorkforceAugust 30, 2018 It is fairly well-known that our population is aging and growing. Not only are there more seniors due to those population and demographic trends, more of those seniors are employed. A rise in the labor force participation rate (LFPR) among seniors has also boosted the number of seniors who are in the labor force and employed. Another interesting trend occurred since about year 2000. Wages for workers 65 and older increased faster than other age groups. This trend was observed nationally, statewide, and also in the Rogue Valley. So what happened? Was it some Y2K computer glitch that boosted earnings for those who were born closer to 1900? Likely not, but there were some other changes that may have contributed to faster-rising average earnings for the oldest age group of workers.
The large cohort of baby-boomers are increasingly moving into the traditional 65 and older retirement age group. In-migration from older age groups also bolstered the local population of the 65 and older crowd. In 2000, there were 29,140 residents age 65+ in Jackson County. By 2017, this group reached 47,347, or an increase of 62.5 percent. Josephine County saw nearly as much percentage change in the older population, growing from 15,302 to 22,783, a gain of 48.9 percent. Turning to the typical working-age population, those 18 to 64, we find that both counties added residents in this group. Jackson County’s 18 to 64 year old group increased from 108,856 to 125,544 from 2000 to 2017, a gain of 10.8 percent. Josephine’s count for this group rose from 43,444 to 46,823, a 7.8 percent increase.
Rogue Valley residents age 17 or under saw their numbers decline from 2000 to 2017. Jackson County lost nearly 200 residents in this younger age group while Josephine County saw a 7.3 percent decline, with a total decline of about 1,260 residents 17 years old or younger. These local population and in-migration trends, along with declining birth rates, and later child bearing years can be concerning for education providers.
Rogue Valley Workers by Age Trends
Similar to population growth, the Rogue Valley has also seen total employment for the older-age group rise rapidly. In 2000, there were about 2,000 workers age 65 or older in Jackson County. By 2017, the number rose to just more than 6,000, an increase of more than 200 percent. In contrast, the percent change in workers ages 14 to 64 was just 12.5 percent during those 17 years. The second fastest growing worker age group were 55 to 64 year-olds, up by almost 100 percent from 2000 to 2017, an increase of 7,688 workers. On the other end of the age spectrum, worker totals ages 14 to 18 and 19 to 21 fell by 32.8 and 7.0 percent, respectively. This represents a net drop of about 1,250 workers under age 22 in Jackson County from 2000 to 2017.
Josephine County experienced similar changes in the age composition of workers from 2000 to 2017. The percent of workers ages 14 to 18 fell by 19.1 percent, down by 146. Workers ages 55 to 64 increased by 2,531 or about double the total in 2000. Similar to Jackson County, workers age 65+ in Josephine County rose by 210.4 percent over that time. With one-quarter of Rogue Valley workers age 55 and older, many job openings will become available to replace workers during the upcoming decade.
The 2000s: Decade of Rebounding Labor Force Participation Rates for Older Workers
Looking at population and worker trends you might have noticed that the growth rate for workers 65+ outpaced the growth rate of the overall population. This trend is reflected in the labor force participation rate. Looking at Oregon’s trend in LFPR since 1990 shows an upward trend from about 2002 when the LFPR was 10.7 percent to about 20 percent from the 2015 to 2017 period.
The U.S. trends in the age 65+ LFPR shows an increase similar to Oregon’s since the early 2000s. The national LFPR rose from about 13 percent in 2002 to nearly 20 percent by the summer of 2018. Going back further in time, national data show the rise of the past two decades is a rebound back to the levels of labor force participation by older workers last seen during the early 1960s.
In Josephine County, the LFPR for older workers was estimated at 9 percent in 2000 and rose to 11.9 percent in 2016 according to the Census Bureau’s American Community Survey.
Rogue Valley monthly earnings by age group show that all ages had increasing monthly average earnings from 2000 to 2016, from about 35 to 38 percent for groups under 25 years, and 50 to 60 percent increases in the 35 to 64 year-old brackets. What really stands out is the average earnings gain of the 65+ group, up by 106.6 percent. This phenomenon wasn’t just a local occurrence. In Oregon statewide, wages for the 65+ group rose 101.8 percent compared to around 50 percent for the next three younger age groups. The youngest workers fared the poorest for average monthly earnings, up by 22.3 and 23.4 percent for the 14 to 18 and 19 to 21 year-old cohorts, respectively. The same general trend played out in the U.S. with the largest percent average earnings growth in the 65 and older group.
Possible Factors Responsible for Increasing Older Workers and Higher Earnings
There are many reasons why a higher percent of older workers are employed and those workers’ earnings are rising faster than other groups. One is the reduction of traditional defined-benefit retirement plans, the traditional pension that had a guaranteed income stream through retirement years. In 1992, about 32 percent of workers were offered defined benefit retirement plans and about 35 percent were offered defined contribution retirement plans, a 401K style plan where employers might match employee savings up to a certain percent of salary. By 2007, defined benefit retirement plans were offered to only 20 percent of workers, while defined contribution plans were offered to 43 percent of workers. By 2017, just 12 percent of civilian workers were offered defined benefit retirement plans whereas 47 percent were offered defined contribution retirement plans.
Another change that likely incentivized seniors to stay in the workforce or increase their earnings was the Senior Citizens' Freedom to Work Act, in 2000. It provided meaningful new earnings and benefit incentives under the Social Security Act (SSA) to workers who opt to work beyond the normal retirement age of 65.
Under prior legislation, retired workers aged 65 through 69 would have had their formula-determined Social Security Administration retirement benefits reduced by one dollar for each three dollars earned above $17,000 before year 2000. By age 70, however, the earnings test would lapse; and they would thereafter receive their full retirement benefits, regardless of how much they earned. The previous rules heavily penalized middle- and high-income earners in the 65 to 69 year-old cohorts and created a disincentive for working. For example, under previous SSA formulae, the largest retirement benefit a mid- to high-income worker could qualify for, at her/his retirement age of sixty-five, was about $17,000 per year. Workers in that cohort earning three times $17,000, plus the $17,000 ceiling, or about $68,000 per year, previously had all of their Social Security benefits taken away. Under the new Act, those workers now receive a $17,000 or 33 percent raise in pre-tax earnings, including social security retirement benefits. So this strong new incentive to increase earnings with penalty to Social Security benefits is another factor that has likely boosted labor force participation and average monthly earnings for workers age 65 and older. There may be other factors which may include personal savings rates, retirement savings (or lack thereof), housing and medical care costs, and supporting extended families.
The next time you are at an establishment where you might have been expecting to see teenage workers but find someone who might be much older, this analysis of employment and population trends by age may help to explain why so many older workers are in the labor force and employed.