More Older Americans Are Working, But Why?

As you know, I write frequently about the economy and specifically about the unemployment rate, as I did in my E-Letter on Tuesday. While the official unemployment rate fell to a six-year low of 5.9% in September, I emphasized that the “labor force participation rate” (those working or seeking work) fell to the lowest level in 36 years. This is not good.

Earlier this week, I ran across the chart below from the “Economics Group” at Wells Fargo Securities. This chart illustrates the workforce trends in employment by age group.

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Many Americans aged 16-54 are dropping out of the labor force, as you can see. The sharpest drop in labor force participation is among those aged 16-19, which includes many who have never been able to get a real job, followed by those aged 20-24.

Within these two younger groups, many have opted to stay in school longer because the jobs they seek are simply not available (some of which are now occupied by older Americans – more on that below). They are betting that more education will pay off in the future.

However, given the rising delinquency rates for student loans, there is mounting evidence that the bet on more education (rather than work) is not generating the income necessary to repay the student loans. In other words, the extra education was not a good decision, at least so far.

Yet what struck me most about this chart is the fact that older Americans, those aged 55 and older, are actually adding to the workforce. With over 10,000 Baby Boomers retiring every day, how can this be happening?

The economists at Wells Fargo suggest that this increased workforce participation by older folks is due to people being in good health and living longer. “Perhaps this is a signal of improving health conditions of baby boomers compared to the past…”

While better health and living longer are certainly factors, I would argue that the increase in participation by older Americans (55+) is mainly because they have not saved nearly enough to retire. In fact, there is a real retirement savings crisis in America, and I plan to focus on that in an upcoming E-Letter where I can discuss it at greater length.

While I don’t know about the conditions where you live, I see people who are clearly above retirement age who are still working just about everywhere I go – whether it be at Walmart, the supermarket, department stores and even at fast-food joints and the like. I don’t get the impression that they are working there just to pass time. And many that I see have been working these jobs for years.

More & More Adults Are Deciding Not to Work

Now let’s change gears and look at another troubling development. At the same time that a lot of older Americans are re-entering the workforce, more people than ever before are choosingnot to work at all, at least not in traditional jobs.

From the early 1970s to the recession of 2001, there was a gradual upward trend in the civilian non-labor force – those people who simply decided to drop out of the workforce. After the 2001 recession, however, there has been a sharp upturn in the non-labor force. The question is, why?

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The economists at Wells Fargo speculate that this trend has occurred because as America has become more affluent, more people choose not to work in traditional jobs and opt instead for more non-compulsory “leisure” activities, such as volunteering.

I’m not sure I buy that argument, especially in the wake of the Great Recession and the financial crisis that saw stock markets plunge over 50% and home prices plunge by almost as much in many areas of the country. Many families are still trying to recover from that devastating hit.

I believe, on the other hand, that our non-working population of 92.6 million people has skyrocketed in recent years largely because the government has made it easier not to work.

By the way, this is no accident. President Obama and Democratic leaders want more people dependent on the government. That’s because people who are dependent on the governmentreliably vote for candidates with a “D” next to their names.

I realize that this is a very political statement to make, but I believe it is nonetheless true.

I’ll leave it there for today and will revisit the issue at greater length in my E-Letter.





Posted 10-10-2014 2:34 PM by Gary D. Halbert
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