How longer work lives ease the crunch of population aging

 
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March 18, 2010

As baby-boomers have aged, so has the population of the United States. This has consequences, in particular for the nation’s labor force. In the 20 years from 1990 to 2010, the labor force in the United States grew 24.4%, keeping pace with the country’s population growth of 26%.  From 2010 to 2030, however, while the population will climb an additional 17.5%, the labor force is expected to grow only 10.5%.

This sharp drop-off has a number of implications, including a slowdown in GDP growth per capita. A 2009 RAND Corporation paper, “How Longer Work Lives Ease the Crunch of Population Aging,” examines the effects of workers remaining in the workforce for longer periods of time.

Key observations of the paper are:

  • An increase in labor-force participation at older ages could reduce the economic dependency ratio — measured by the ratio of nonworkers age 16 and older to workers age 16 and older — in 2030 from an estimated 63 nonworkers per 100 workers to 53 nonworkers per 100 workers.
  • The change in labor-force participation can be positive because older workers now have more years of schooling than their predecessors, making them better suited to jobs that required cognitive and analytic skills.
  • Changes in the structure of employer-provided pensions and the Social Security are likely to propel future increases in labor-force participation.

While the effects of an aging population and shrinking workforce growth in the United States are anticipated to be less severe than in other countries, the author advocates for further public policies to support greater labor force participation by older Americans. These can include removing work disincentives built into private and public pensions and resolving information-related labor market imperfections.

Tags: aging, economy, employment, Social Security

 

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Citation: Maestas, Nicole; et al, "How Longer Work Lives Ease the Crunch of Population Aging," Rand Corporation Working Papers, 2009, PDF.