Yesterday Gallup released another in its series of studies of Boomer behavior, this time focusing on attitudes toward retirement. The article opens with some generalizations that come as no surprise to those of us who study the government's monthly employment data:
True to their "live to work" reputation, some baby boomers are digging in their heels at the workplace as they approach the traditional retirement age of 65. While the average age at which U.S. retirees say they retired has risen steadily from 57 to 61 in the past two decades, boomers -- the youngest of whom will turn 50 this year -- will likely extend it even further. [Link to Article]
Here is the first of four tables in the article:
Early last year I started posting monthly updates on demographic trends in employment, one of which examines two broad labor force cohorts: age 25-64 and 65 and over. The other offers a closer examination of six cohorts starting at age 50.
Whereas the Gallup study is concerned with future expectations, my analysis focuses on patterns we've actually seen, especially since the turn of the century. There are some observations that I would highlight. The first is that the labor force participation rate (LFPR) of workers under the age of 50 has been declining since 2000 and rising for those 50 and older, with the rise in participation most dramatic in the 65-and-over cohort.
In fact, when we examine the 50+ population, we find that older the cohort, the greater the growth.
The Gallup table above shows that 39% of the Boomers they surveyed expected to retire at age 66 or older and 10% think they'll never retire.
Let's compare those expectations with the latest real numbers. The table inset in the second chart above shows the participation rate for the latest month and the percentage growth since January 2000. The adjacent table rounds the rates to integers for January 2000 and for the latest month. Essentially this table gives us two snapshots: The number of workers per hundred for each of the six cohorts at the turn of the century and the number of workers per hundred now. Today nearly one in three of the 65-69 cohort and almost one in five of the 70-74 cohort are in the labor force.
There is a complex array of explanation for Boomer retirement expectations and the reality of today's aging workforce. The Gallup article offers a number of interesting observations that I won't reiterate here. Suffice to say that the trend toward delayed retirement, as the LFPR data shows, can be traced at least as far back as the year 2000. Moreover, well before the Financial Crisis and Great Recession, many economists were forecasting a continuing trend toward delayed retirement. At the Milken Institute's 9th annual Global Conference in 2006, Professor of Finance Jeremy Siegel stated that "Life expectancy will continue to rise. But the retirement age will rise substantially more, I believe, from 62 today to 73 or 74 in the future." I first reported on Siegel's forecast in an article I wrote for the Motley Fool in August of that year, a version of which preceded it on my legacy dshort.com website.
The bottom line: Gallup's survey on the topic, while interesting, is scarcely new news. As a first wave Boomer who loves to work, part of me applauds the trend. However, it has its downside. Consider the impact of trends on the overall labor force:
- The ongoing increases in workforce efficiency
- Replacement of human labor by technology
- Global outsourcing
- Delayed retirement by the elderly (the Gallup survey)
Together, these trends increase the difficulty of finding employment for the younger cohorts, as their participation rates in the first chart above clearly illustrate.