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Summary

  • The labor force participation rate continues to decline from a peak of 67.1% in 1997.
  • The number of Hispanics in the labor force continues to climb.
  • Whites account for the decrease in the labor force participation rate.
  • Baby boomers are an exception to the falling labor force participation trend among Whites, not the cause.

The labor force participation rate measures the civilian labor force for all workers aged 16 years and older. The baby boomer generation was born in the years 1945-1955. Therefore, the average birth year of a baby boomer is 1950 and the average baby boomer entered the labor force in the year 1966. The labor force participation rate steadily grew from 1966 from 59% to a peak of 67.1% in 1997. The continued decline of the labor force participation rate has led many to believe that the baby boomer generation is leaving the workforce in droves. However, if the average baby boomer was born in 1950 and the average US worker retires at the age of 61, baby boomers should have started to leave the workforce around 2011. Looking at the chart below, the labor force participation rate has been falling for over a decade prior to 2011.

Secondly, if we break down who is joining and leaving labor force by age, it is evident that the baby boomers are increasing their prevalence in the labor force.

Looking at the labor force participation rate by age shows that baby boomer participation grew 1% from 1992 through 2002 and then grew at a staggering 4.6% in the years 2002 through 2012. Furthermore, the baby boomers are projected to grow at a rate of 2.6% in the labor force from the years 2012 to 2022. Also of interest, the age bracket 16-24 is projected to fall 1.4% from 2012 to 2022.

The problem with breaking data down by age only is that it fails to account for race. The baby boomers were a 58 million person generation and out of those 58 million people, 56 million were White. Therefore, 96.5% of the baby boomer generation was White. Breaking the data down by race, we can see that Hispanics are going to be increasing their participation in the labor force while White non-Hispanics will be decreasing their participation in the labor force through 2022. A chart of Hispanic participation vs. White non-Hispanic participation shows a clearly defined trend.

Given the data, it's evident that older people are not driving the lower labor force participation rate. That begs the question, is it younger Whites or older Whites driving labor force participation rate lower?

Looking at the data for the labor force participation rate for Whites aged 16 to 19 and all White males over 20 years, we see a precipitous decline from 2000 through 2014.

Looking at a recent graph from the Cleveland Fed showing White men not in the labor force, it's evident that baby boomers are returning to the labor force.

The Cleveland Fed stated in its report, "[t]he biggest exception is older men, whose labor force participation rate has actually increased since the beginning of the recession." Given this data it's clear that nearly all Whites are driving the labor force participation rate lower. However, baby boomers are an exception to this trend, not the cause.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Lionfin Capital is a group of investors.

Source: The Baby Boomer Theory Of The Labor Force Participation Rate Is Deeply Flawed