Wednesday, January 29, 2014

Living Longer and Working Longer

Rafael Gonzalez published interesting labor statistics on LinkedIn last week. He provided this link to the Bureau of Labor Statistics  (BLS). It provides some telling indication of where the American workforce is, and where it is going. 

One of the interesting points made by the BLS is the notable decline in youths participating in the workforce. The report notes that sixteen to twenty-four year old workers made up almost 17% of the workforce in 1992, and that has decreased to 15.4% in 2002, then to 13.7% in 2012. They predict that it will decrease to 11.3% by 2022.  

Another critical point of this analysis involves workers between 25 and 54 years old. In 1992, these workers were 71.4% of the American workforce. This decreased to 70.2% in 2002 and then to 65.3% in 2012. The BLS predicts that this will decrease further, to 63.1% in 2022. 

Where are the jobs going? Which demographic is increasing as a percentage of the workforce? Well, those workers over 75 years of age is increasing, but very little, from .4% in 1992 to a projected 1.6% in 2022. 

The real increase is in the workforce participants between 55 and 64. That demographic has increased from 9% in 1992 to 15.9% in 2012, and projected to be 17.3% in 2022. There is also significant increase in the 65 to 74 year old demographic; that has increased from 2.3% in 1992 to 4.1 % in 2012, and projected to be 6.7% in 2022. Workers in the 55 to 74 year old group are increasing as a percentage of the workforce.

Part of this is the natural effect of the baby-boom generation. These were born 1946-1964. This was a period during which many children were born in the post-World War Two era. These individuals began reaching 65, the somehow default or expected retirement age, in 2011. Their generational achievement of 65 years old will continue through 2029. As a natural effect of the lower birthrates that followed the baby-boom, there will be less workers in the generation that follows them. 

Why are the older workers remaining in the workforce longer? For one thing, life expectancy has changed significantly. In 1900, life expectancy for an American born that year was 47 years. For someone born in 1960, the life expectancy predicted at that time was 67 years. An American born in 2000, the expectancy at time of birth was 75 years. Americans are statistically living longer. Advances in medicine and the abundance of food available in North America are influencing this. 

It is not simply for sustenance that we work, but to give value to time. Humans like to achieve things, to be challenged, and to feel as if we are contributing something. This desire to have something to do with our time is an element. I know many who are working into their 70s and they are doing so because they enjoy what they do. 

The economy is another element. We have seen the failure of pensions. We have seen the loss of nest eggs, and we have seen devaluation of real estate and other investments. There are none left who continue to deny the impending bankruptcy of Social Security. That program could never have been sustained based on the simple mathematics of decreasing birth rates, the increasing retirements as the "boomers" reach retirement, and the increasing life expectancy. The concerns about economic futures is an element in people working longer.

Simply put, Americans will work longer. The workforce will be older statistically. This BLS prediction has been confirmed by the National Council on Compensation Insurance (NCCI). This may have implications for the workers' compensation market. NCCI concludes "overall, the data shows that both indemnity and medical severity have exhibited steady increases over time with severity for older claimants costing more." The changes in the workplace demographic may therefore have implications for workers' compensation premiums across the country. 

Overall, persons over 65 years old make up 13.7% of the American population. In Florida that demographic group makes up 18.2%. The impact of this longer workforce participation may therefore be of greater impact here than elsewhere. It will be interesting to follow this thought in coming years to see whether the anticipated workforce participation is fulfilled.  

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