Labor-Force Participation, Policies & Practices in an Aging America: Adaptation Essential for a Healthy & Resilient Population

Abstract

Population aging in the United States poses challenges to societal institutions while simultaneously creating opportunities to build a more resilient, successful, and cohesive society. Work organization and labor-force participation are central to both the opportunities and challenges posed by our aging society. We argue that expectations about old age have not sufficiently adapted to the reality of aging today. Our institutions need more adaptation in order to successfully face the consequences of demographic change. Although this adaptation needs to focus especially on work patterns among the "younger elderly," our society has to change its general attitudes toward work organization and labor-force participation, which will have implications for education and health care. We also show that work's beneficial effects on well-being in older ages are often neglected, while the idea that older workers displace younger workers is a misconception emerging from the "lump of labor" fallacy. We conclude, therefore, that working at older ages can lead to better quality of life for older people and to a more productive and resilient society overall.

Figure 1. Early Retirement and Unemployment in the OECD

Source: Figure prepared by authors using calculations based on the 2012 Organisation for Economic Co-operation and Development, Employment Outlook 2012 (Paris: OECD Publishing, 2012). The R-squared of the correlation (a measure of statistical tightness) is 18 percent. This is not driven by the outliers (Greece and Spain). If these crisis-affected economies are omitted, the positive correlation is actually stronger (with an R-squared of 21 percent).

Figure 2. Labor-Force Participation of Young and Elderly Males in Germany

Source: German Mikrozensus. Each line represents a different age group. https://www.destatis.de/DE/Methoden/SUFMikrozensus.html

Figure 3. Unemployment Rates in West Germany by Age Group, 1966–2006

Source: Bundesagentur für Arbeit. http://statistik.arbeitsagentur.de/Navigation/Startseite/Startseite-Nav.html