by Calculated Risk on 5/04/2014 12:59:00 PM
Sunday, May 04, 2014
A frequent question is: "I've heard the participation rate for older workers is increasing, yet you say one of the reasons the overall participation rate has fallen is because people are retiring. Is this a contradiction?"
Answer: This isn't a contradiction. When we talk about an increasing participation rate for older workers, we are referring to people in a certain age group. As an example, for people in the "60 to 64" age group, the participation rate has increased over the last ten years from 51.1% in April 2004 to 55.7% in April 2014 (see table at bottom for changes in all 5 year age groups over the last 10 years).
However, when we talk about the overall participation rate, we also need to know how many people are in a particular age group at a given time. As an example, currently there is a large cohort that has recently moved into the "60 to 69" age group. To calculate the overall participation rate we need to multiple the participation rate for each age group by the number of people in the age group.
Click on graph for larger image.
This graph shows the population in each 5 year age group in April 2004 (blue) and April 2014 (red). Note: Not Seasonally Adjusted, Source: BLS.
In April 2004, the two largest groups were in the "40 to 44" and "45 to 49" age groups. These people are now the 50 to 59 age group.
In April 2004, there were also a large number of people in the 50 to 59 age group. These people are now 60 to 69.
The following table summarizes what has happened if we follow these two cohorts (40 to 49 in April 2004, and 50 to 59 and April 2004).
|1Cohort 1: People aged 40 to 49 in April 2004.|
2Cohort 2: People aged 50 to 59 in April 2004.
So even though the participation rate for an age group is increasing, the participation rate for a cohort decreases as it moves into an older age group. This shows we need to follow 1) the trend for each age group, and 2) the number of people in each age group.
Note in the table below that the participation rate has been falling sharply for younger age groups (staying in school - a positive for the future) - and that the population is increasing for those age groups. This is another key trend that has been pushing down the overall participation rate.
This table is population, labor force and participation rate by age group for April 2004 and April 2014.
|Populaton and Labor Force by Age Group (000s) NSA|
|16 to 19 Age Group||Population||16,198||16,652|
|20 to 24 Age Group||Population||20,173||22,107|
|25 to 29 Age Group||Population||18,886||21,151|
|30 to 34 Age Group||Population||20,027||20,877|
|35 to 39 Age Group||Population||20,595||19,332|
|40 to 44 Age Grou[||Population||22,683||20,232|
|45 to 49 Age Group||Population||21,825||20,554|
|50 to 54 Age Group||Population||19,247||22,306|
|55 to 59 Age Group||Population||16,126||21,149|
|60 to 64 Age Group||Population||12,499||18,441|
|65 to 69 Age Group||Population||9,716||14,881|
|70 to 74 Age Group||Population||8,349||10,915|
|75 and older||Population||16,434||18,841|