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Monday, December 11, 2023

Why 25 to 54 is the Prime Working Age group for the Participation Rate

by Calculated Risk on 12/11/2023 10:30:00 AM

A reader asks if we could look at the participation rate for 25 to 64, as opposed to 25 to 54, since many people work until they receive Social Security and Medicare.

First, the BLS provides seasonally adjusted data for the "Prime" working age group (25 to 54), but only NSA data for the 55 to 64 cohort. So, this makes tracking a larger Prime+ group more difficult.

Second, the reason we use the 25 to 54 group is that the participation rate is fairly steady across the entire age spectrum.

Participation rate by age cohortHere is a graph of the participation rate by age cohort for November (1983, 1993, 2003, 2013 and 2023 NSA).  The participation rate dips a little for the 50 to 54 age group, but in general the participation rate is fairly steady from 25 to 54.

If we added 55 to 59 to the prime group, calling it prime+, we'd have to age adjust to track the participation rate over time.  

Although the participation rate is increasing over time, it is still below the prime levels.  When a large cohort is moving through that age group, that would push down the prime+ participation rate, and when a small cohort is passing through that would push up the prime+ participation rate.

This graph shows that older people are participating more over the last 40 years, and younger people are participating less.  This is probably because people are healthier (older participation rate), and younger people are staying in school.  Both positives!