Jan 6 Today's report on unemployment shows that
the economy continues to gather steam - payrolls grew by
200,000 and the jobless rate ticked downward again, to 8.5
But young Americans are having a much tougher time finding
work than older workers. The seasonally-adjusted jobless rate
for workers over age 55 stood at 6.2 percent last month,
compared with 9.4 percent for workers age 25 to 34.
And the overall workforce is getting more gray. Labor force
participation by workers over age 55 has risen 11 percent since
December 2007, and is projected to go higher as baby boomers
try to restore retirement security by staying on the job
longer. For example, 15 percent of Americans tell the Employee
Benefit Research Institute they expect to work until age 70, up
from 11 percent as recently as 2006.
All of which begs the question: In an economy where 20
million Americans are still out of work or underemployed, are
older workers hurting the young by refusing to get out of the
way? News stories on unemployment often say that they are - and
intuition might tell you that's so.
But any mainstream economist will tell you that's just not
how labor markets work.
"Many people who aren't economists think there is only a
finite amount of work to do," says Jeffrey Zax, a professor at
the University of Colorado who specializes in labor economics.
"No one within the field of economics believes that, but it's a
perpetual myth that we've never succeeded in killing as we
would like to."
"Work comes from the ability to do something useful, and
there is no fixed limit on how many useful things can be done,"
he adds. "History shows we are always thinking of new things to
do that are useful. So what determines how much work is
possible is how much useful work there is to do."
Economists call this the lump sum of labor fallacy. It
stems from understandable gut-level fears and insecurities we
all feel. And it's no different than fears sparked by the
growth of other demographic groups in the labor force over
time, such as women or immigrants.
"People have a very static view of the economy," Zax says.
"They think 'my job is my job, and if someone takes my job what
will I do?' But in reality, there is enormous volatility and
churn in the economy. Businesses and jobs come and go. None of
us want to experience that personally because of the
uncertainty, but the economy is always creating new
There's no evidence that older and younger workers compete
directly for the same positions, Zax says. "Younger workers
come into the labor force with a different vintage of
education, and they don't have work experience. So, you don't
often find old and young workers clamoring for the same
low-wage McDonald's job."
In fact, Zax argues the different age groups often play
complementary roles. "A senior worker with experience might
allow a company to hire more junior employees because you have
someone who can manage them," he says. Likewise, older
job-creating entrepreneurs represent a rising share of start-up
activity, according to the Kauffman Index of Entrepreneurial
Activity; in fact, entrepreneurs age 55 to 64 accounted for 23
percent of start-up activity in 2010.
Jobless rates historically have been higher for younger
workers - even during times of economic expansion. BLS reported
today that 23.1 percent of teens age 16 to 19 seeking work were
jobless last month; for workers age 20 to 24, the figure was
14.4 percent. The Occupy Wall Street movement underscores the
urgency of the jobless problem among the young, but this
reflects our broader economic challenges, not a refusal of
older workers to retire.
The incentives for older people to continue working are
powerful and positive at a time when the nation's retirement
safety net is badly frayed.
Working at least until the Social Security Normal
Retirement Age (NRA) of 66 allows seniors to avoid 8 percent
annual early-filing benefit reductions - and they can add 8
percent to annual benefits for every year they delay filing up
to age 70.
What's more, Social Security imposes no benefits penalty
for seniors who continue to work after reaching the NRA.
Partial benefits are withheld for seniors who file for benefits
before the NRA and earn more than a $14,640 per year. In those
cases, $1 will be deducted from your benefit payments for every
$2 earned over that amount; the withheld benefits are added
back into benefits after the NRA is reached.
Additional years on the job also allow workers to make
additional contributions to retirement accounts, building
balances that can be put to work in the market; and every
additional year of income is a year in which workers aren't
drawing down retirement balances to support themselves.
So, it's time to get used to the idea of a graying
workforce. It's not going away anytime soon - and we shouldn't
wish that it would.
The author is a Reuters columnist. The opinions expressed
are his own.