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Although the economy is technically in a recovery, unemployment remains high. And the Fed’s August 9 decision to keep rates low through mid-2013 suggests that policymakers expect weak growth for the foreseeable future. What’s happening to older workers in this never-ending malaise?
The answer turns out to be a little complicated. Two forces are at work. On the one hand, labor force participation among older workers has risen significantly since the mid-1980s, a reversal of the long-standing trend toward ever-earlier retirement. The reasons for this reversal include changing incentives in Social Security and employer pensions; better education and health coupled with less strenuous jobs; and the decline in retiree health insurance. Participation rates among older men even continued to rise during both of the recessions in this decade – a dramatic change from previous experience (click on the figure below). Most likely the upward trend was reinforced by the financial crises that depleted 401(k) balances.
Of the two forces, the trend growth in labor force participation appears to dominate the loss of job security. As a result, the employment rate of older workers – the percent of the population with a job – declined only slightly during the 2007-2009 recession. This pattern contrasts sharply with the far more typical decline in employment rates for workers under age 55 (click on figure below).