The Exchange

Older Workers Aren’t Crowding Out Younger Ones, Study Says

The Exchange

Older workers who stay at their jobs longer are holding positions that could otherwise be taken by younger workers. That's been a popular notion in the past few years as the recession and poor job market have devastated young adults. Some economists have even argued for an early retirement policy that would provide incentives for people to exit the work force at age 62 to open up positions for younger workers.

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A new paper from the Center for Retirement Research at Boston College hopes to put that idea to rest. After analyzing data from the Census Bureau's Current Population Survey from 1977 to 2010, co-authors Alicia Munnell and April Wu found nothing to indicate that older workers are "crowding out" younger ones.

"Our estimates show no evidence that increasing employment of older persons reduces the job opportunities or wage rates of young persons," they say. The study's results were true for both men and women, for groups with different educational levels, and even during the Great Recession.

In fact, a higher rate of employment among older workers has a positive impact on the young "in the form of reduced unemployment, increased employment, and a higher wage," they write. The study found that a 1-percentage-point increase in the employment rate for seniors is associated with a 0.21-percentage-point increase in youth employment, and a slight gain in the number of hours worked per week by the young. According to Munnell, the dynamic nature of the economy means that in the long run, when someone becomes a worker they become a consumer, too -- they need goods and services that will help create jobs for others.

There's no doubt that increasing numbers of older Americans are choosing to keep the paychecks coming -- more out of financial necessity than preference. According to the latest jobs report, the number of employed people 65 and older was 21% higher in September (6.46 million) than the same month in 2008 (5.32 million), while the overall labor force saw a 1.3% dip over the same period. And it looks like the trend will only continue. A 2011 Wells Fargo survey found that a quarter of middle-class Americans say they will "need to work until at least age 80" to live comfortably in retirement.

"Generally the most helpful step that Americans can take to help them in retirement is stay at work for five more years than they'd planned on," says Munnell.

So if having more older workers in the labor force actually has a positive impact on the young job seekers, why are they still in such dire straits? (The unemployment rate for 16- to 24-year-olds was 17.1% in July, little changed from the year before.) Munnell suggests this is because while a higher share of manufacturing jobs is generally associated with higher employment of young people (because they tend to be lower-skilled), this effect declines during a recession like the one we just had.

"The cyclicality of these jobs may help explain why the young are hardest hit by the Great Recession," she says.

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