Cambridge, Mass.
DR. B. BOOMER — an unfortunate, but fictional, dentist — worked and saved for years, only to see her portfolio shrivel after a series of investments in orthodontia-related dot-coms a decade ago. She then put her money into seemingly safe financial firms, like A.I.G., and was hammered during the subsequent downturn. Her plan to retire by selling her Scottsdale McMansion isn’t going well either. So the poor woman is spending her 65th year, not in glorious retirement, but fixing fillings for screaming children and generally annoyed adults.
Dr. Boomer is hardly alone. Retirement seems out of the question for increasing numbers of Americans who are saddled with debt and whose savings evaporated during the recent bust. Today’s workers should expect to labor longer, and companies should expect to employ more older workers.
The numbers supply a vivid picture of America’s graying work force. Between 2007 and 2010, the number of working Americans over 65 years old jumped 16 percent; the number of under-65’s in the labor force shrank. The trend started before the current downturn: the number of Americans over 65 in the labor force increased from 10.8 percent in 1985 to 12.1 percent in 1995 to 15.1 percent in 2005 to 17.4 percent in 2010. Until 2001, most workers age 65 and older had part-time jobs; since 2001, full-time work has been far more common.
Consider the difference between today’s extended work life and the average American work life during the mid-20th century in the midst of what was, in retrospect, a retirement boom. Again, the numbers present a vivid picture: from the ’40s to the ’80s, the percentage of men who were 65 and older in the labor force fell precipitously — from 47 percent in 1949 to 15.6 percent in 1993. By the 1980s, retirement at age 65 was nearly universal for American workers. Today, however, 36.5 percent of 65- to 69-year-old men are still part of America’s labor force. (The number of working women in this demographic is slightly lower.)
Economic downturn plays a big part in shifting retirement patterns. Recessions generally affect work lives in two opposing ways. They decrease portfolio values, which tends to make people poorer and thus in need of income from work. Recessions also mean weak labor markets, which make work less rewarding and less available, which in turn encourages older workers to retire. Dr. Boomer’s talents will be in demand as long as teeth rot, so it’s not surprising that in her case, the portfolio effect exceeded the labor market effect.
Two years ago, the economists Courtney Coile and Phillip B. Levine predicted that, faced with diminishing job prospects during times of high unemployment, more workers (especially those who are less educated) would throw in the towel and retire, rather than delay retirement to make up the lost savings. History supplied support for their view; older workers who were laid off in the past traditionally responded by leaving the job market altogether.
But lately, labor patterns haven’t conformed to historical precedent: recent increases in unemployment haven’t encouraged many older Americans into retirement. Why not?
One reason is that as of 2000, Social Security no longer penalizes older workers who continue to earn money. So even though new Social Security awards have soared since 2007, many of those who receive benefits keep working. And there are additional reasons retirement has become less common: work today is far less arduous for most workers, and the elderly are far healthier. Retirement was far more desirable — if not outright necessary — for older Americans who worked on blast furnaces or in coal mines.
But today, comparatively few workers over the age of 55 work in heavy industrial fields like manufacturing, construction or mining. By far the largest portion of older workers today work in the education and health sectors. These jobs aren’t easy — just ask Dr. Boomer — but they beat working in a coal mine. (Also, and not incidentally, there has been relatively little job loss in these sectors; this, too, contributes to diminishing retirement.)
Edward L. Glaeser is a professor of economics at Harvard and the author of "Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier."
This article has been revised to reflect the following correction:
Correction: November 20, 2011
An earlier version of this article provided an incorrect middle initial for the writer. He is Edward L. Glaeser, not P.
Read Full Article »