People Begin Retiring Earlier Than You Might Think

By Brad R. Watts, W.E. Upjohn Institute for Employment Research

In an earlier blog post I discussed the trends that have caused the nation’s overall labor force participation rate to decline over time. As previously stated, most of the decline is being driven by the aging of our society; simply put, as people age they are less likely to work and more likely to retire. Because many members of the baby boom generation are still in their 50s, it may seem that the loss of these workers is an event that is right around the corner; however, a look at how participation varies by age suggests that the transition is already well underway.

As is shown in the accompanying chart, labor force participation begins to trend downward just after age 50, which is long before the age at which most baby boomers will be able to receive full Social Security retirement benefits (age 66 or 67 for persons born after 1943). By age 66 (denoted by the light blue vertical line) labor force participation has already declined to just under 33 percent, which is down by more than half from the participation rate of higher than 80 percent observed for persons in their thirties and forties. 
 
In short, the data show that baby boomers have already begun to leave the workforce. It is unknown what percentage of these individuals are leaving voluntarily by taking early retirement, and what percentage are simply giving up their job search because of the recession and/or age discrimination. Although it is likely that some of the boomers may buck past trends and stay in the workforce longer, it is unlikely that they will be able to shift the age-participation curve by more than a few percentage points. For example, while some white-collar professionals may wish to stay on the job until a later age, many other workers will be (or already have been) enticed out of the system by early retirement offers.  Additionally, workers who are in jobs requiring more physical exertion, such as construction, manufacturing, and even some health care occupations, may find that waiting to retire until age 66 or later is simply not an option.
 
Brad Watts can be reached at Watts@upjohn.org. Originally posted February 29, 2012 on the Upjohn Institute blog.