KEY TAKEAWAYS
  • Since 2000, labor force growth has come primarily from increases in workers ages 55 and older, while the number of young and prime-age workers has stayed flat
  • The proportion of long-tenured employees is rising because of worker aging
  • Service sectors are expected to continue to drive future employment growth, although the gap in employment growth rates between services and goods-producing sectors has diminished since 2010
  • Women compose about 55% of current and projected net additions to the labor force and have higher educational attainment than men at all ages below 60

The composition of the US labor force is always changing. There are twice as many people over 55 working today than in the year 2000, many of them long-tenured at their current jobs. New entrants into the labor force are more likely to be women and college-educated than ever before, and they are more likely to enter service sectors.

This changing labor force affects the workers compensation system in many ways, a point made by NCCI’s CEO, Bill Donnell, in his opening remarks at Annual Issues Symposium 2018. The amount and types of workplace injuries vary for workers of different ages, gender, and experience, and across different economic sectors. Payroll growth also depends on the size and skills of the labor force.

This issue of the Quarterly Economic Briefing (QEB) highlights demographic trends in the labor force that are important for workers compensation. The discussion here focuses on worker aging, labor force participation, tenure, economic sector, and gender. This issue does not directly address workers compensation outcomes, but forthcoming NCCI research will show the impacts of these changing demographics on workers compensation frequency. That study will be released later this year.

Why is the US Labor Force Adding So Many Older Workers?

The most prominent trend in the US labor force over the past two decades is the increasing share of older workers—from about 12% to 23% of the labor force. And population aging will continue to impact the labor force in future. There are two main reasons for this trend:

Baby Boomers

Baby Boomers, defined by the US Census Bureau as people born during the years 1946–1964, have had an outsized impact on the labor force for their entire working lives. The Baby Boomers are larger than any cohort before them. As a result, most of the growth in older workers since 2000—as well as the leveling off of middle-age workers—is due to Boomers’ aging into their fifties and sixties. We show this in Figure 1, which measures the size of the US labor force by year as estimated by the Current Population Survey.Figure 1 and other figures citing IPUMS-CPS are the authors’ calculations from the Integrated Public Use Microdata Series data set of the Current Population Survey produced by the University of Minnesota, www.ipums.org.

We divide the labor force into three age ranges: younger than 35, 35–54, and 55 and older. The oldest Baby Boomers turned 55 in 2001, which is marked by the shading on Figure 1. The figure shows that around this time, the size of the labor force age 35–54 leveled off, while the size of the labor force 55 and over was beginning its long increase. The youngest Boomers will turn 55 in 2019. However, the Bureau of Labor Statistics (BLS) projects the number of older workers to continue to increase, in part because of trends in labor force participation we discuss next.

Older Americans Have Been Working More Since the 1990s

The increase in older workers is not entirely due to population aging. It is also partially caused by increased labor force attachment among older people.

Figure 2 shows the labor force participation rates for the three age ranges. Since 1990, individuals age 55 and older have increased their labor force participation rate by one-third, from 30% to 41%. Most of this increase occurred between the mid-1990s to mid-2000s, meaning that this phenomenon is not primarily a matter of delayed retirement for people whose nest eggs were hurt by the Great Recession.

Over the same time period, the labor force participation rate of adults under 55 has declined. This decline is most pronounced for people under 35, from 76% to 69%, and is largely (but not entirely) due to increased time spent in school. Full-time students who are not working are not considered part of the labor force. The decline for individuals ages 35–54 is smaller. Their labor force participation has dropped from 83% in 1990 to around 81% now—a small decline in percentage terms, but still responsible for 1.5 million fewer people in the labor force than there would be at the 1990 participation rate.

What is the net effect of these changes within age groups, and of population aging generally? The overall US labor force participation rate—defined as the proportion of Americans age 16 and older either employed or looking for work—has decreased from a high of around 67% in the late 1990s to about 63% today.

About three-quarters of this decline took place from about 2008 to 2013. The rate of decline has decreased since 2013 despite the ongoing economic expansion. The biggest reason for this is the higher proportion today of older Americans. Declining labor force participation of younger and middle-age people also contributes. If not for the increased labor force participation rates for older Americans, the decline shown in the Figure 3 would be even sharper.

How Aging Affects Employee Tenure

How long do workers stay with employers? Employee tenure is an important aspect of the labor market because workers may develop firm-specific human capital, affecting their productivity and wages. More experienced workers also tend to have lower accident rates, making tenure particularly relevant to workers compensation.

Figure 4 shows employee headcounts by tenure from 1996–2016. These data, from the Job Tenure and Occupational Mobility supplement from the Current Population Survey, were collected in even-numbered years. The number of employees with over one year and over five years’ tenure increased during this period, while the number of workers with less than one year of tenure decreased slightly.

This result is not so surprising in view of the large increase in older workers over this time period, since older workers are likely to have longer job tenure.

Figure 5 shows the proportion of workers in each tenure category by age range. Job tenure patterns within age groups have not varied much over time, suggesting that the increase in average job tenure is mostly due to the workforce aging we discussed above.

Changing Sector Mix

Much has been made of the long-term trend in employment away from goods-producing sectors—especially manufacturing but