Seniors still make up a relatively small share of the total workers in America.… (Melanie Stetson Freeman,…)
WASHINGTON — Millions of workers in their prime have dropped out of the labor market in recent years, but many older Americans are delaying retirement and being added to the workforce in record numbers.
Nearly 1 in 5 Americans ages 65 and older are working or looking for jobs — the highest in almost half a century.
The labor participation rates for other age groups have slid since the recession began at the end of 2007, most sharply for younger adults but also for people in their prime working years, their 30s to 50s.
The contrasting employment paths of seniors and other age groups reflect a long-term population and lifestyle shift intensified by the recession. And the trend has significant implications for the broader economy.
Having more older workers in the job market helps the country's precarious fiscal situation; by working, they're paying Social Security and other taxes rather than drawing public retirement and Medicare funds. The share of seniors claiming Social Security benefits fell last year to the lowest level since 1976.
But there is a trade-off: In this lackluster economy, the increasing employment of seniors means fewer jobs for their younger counterparts. Apart from the direct financial hit to individuals, the shift represents a big collective loss of purchasing power.
Young adults and prime-age workers spend comparatively more money because they are more apt to move, start families, send children to school and buy the latest gadgets. Consumer spending accounts for about two-thirds of the economy, and it has been sluggish during this recovery.
"One of the reasons is young people can't find jobs because older people are not leaving the workforce," said Sung Won Sohn, an economist at Cal State Channel Islands who has studied the issue. Discouraged, many younger workers are staying in school longer or sitting on the sidelines until their prospects improve.
That affects business at restaurants, furniture stores and electronics outlets. And it puts a squeeze on many local governments that rely on retail sales taxes for their revenue.
"As we get older, we require more services but buy less stuff," said Bob Murphy, the mayor of Lakewood, Colo., a community west of Denver with a growing elderly population. "We need to stabilize and sustain a revenue stream in a system [that's built on] where people buy things."
By age group, the nation's biggest spenders are those 35 to 44 and 45 to 54, government statistics show. On average, households with people of these ages spend about twice as much as those headed by older Americans for things such as eating out and entertainment, and they spend roughly 50% more for housing and transportation.
Seniors, of course, still make up a relatively small share of the total workers in America. But senior employment has jumped 27% in the last five years, surpassing 7 million in July, while adults ages 35 to 54 with jobs has fallen 8% during the same period.
In four months, Linda Madden will retire from her full-time administrative job at Colorado College, freeing her up to take long hikes in the southern Rockies and visit her three adult children and families scattered across the country.
But the 66-year-old has no plans to stop working. In fact, Madden already has a part-time job lined up, as a teaching director at a church-run school in Colorado Springs. "I need the income," she said.
Separated from her husband for about 15 years, Madden lives in a small bungalow in downtown Colorado Springs. Apart from expenses for yoga classes and her hiking club, she rarely buys things. She has an ordinary cellphone, not a smartphone. She's had the same television set for 15 years. Her desktop computer, nearing 11 years old, is well past the typical life span. "It still works fine," she said.
As frugal as she lives, Madden is nervous about giving up her full-time job because she doesn't know whether she'll have enough to maintain her lifestyle. Her future income will depend partly on a retirement annuity that's linked to the stock market.
"If you lost a lot and even if you recovered a lot of what was lost, the fluctuating stock market is constantly hanging over you," said Sara Rix, a senior advisor at the AARP Public Policy Institute in Washington.
The housing downturn also left many seniors less wealthy. Although those 50 and older typically have more equity in their homes than younger homeowners, more than 1.5 million of them have lost their homes since 2007 because of the mortgage crisis, the AARP institute found.
What's more, Pew surveys suggest that people 65 and older were the most likely to be bracing for a long recovery. That helps explain why so many older workers have put off retirement.
And many seniors, thanks to the recession, now see how shaky their 401(k) retirement plans are. Without the assurance of the old corporate pension plans, they don't know exactly how far their retirement savings will stretch.