Older Workers Step In as Share of Prime-Age Cohort Falls

Older workers are holding up the labor force for their younger counterparts, according to new analysis from the Employee Benefit Research Institute.

According to the paper released Monday analyzing the U.S. civilian labor force through December 2023, many in the Baby Boomer generation that should be heading into retirement are still working—often in roles that might otherwise be held by prime-age workers of between 25 and 64, according to report authors Craig Copeland and Kyle Bedu.

The share of the labor force considered “prime working age” has fallen “significantly” since the mid-1990s, the authors wrote. With the decrease coming predominantly from these ages, either younger or older workers are needed to cover the gaps.

“So far, the older population has been filling the gap in the labor force, as those younger than age 25 are at near-record-low levels for their share of the labor force,” the authors wrote.

The findings reinforce a current trend of retirement-age workers continuing to punch the clock well past traditional quitting time. That may have implications for how employers manage benefits such as 401(k)s and financial education programs, says Copeland, EBRI’s director of wealth benefits research.

“A significant percentage of the labor force is ages 55 or older, so employers need to be thinking about how to design these programs with those workers in mind,” he says. “At the same time, there is a growing number of younger workers in the labor force. The middle-aged workers or Gen X is smaller, so employers need to think about the old and the young as they design their plans. It is important to have income and growth options to cover the needs of both age groups.”

Generational Focus

Copeland says employers should consider the different educational needs of the groups, with older workers needing advice on how to turn assets into retirement income in a tax-efficient way. For younger workers, the focus should be on accumulation, while also considering needs such as emergencies and home purchases.

In the report, Copeland also noted that members of the Baby Boomer generation are almost all at least in their 60s, and Gen X is much smaller, so a “decrease in the share of workers ages 55 or older is imminent.”

Just how fast that decrease happens will depend on how long Baby Boomers keep working, which, as separate surveys have pointed out recently, may also depend on how confident they are in having enough retirement income to last the remainder of their lives.

In a retirement outlook report published by Transamerica’s retirement studies center Wednesday, the greatest “retirement fear” middle class people considered was “outliving savings and investments.” On the plus side, 69% of the survey sample of 5,726 people said they are “confident they will be able to fully retire with a comfortable lifestyle.”

Copeland notes that older workers are remaining in the workforce likely due to a combination of the jobs being available and the necessity of not having enough saved.

“Many people continue to work because they can and have jobs that are meaningful to them,” he says. “However, there are those who are behind in their savings and need to continue to build up assets or hold off drawing down their assets. The first circumstance could call for more flexible options within the plan such as in-service withdrawals, while the second circumstance could [call for] increasing contributions and maximum growth in the short term.”

The graying of the workforce, according to the authors, started in 2008, when the U.S. population aged 16 or older became increasingly made up of those ages 65 or older. By 2023, that cohort made up the largest share of the population. Meanwhile, Americans aged 16 through 24 made up the smallest proportion of the U.S., and those aged 45 through 54 made up the second smallest, according to EBRI.

Interestingly, as much as older workers are filling in the labor gap, their labor force participation rates are still not at pre-pandemic levels, according to the researchers. Prime-age worker participation, however, is back to the level seen before the pandemic rocked the workforce.

Other Areas 

The authors also considered labor force participation rates by age and gender.

In age and gender, the authors found that, while women make up the largest proportion of the population “by a sizable margin,” men make up a comparatively larger share of the labor force, particularly among middle-aged workers; the gender gaps shrinks for younger and older age ranges.

In terms of overall labor force participation, more women are in the workforce than in the past, though labor participation rates have dropped for both men and women since 2008.

In addition, the authors found that labor force participation rates for Black and Hispanic Americans increased sharply from 2021 through 2023 after a drop in 2020.

EBRI’s research used data from the U.S. Census Bureau’s Current Population Survey going back to 1975.