As the Class of 2013 migrates into the labor market, many fresh college grads will be startled by the lack of jobs. They might want to ask their grandparents if they know anything about that.
The lean labor market has become a cutthroat turf battle, with many workers reluctant to cede ground to newcomers. And one reason opportunities for young workers are scarce is that workers over 55 are holding on to their jobs longer than ever.
It’s well-known that the Great Recession trashed retirement prospects for many baby boomers, denting nest eggs, puncturing living standards and sending some to the unemployment line during what should have been their peak earning years. Boomers have responded in a perfectly rational way: By extending their careers and sometimes working well beyond retirement age, to make up for lost wealth and bring in needed income.
A rise in retirement age
The average age at which Americans say they retire is now 61, the highest it’s been in the 22 years Gallup has been asking the question in polls. Gallup’s data shows an increase of two years in the average age at retirement since 2010 and a general upward trend during the past two decades. And it’s likely to go higher still, since the proportion of people who plan to delay retirement has been rising as well.
Those stretched-out boomer careers are distorting the labor market. The economy has created nearly 5 million new jobs since the recession ended in 2009, with more than 4 million of them, on net, going to workers 55 and over. The unemployment rate among workers 55 and older is just 5.5%, while it’s 16.1% among 16- to 24-year-olds.
In general, that means the U.S. workforce is getting older and there’s less turnover than there used to be, which reduces opportunity at the beginning of the career pipeline. “The 'gray society' is creating a drag on markets and the economy,” Larry Fink, CEO of big money-management firm BlackRock, said in a recent speech. “The 'gray society' is restricting job opportunities for younger people as older people stay in the workforce longer.”
Older, experienced workers don’t necessarily compete directly for jobs with recent college grads. But the economy can only support so many jobs, and as older workers stay on the payroll longer, it impedes the creation of new jobs, many of which would go to younger workers. BlackRock estimates that every increase of three years in the average retirement age shifts 10 million jobs into older age brackets, effectively taking them away from younger workers.
Labor-market trends change all the time, and there’s no rule that says one age group needs to make room for another. But there’s plenty of anecdotal evidence that younger workers are suffering more during this weak “jobless” recovery than older ones. A recent study by the Pew Charitable Trusts found that Generation Xers born between 1966 and 1975 lost a greater portion of their wealth during the recession than boomers did, and are likely to be more poorly prepared for retirement than boomers as well. And many millennials (born in the 1980s or ‘90s) are basically stalling as they try to get a career started, while grappling with high levels of student debt and low-paying jobs that don’t cover the bills.
Economist James K. Galbraith of the University of Texas has been one advocate of lowering the retirement age to stimulate more job growth further down the career food chain. But boomers — represented by influential groups such as AARP — are a potent political force, and younger population groups just aren’t. At least they’re not yet organized in a way that is likely to increase their share of the pie at boomers’ expense. That leaves an entrenched status quo likely to favor boomers for the foreseeable future.
Generous boomers could always help out younger generations in their own families, of course, by sharing their wealth or spending carefully in retirement, to leave a bit of an inheritance. Some have already pitched in, by giving their grown kids a place to live while they look for a job and get on their feet. But a job is better than a handout, even for the youngest members of the labor force. Boomers, at least, have something to retire from.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.