*Arrows next to "Older Workers at a Glance" statistics reflect the change from the previous quarter's data.
- Less Employable: Older workers are more likely than younger workers to think they can’t find a job comparable to their current one, a well-founded fear that persists at every earnings level and reflects the reality of an unfriendly labor market.
- Decreasing Bargaining Power: Without the ability to find a better job, older workers are less likely to quit their jobs, further eroding their bargaining power.
- Policy Recommendations: Increase older workers’ opportunities by increasing their bargaining power in the workplace. Establish a federal Older Workers Bureau, expand Social Security, and create universal Guaranteed Retirement Accounts and an emergency savings program.
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Older Workers Know They Are Less Employable
Unfriendly Labor Market Is A Fact
Data confirm older workers’ wary assessment of their job prospects. The wage premium for experienced workers is declining. Between 1992 and 2015, the effect of an additional year of experience on the hourly wages of older workers fell by 45%. When older workers get rehired, their hourly wages are lower than their previous job. Following a job loss, median hourly wages of older workers ages 50-61 are 20% lower on the new job than the old job and for workers 62 and older, wages are 27% lower on the new job. Even if they voluntarily quit their previous jobs, older workers’ (51 and older) wages decrease by 5%. Moreover, older workers who change jobs in their fifties experience longer spells of unemployment compared to older workers who do not.
Older Workers Of All Earnings Fear The Labor Market
Older workers in the top 20% of the earnings distribution are 14 percentage points more likely to lack confidence about finding another job compared to younger workers. For medium earners, the difference is 15 percentage points and for the lowest 40% of earners the difference is 14 percentage points. Older workers feel they have to hold on to low-earning and/or low-quality jobs, reflecting their inability to get a better job.
Afraid To Find A New Job, Older Workers Stick To Their Jobs
Knowing they are less employable than younger workers, older workers often don’t attempt to look for a new job. Examining the rate at which workers move from one job to another (without a spell of unemployment) reveals that older workers are not changing jobs as frequently as their younger counterparts. In 2018, workers over 55 were on average 62% less likely to change jobs compared to younger workers (age 18-54).1
Job Insecurity Impacts Bargaining Power
From a lack of retirement security to the erosion of workers’ rights and the growth of alternative jobs and the gig economy, a host of factors contribute to older workers’ vulnerability in the labor market.
Because of this well-founded fear, the rate at which older workers quit their jobs remains low, even during a time of historically low unemployment. This signals to employers that they do not need to raise workers’ pay to keep retention rates high and turnover costs low, tilting the balance of power towards employers. Workers who deem themselves less employable — and who are less likely to to quit in hopes of getting a better job — have lower reservation wages (the lowest wage workers will accept to participate in the labor market), further eroding their bargaining power.
Older workers’ fears are founded in fact. Leaving them on their own to navigate an unfriendly labor market and the resulting insecurity further exacerbates their declining bargaining power. The solution is to create policies that give older workers viable alternatives to bad jobs and suppressed wages.
Policy Recommendations
Create A Federal Older Workers Bureau
The rising share of older workers in the U.S. calls for the establishment of an Older Workers Bureau—similar to the Women’s Bureau established in 1920—to focus on older workers’ issues, combat age discrimination, and consistently document conditions facing a growing and permanent segment of the labor force. An Older Workers Bureau focuses the attention of policy makers and data analysts on older workers.
Create Emergency Savings Program
Since half of Boomer households have just $5,000 or less in liquid assets, they are often forced to deplete their retirement savings due to emergency spending needs.2 Lawmakers should respond by implementing an emergency savings program, modeled on the Obama administration’s MyIRA program, to automatically enroll workers into emergency savings plans funded by payroll deductions. This program can supplement meager unemployment benefits and give workers the opportunity to look for better jobs.Since half of Boomer households have just $5,000 or less in liquid assets they are often forced to deplete their retirement savings due to emergency spending needs. Lawmakers should respond by implementing an emergency savings program, modeled on the Obama administration’s MyIRA program, to automatically enroll workers into emergency savings plans funded by payroll deductions. This program can supplement meager unemployment benefits and give workers the opportunity to look for better jobs.
Ensure The Option Of Quality Retirement
Instead of increasing the retirement age, which is equivalent to a cut in benefits, lawmakers should strengthen and expand Social Security, ensuring a reliable fallback option when working longer is not possible. Guaranteed Retirement Accounts (GRAs) would give workers access to a secure and accessible way to save for their retirement and supplement their Social Security benefits. GRAs are a proposal for universal individual accounts funded by employer and employee contributions throughout a worker’s career and a refundable tax credit.
Unemployment Rates
The headline unemployment rate (U-3) for workers ages 55 and up is 2.5% this quarter (from October to December), which represents a 0.1% decline from last quarter. ReLab’s U-7 figure includes everyone in headline unemployment, plus marginally attached and discouraged workers, involuntary part-time workers, and the involuntarily retired (those who say they want a job but have not looked in over a year). U-7 decreased from 5.5% to 5.2% in the last three months.
Longer Unemployment
Compared to their younger counterparts, older workers are less able to recover from the financial shock of losing a job. For them, job loss often leads to lower wages, lower-quality jobs and has more severe health consequences. Older workers experiencing job loss take one month longer than younger workers, on average, to find a new job. In 2019, older workers spent 24 weeks looking for a job compared to 20 weeks for younger workers. The average number of weeks spent unemployed has increased for both age groups since the peak of the last business cycle (2007). As older workers’ time looking for work stretches out, many tap into their retirement savings, further compromising their standards of living once they retire.
Retirement Coverage
Workplace retirement plan coverage fell in 2019 to 41%. Low retirement plan coverage increases retirement insecurity for workers and weakens their bargaining position.
Endnotes
1. SCEPA calculations using data from Longitudinal Employer-Household Dynamics (LEHD).
2. SCEPA calculations using Survey of Consumer Finances (SCF). Liquid assets include: saving, checking ,money market accounts, call accounts with brokerage, and prepaid cards.
References
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Gallo, W. T., Teng, H. M., Falba, T. A., Kasl, S. V., Krumholz, H. M., & Bradley, E. H. (2006). The impact of late career job loss on myocardial infarction and stroke: A 10 year follow up using the health and retirement survey. Occupational and Environmental Medicine. 63(10), 683-7
Johnson, R. W. (2019). Older Workers and the Declining Rate of Return to Worker Experience. Generations. 43(3). 63-70
Johnson, R. W., & Mommaerts, C. (2011). Age differences in job loss, job search, and reemployment. Washington, DC: The Urban Institute.
Papadopoulos, M. (2020) “Reservation Wages and Work Arrangements: Evidence From The American Life Panel.” Schwartz Center for Economic Policy Analysis andDepartment of Economics, The New School for Social Research,Working Paper Series 2020-1.
Sass, S. A., & Webb, A. (2010). Is the Reduction in Older Workers’ Job Tenure a Cause for Concern? Boston College Center for Retirement Research Working Paper No. 2010-20
Schwartz Center for Economic Policy Analysis (2019).10+ Years of No Wage Growth: The Role of Alternative Jobs and Gig Work. The New School, Schwartz Center for Economic Policy Analysis
Schwartz Center for Economic Policy Analysis (2019).20+ Years of Older Workers’ Declining Bargaining Power. The New School, Schwartz Center for Economic Policy Analysis
Suggested Citation: Retirement Equity Lab. (2020). “Older Workers Know They Face An Unfriendly Labor Market." Status of Older Workers Report Series. New York, NY. Schwartz Center for Economic Policy Analysis at The New School for Social Research.
