Goodbye, Golden Years

Cambridge, Mass.

Bob Gill

Bob Gill

DR. B. BOOMER — an unfortunate, but fictional, dentist — worked and saved for years, only to see her portfolio shrivel after a series of investments in orthodontia-related dot-coms a decade ago. She then put her money into seemingly safe financial firms, like A.I.G., and was hammered during the subsequent downturn. Her plan to retire by selling her Scottsdale McMansion isn’t going well either. So the poor woman is spending her 65th year, not in glorious retirement, but fixing fillings for screaming children and generally annoyed adults.

Dr. Boomer is hardly alone. Retirement seems out of the question for increasing numbers of Americans who are saddled with debt and whose savings evaporated during the recent bust. Today’s workers should expect to labor longer, and companies should expect to employ more older workers.

The numbers supply a vivid picture of America’s graying work force. Between 2007 and 2010, the number of working Americans over 65 years old jumped 16 percent; the number of under-65’s in the labor force shrank. The trend started before the current downturn: the number of Americans over 65 in the labor force increased from 10.8 percent in 1985 to 12.1 percent in 1995 to 15.1 percent in 2005 to 17.4 percent in 2010. Until 2001, most workers age 65 and older had part-time jobs; since 2001, full-time work has been far more common.

Consider the difference between today’s extended work life and the average American work life during the mid-20th century in the midst of what was, in retrospect, a retirement boom. Again, the numbers present a vivid picture: from the ’40s to the ’80s, the percentage of men who were 65 and older in the labor force fell precipitously — from 47 percent in 1949 to 15.6 percent in 1993. By the 1980s, retirement at age 65 was nearly universal for American workers. Today, however, 36.5 percent of 65- to 69-year-old men are still part of America’s labor force. (The number of working women in this demographic is slightly lower.)

Economic downturn plays a big part in shifting retirement patterns. Recessions generally affect work lives in two opposing ways. They decrease portfolio values, which tends to make people poorer and thus in need of income from work. Recessions also mean weak labor markets, which make work less rewarding and less available, which in turn encourages older workers to retire. Dr. Boomer’s talents will be in demand as long as teeth rot, so it’s not surprising that in her case, the portfolio effect exceeded the labor market effect.

Two years ago, the economists Courtney Coile and Phillip B. Levine predicted that, faced with diminishing job prospects during times of high unemployment, more workers (especially those who are less educated) would throw in the towel and retire, rather than delay retirement to make up the lost savings. History supplied support for their view; older workers who were laid off in the past traditionally responded by leaving the job market altogether.

But lately, labor patterns haven’t conformed to historical precedent: recent increases in unemployment haven’t encouraged many older Americans into retirement. Why not?

One reason is that as of 2000, Social Security no longer penalizes older workers who continue to earn money. So even though new Social Security awards have soared since 2007, many of those who receive benefits keep working. And there are additional reasons retirement has become less common: work today is far less arduous for most workers, and the elderly are far healthier. Retirement was far more desirable — if not outright necessary — for older Americans who worked on blast furnaces or in coal mines.

But today, comparatively few workers over the age of 55 work in heavy industrial fields like manufacturing, construction or mining. By far the largest portion of older workers today work in the education and health sectors. These jobs aren’t easy — just ask Dr. Boomer — but they beat working in a coal mine. (Also, and not incidentally, there has been relatively little job loss in these sectors; this, too, contributes to diminishing retirement.)

Despite the relative strength of the sectors in which the largest portion of older workers are employed, they — like the rest of us — have suffered the repercussions of recession. Today nearly 450,000 Americans 65 and older are unemployed and looking to work. To get an idea of how dramatic a jump this is, consider this: the number of unemployed elderly job seekers has more than doubled in the last four years.

Many older people keep working, or at least continue to look for work, because they feel they can’t afford not to. Nearly 40 percent of 55- to 64-year-old Americans don’t have retirement accounts. Less than a quarter of this group owns a single stock or savings bond. The median net worth of 55- to 64-year-old Americans has declined during the last years and is now $254,000 (including housing), down from $273,000 just three years ago. American households saved less than 4 percent of their incomes for every year between 1999 and 2008; during this time, thrifty Germans were saving about one-tenth of their earnings. A nation that prefers spending to saving is going to find it difficult to enjoy a comfortable retirement.

IT’S counterintuitive, but the forever work life of older Americans may turn out to be a good thing for young workers. The “lump of labor fallacy” envisions an economic order in which there is a fixed amount of work to be done. But we can make more or less, buy more or less, and most important, we can create new lines of enterprise. Over time, growth and innovation can create plentiful new work opportunities. If the economy needed only a lump of labor, the spectacular expansion of America’s female work force would have led to vast male unemployment. But it didn’t. In fact, the number of working women rose by 87 percent in the 25 years between 1975 and 2000, during which time total male employment also increased, by 41 percent.

Recent studies in Britain and Germany find a positive correlation between labor-force participation among the elderly and youth employment. It’s not that older workers never crowd out younger workers, but there are myriad ways in which older workers also increase employment among the young. As older workers earn more, they can afford to buy more products produced by the young. Older workers may be entrepreneurs who employ younger workers, and they may pass along valuable skills to the young.

America has a terrible youth unemployment problem; the Occupy Wall Street movement may be the most visible manifestation of the unrest it has created. The unemployment rate for 20- to 24-year-olds is 15.5 percent; their economic distress reverberates throughout the system. When the young don’t earn, they don’t marry or buy houses, depressing housing demand and housing prices. Economists have found that people who begin their work lives during a downturn suffer adverse economic consequences for years afterward. We have reason to worry that the current economic slowdown will create a lost generation of Americans who are now in their 20s. But it’s a mistake to imagine we can fix the problem of youth unemployment by encouraging older workers to retire.

Almost 60 years ago, when baby boomers were still rattling around in their playpens, my former colleague John Kenneth Galbraith imagined an “affluent society” in which we would be able “to dispense with the labor of those who have reached retiring age.” It’s a source of common sorrow that his words — and their promise — turned out to be a mirage. While I feel sorry for every American who, like Dr. Boomer, wants to retire but can’t, there is a lot to like in this surge of experienced workers. Longer work lives mean more tax dollars, and that helps with America’s fiscal problems. Older workers also bring a diversity of perspectives and experience to the work force.

America desperately needs more entrepreneurship, and by at least one measure, the elderly are often the most entrepreneurial Americans. Self-employment rises significantly with age. West Palm Beach, a retiree haven, has the highest self-employment rate of any metropolitan area in the nation; other areas around the country that attract older Americans boast similar self-employment patterns. Self-employment is particularly natural for older Americans, because it provides so much more control over working hours and conditions. While self-employment is surely an imperfect measure of entrepreneurship, it correlates with other indices of entrepreneurship. I’m not suggesting that West Palm Beach is likely to become the next Silicon Valley, but we shouldn’t pooh-pooh the independent economic activity of the elderly, either.

Gradually, our image of 70-year-olds needs to change from Florida retirees to Florida entrepreneurs, who find ways to make a bit of cash doing something a bit more fun than their former work. I’ve heard Dr. Boomer is considering starting a Web service, with her grandson, selling advice to aspiring Indian dentists. The government can help, perhaps by promoting adult education for 60-somethings looking to learn new technologies, but this will primarily be a private business.

The United States has always had a Calvinist backbone. We’ve long been comfortable with shorter vacations and longer workweeks. In this light, the mid-20th century retirement boom seems like something of an aberration. In a sense, the current rise in the working elderly is a reversion to form, and perhaps that’s not such a bad thing. While some older workers will have to work because they can’t afford not to, there remains the sunny possibility that others, like Galbraith himself — who worked well into his 90s — will do so because they find fulfillment in their jobs.

This article has been revised to reflect the following correction:

Correction: November 20, 2011

An earlier version of this article provided an incorrect middle initial for the writer. He is Edward L. Glaeser, not P.

Copyright 2011 The New York Times Company. Reprinted from The New York Times, Sunday Review, of Sunday, November 20, 2011.