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  4. Winter 2010
  5. How Longer Work Lives Ease the Crunch of Population Aging

How Longer Work Lives Ease the Crunch of Population Aging

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Abstract

Population aging is not a looming crisis of the future -- it is already here. Economic challenges arise when the increase in people surviving to old age and the decline in the number of young people alive to support them cause the growth in society's consumption needs to outpace growth in its productive capacity. The ultimate impact of population aging on our standard of living in the future depends a great deal on how long people choose to work before they retire from the labor force. Here, there is reason for optimism. A constellation of forces, some just now gaining momentum, has raised labor force participation at older ages at just the time it is needed. We examine the most important factors behind the increase in labor force participation realized to date: the shift in the skill composition of the workforce, and technological change. We argue that forces such as changes in the structure of employer-provided pensions and Social Security are likely to propel future increases in labor force participation at older ages. The labor market is accommodating older workers to some degree, and older men and women are themselves adapting on a number of fronts, which could substantially lessen the economic impact of population aging. Age-related health declines and the reluctance of employers to hire and retain older workers present challenges, but the outlook for future gains in labor force participation at older ages is promising.

Citation

Maestas, Nicole, and Julie Zissimopoulos. 2010. "How Longer Work Lives Ease the Crunch of Population Aging." Journal of Economic Perspectives, 24 (1): 139-60. DOI: 10.1257/jep.24.1.139

JEL Classification

  • J11 Demographic Trends and Forecasts; General Migration
  • J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
  • J21 Labor Force and Employment, Size, and Structure
  • J22 Time Allocation and Labor Supply
  • J23 Labor Demand
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