Baby boomers at work

The number of people working past the normal retirement age is soaring to new highs. This surprising phenomenon will have a major impact on every aspect of life.

The 65+ age group will make up 25 percent of Canada’s population by 2031, a giant leap higher from today’s 11 percent.  This population bulge of older people will create a tsunami in the work place and it’s happening now.

Canadians will have noted already increasing numbers of gray-haired citizens. Trend analysis predicted this ever since 1946 when the two-decade baby boom started. The greying of North America is happening right here and right now. But little thought was given to some basic questions about its impact, until recently.

One obvious question — what will those people do all day?

Apparently, if recent trends in the U.S. are an indicator, those that are not disabled and can find employment will work for a living.

Source: U.S. Bureau of Labor Statistics

The long term graph shows a return to a high level of participation in the work force for seniors, defined as age 65+, while the overall labour force shows a decline in the number of workers as a percent of the total population.

From the Bureau of Labor Statistics in the U.S.:

“The labor force is projected to grow over the next 10 years at an average annual rate of 0.5 percent, a slower rate than in recent decades. Demographic factors—including slower population growth and the aging of the U.S. population—in addition to the declining labor force participation rate will be responsible for the projected growth of the labor force”

The labor force overall is hardly growing while the participation rate among seniors is soaring.

Source: Bloomberg

It’s becoming clear that the 1980s and 1990s were the anomaly and employment trends are rapidly returning to previous eras where most people worked, if they could, well into old age.

I’ve been talking to seniors and middle-aged people about their retirement plans for decades now, as this is the main topic in the financial planning portion of the annual reviews that we conduct with our clients. And most people say that they will retire by 55 to 65 years old. But as that age approaches in their lives, a large proportion of them change their minds and decide to keep working well past the “normal” retirement age. Of course, clients with large investment portfolios are in the very fortunate position of having a choice. I suspect that the numbers for the broad population include many people who are working out of necessity, especially in the U.S. where the housing crash devastated the finances of many people in that age category.

While the numbers as a percent of the population are trending higher, the truly shocking picture is the increase in the absolute number of people in that 65+ age group compared to younger people.

None of the growth in the labor force in the last decade came from people under the age of 55 years old!

Source: U.S. Bureau of Labor Statistics

And, of course, the large increase in numbers of working people is a function of the growth in the absolute number of people.

Changes in the civilian noninstitutional population, 1994-2004, 2004-14, and projected 2014-24

Source: U.S. Bureau of Labor Statistics

In the last two decades a total of 40 million people have reached the 55 years and older category. With the longevity improvement we’ve seen, the same trend will happen in the categories of 65+ and 75+ over the next two decades.

We need to prepare for a different world as there will be many, many older people around us and in the work force.

While most of the changes that this will bring are unknown at this time, one thing is certain – once again the baby boom will be a disruptive force.

 

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Hilliard, The MacBeth Group team and their clients may trade in securities mentioned in this blog.

 

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