Tom Keene's EconoChat

Drew, are we seeing a structural change in the workforce?
We (UBS) did a piece recently suggesting that we are seeing a cyclical downturn in the labor force participation rate, but also a structural one for the baby boomers.

What's the structural change for boomers?
When people begin to get closer to retirement age, their attachment to the workforce becomes less. So, for example, if—and this isn't exactly the way it works—you are a 54-year-old male, your participation rate in the labor market is around 89 percent.

So 89 percent of these men are either working or looking.
But if you go to age 57 or 56, you are down to the forties. So if you swing that population of boomers from 89 to 40 percent, you can tell that their overall participation rate in the workforce goes down.

So what portion of the recent downturn in employment is cyclical and what portion structural?
I think it's about 50-50. Another interesting point is this perception that baby boomers have not saved enough for retirement and must keep working. The facts simply do not bear this out. The net worth of the generation approaching 65 is higher than the previous generation. What that tells me is, fine—life expectancy has increased a little and there is some desire to keep working more. But is there a need? I cannot find evidence of that.

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