Why Grandpa Hasn't Retired

It's well known that the U.S. is turning gray. It's less well known that the workforce is turning gray as well.

It's well known that the U.S. is turning gray. It's less well known that the workforce is turning gray as well. The percentage of Americans who are 65 and older will rise from 13 percent in 2010 to 20 percent by 2030 -- and, if the recent trend continues, a growing share of those elderly Americans will carry on working past the normal retirement age.

Source: Bureau of Labor Statistics

In 1990, 11.8 percent of those 65 and older worked. In 2010 the figure was 17.4 percent. By 2020, the Bureau of Labor Statistics expects it to be 22.6 percent. The numbers are even more surprising for Americans older than 75. Less than 5 percent of them worked in 1990. In 2010, it was 7.4 percent. By 2020, according to the BLS, 10 percent of them will still be toiling away.

Since 1990, the aging of the population would have increased the number of workers older than 55 by 9.6 million if their participation rate hadn't changed. The increase in the participation rate added another 8.7 million. The rise in participation is almost as powerful as the underlying demographic change.

This is a fundamental change in the way America works. Labor-force participation rates have been declining for Americans younger than 45 -- and especially for those younger than 25. The combined effect of these changes is to shift the average American worker's "economic lifecycle." Between 1990 and 2020, the average period spent in the workforce will have shifted roughly five years later. That's a change of historical magnitude, one to be compared to the end of child labor at the turn of the century or the expansion of public high schools after World War II.

The trend toward ever-later retirement looks likely to continue. The Gallup Organization, a polling firm, asks working Americans when they expect to retire. In 1996, the average answer was 60; in 2012, it was 67.

Why is it happening? For two reasons. First, some Americans work longer because they want to. This applies especially to those who've made higher-than-average earnings during their working lives or have white-collar jobs. Their health allows it -- their life expectancy has increased significantly.

But some are retiring later because they have no choice. The wage stagnation of the past decade and loss of savings (including housing equity) during the recession are forcing them to delay retirement. This group hasn't seen the same improvement in life expectancy: Workers with less-than-median earnings have missed out on that trend since the 1970s. They're working longer, though they aren't living much longer, because they have to.

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