by Calculated Risk on 5/04/2014 12:59:00 PM

A frequent question is: "I've heard the participation rate for older workers is increasing, yet you say one of the reasons the overall participation rate has fallen is because people are retiring. Is this a contradiction?"

Answer: This isn't a contradiction. When we talk about an increasing participation rate for older workers, we are referring to people in a certain age group. As an example, for people in the "60 to 64" age group, the participation rate has increased over the last ten years from 51.1% in April 2004 to 55.7% in April 2014 (see table at bottom for changes in all 5 year age groups over the last 10 years).

However, when we talk about the overall participation rate, we also need to know how many people are in a particular age group at a given time. As an example, currently there is a large cohort that has recently moved into the "60 to 69" age group. To calculate the overall participation rate we need to multiple the participation rate for each age group by the number of people in the age group.


Click on graph for larger image.

This graph shows the population in each 5 year age group in April 2004 (blue) and April 2014 (red).  Note: Not Seasonally Adjusted, Source: BLS.

In April 2004, the two largest groups were in the "40 to 44" and "45 to 49" age groups. These people are now the 50 to 59 age group.

In April 2004, there were also a large number of people in the 50 to 59 age group. These people are now 60 to 69.

The following table summarizes what has happened if we follow these two cohorts (40 to 49 in April 2004, and 50 to 59 and April 2004).

Cohort 11	Apr-04	Apr-14
Population	44,508	43,455
Participation Rate	83.8%	74.9%
Labor Force	37,294	32,535
Cohort 22	Apr-04	Apr-14
Population	35,373	33,322
Participation Rate	76.1%	45.2%
Labor Force	26,915	15,065
1Cohort 1: People aged 40 to 49 in April 2004. 2Cohort 2: People aged 50 to 59 in April 2004.

So even though the participation rate for an age group is increasing, the participation rate for a cohort decreases as it moves into an older age group.  This shows we need to follow 1) the trend for each age group, and 2) the number of people in each age group.

Note in the table below that the participation rate has been falling sharply for younger age groups (staying in school - a positive for the future) - and that the population is increasing for those age groups.   This is another key trend that has been pushing down the overall participation rate.

This table is population, labor force and participation rate by age group for April 2004 and April 2014.

Populaton and Labor Force by Age Group (000s) NSA
		Apr-04	Apr-14
16 to 19 Age Group	Population	16,198	16,652
	Participation Rate	40.7%	31.1%
	Labor Force	6,600	5,174
20 to 24 Age Group	Population	20,173	22,107
	Participation Rate	74.2%	69.2%
	Labor Force	14,970	15,287
25 to 29 Age Group	Population	18,886	21,151
	Participation Rate	81.4%	79.8%
	Labor Force	15,383	16,871
30 to 34 Age Group	Population	20,027	20,877
	Participation Rate	83.4%	81.4%
	Labor Force	16,712	17,001
35 to 39 Age Group	Population	20,595	19,332
	Participation Rate	83.3%	81.9%
	Labor Force	17,151	15,841
40 to 44 Age Grou[	Population	22,683	20,232
	Participation Rate	83.9%	82.6%
	Labor Force	19,026	16,701
45 to 49 Age Group	Population	21,825	20,554
	Participation Rate	83.7%	81.4%
	Labor Force	18,268	16,737
50 to 54 Age Group	Population	19,247	22,306
	Participation Rate	80.4%	78.1%
	Labor Force	15,480	17,416
55 to 59 Age Group	Population	16,126	21,149
	Participation Rate	70.9%	71.5%
	Labor Force	11,435	15,119
60 to 64 Age Group	Population	12,499	18,441
	Participation Rate	51.1%	55.7%
	Labor Force	6,384	10,273
65 to 69 Age Group	Population	9,716	14,881
	Participation Rate	26.6%	32.2%
	Labor Force	2,585	4,792
70 to 74 Age Group	Population	8,349	10,915
	Participation Rate	15.3%	19.0%
	Labor Force	1,280	2,070
75 and older	Population	16,434	18,841
	Participation Rate	6.0%	8.3%
	Labor Force	986	1,563
Total	Population	222,758	247,438
	Participation Rate	65.7%	62.6%
	Labor Force	146,260	154,845