Labor force gap grows as baby boomers age

As of last year, people aged 65 and older made up the largest share of the U.S. population over age 16, a trend that started in 2008 as baby boomers aged. Meanwhile, Americans between the ages of 16 and 24 represent the smallest proportion of the population and those between the ages of 45 and 54 make up the second smallest share.

This population shift has implications for the U.S. labor force as the large contingent of people over age 65 increasingly make up a smaller proportion of the labor force, according to an Employee Benefit Research Institute issue brief. The report examined the U.S. labor force through December 2023 using data from the U.S. Census Bureau’s Current Population Survey.

“At present, the aging of the baby boom generation has resulted in an increased share of older individuals in the labor force. However, members of this generation are almost all at least in their 60s, and the next generation (Gen X) is much smaller, so a decrease in the share of workers ages 55 or older is likely to follow,” said EBRI. “Working longer not only has implications for companies, but also for the individuals themselves, as working into older ages can lead to the accumulation of more assets, less need to deplete assets already accumulated, and a delay in claiming Social Security benefits.”

However, post-pandemic labor force participation rates of those ages 65 or older have not recovered to their pre-2019 levels, and as a result, many individuals are not likely to be working at older and older ages, the report said. Furthermore, women over age 65 are the largest proportion of the U.S. population aged 16 and older by a sizable margin, but men make up a comparatively larger share of the labor force than women.

The share of the labor force that is considered prime working age – those between the ages of 25 and 64 – has significantly fallen since the mid-1990s despite the labor force participation rates of individuals of these ages remaining near their mid-1990s levels, said EBRI. The decrease is driven by the smaller number of people in this age group and has created a gap that must be filled by people outside of the prime working age. So far, the older population has been filling the gap in the labor force, as those younger than age 25 are at near record-low levels for their share of the labor force, EBRI said.

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For nearly 50 years, from 1975 to 2023, the labor force participation rate of those 16 and older was relatively constant. Though both genders in this age group had lower participation rates starting in 2023, participation levels rose for females and fell for males.

Labor force participation rates among White Americans over age 16 have declined in the past 24 years, while participation rates for Black and Hispanic Americans were also lower though the decrease was less pronounced. After falling in 2020, participation rates for Black and Hispanic Americans increased sharply from 2021 to 2023, the report found.