The Impact of the Great Recession
The Great Recession, which began in 2007 and was declared over in June 2009, decimated retirement savings accounts and caused the largest increase in unemployment in the United States since World War II. Its repercussions will impact society for decades.
In the two years from December 2007 to December 2009, the labor market shed 6.1% of all payroll employment. By comparison, in the deep recession that began in 1981, job loss, at 3.1%, was about half as severe. While it has shown signs of improvement in recent months, the national unemployment rate remains high (see the Bureau of Labor Statistics website for current figures.
When the stock market crashed in 2008, it wiped out trillions of dollars in retirement savings accounts. Retirement accounts lost $2.7 trillion (31%) of their overall value (Source: The Urban Institute). By the end of 2011, retirement account balances were back to $8.6 trillion and close to their peak value in 2007. But adjusted for inflation, these accounts remain 9% below the peak value. (Source: The Urban Institute).
The typical working-age household saw an income decline of $2,700 from 2007 to 2009. Furthermore, given that this recession came on the heels of one of the worst business cycles (2000-07) on record in terms of job creation, the typical working-age household brought in roughly $5,000 less in 2009 than it did in the year 2000. (Source: State of Working America)
Losing Jobs and Staying Unemployed Longer
Many plus 50 adults lost their jobs in the economic recession. When they started looking for new jobs, many found their skill sets don’t match the jobs for which people are being hired. And they had to wait – a long time – to find a new job. When older workers lose their jobs, their chances of finding another job are extraordinarily low. The average jobless person between the ages of 55 and 64, will spend 44.6 weeks, nearly a year, looking for a new job. (Source: New York Times)
Nearly half (49.1%) of older job seekers had been unemployed for 27 weeks (half a year) or longer in February 2010. Younger people stayed unemployed for shorter periods of time – with 28.5% of workers aged 16 to 24 years and 41.3% of workers aged 25 to 54 years being unemployed for 27 weeks or longer. (Source: Bureau of Labor Statistics)
Staying in the Labor Force
According to the Current Population Survey, there were 18.4 million workers age 55 in the labor force in 2000, a number that the Bureau of Labor Statistics projects to 31.9 million by 2015. Older workers will comprise nearly 20% of the total labor force by 2015. (Government Accountability Office, 2001)
Between 1977 and 2007, employment of people 65 and over doubled while employment for everyone 16 and over increased by less than 60%. A larger share of people 65 and older is staying in or returning to the labor force. The labor force participation rate for older workers has been rising since the late 1990s. This is especially notable because the 65-and-over labor force participation rate had been at historic lows during the 1980s and early 1990s. (Bureau of Labor Statistics, 2008)
The share of workers ages 55 years and older, is anticipated to leap from 19.5% to 25.2% of the labor force from 2010 to 2020, a growth rate greater than for any other age group in the labor force. (Source: Bureau of Labor Statistics)
And it’s a good thing they’re staying. The departure of baby boomers from the workforce could have a detrimental effect on the economy and jeopardize the global competitiveness of the United States. As a nation, we cannot afford for people over the age of 50 to leave the workforce entirely over the next 20 years.
Full-Time vs. Part-Time Employment
Between 1990 and 1995, part-time work among older workers began trending upward with a corresponding decline in full-time employment. But after 1995, that trend began a marked reversal with full-time employment rising sharply. Between 1995 and 2007, the number of older workers on full-time work schedules nearly doubled while the number working part-time rose just 19% As a result, full-timers now account for a majority among older workers: 56% in 2007, up from 44% in 1995. (Bureau of Labor Statistics, 2008)
The average life span of Americans has increased by 30 years in the past century. In 1900 the typical American lived to age 47. Today, the average American lives to age 77. (Centers for Disease Control, 2008). The plus 50 adults of today want an active lifestyle. Many continue to work, for money or because they want to, well into what would be considered the typical retirement years.
Among all workers, participation in defined benefit plans has fallen while participation in defined contribution plans has risen. In defined benefit plans, companies pay workers a specified amount in retirement benefits. In defined contribution plans, companies contribute a specified amount for investment but make no assurance as to the final payout.
Among all workers, there has been a decrease in the percentage covered by defined benefit ("payout") plans and an increase in the percentage covered by defined contribution (“pay in”) plans.
For more and more workers, this means that risk — in terms of steady retirement income — has been transferred from the employer to the eventual retiree. In 2007, 43% of workers were covered by defined contribution retirement plans, up from 36% in 2000. While the percent of workers covered by defined benefit plans was at 20% in 2007 and 19% in 2000. (U.S. Bureau of Labor Statistics, National Compensation Survey).
- U.S. Bureau of Labor Statistics, National Compensation Survey.
- Bureau of Labor Statistics, Current Population Survey, Spotlight on Statistics: Older Workers, July 2008.
- Government Accountability Office, "Older Workers: Demographic Trends Post Challenges for Employers and Workers," 2001. Page 2.
- Centers for Disease Control, CIA World Fact Book, 2008.
- American Council on Education (MetLife Foundation funded study), "Framing New Terrain: Older Adults and Higher Education," October 2007, p.16.
- "Job Loss," State of Working America, Economic Policy Institute, 2010.