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Several issues now before the Congress deal with the causes or consequences of the growing number of older persons who are not employed. This paper, requested by the Senate Budget Committee, describes the present and future elderly populations and how demographic changes will affect the labor market, the economy, and the federal budget. It examines the determinants of retirement decisions, how those choices are affected by federal programs and policies, and options to facilitate continued employment by older persons.

This study was prepared by Bruce Vavrichek of the Congressional Budget Office's (CBO) Human Resources and Community Development Division, under the supervision of Nancy M. Gordon and Martin D. Levine. Many individuals provided valuable technical and critical contributions, including Stephen R. McConnell, Paul Cullinan, Jan Lilja, Marilyn Moon, Malcolm Morrison, Lawrence Olson, and Carl Schmertmann. Patricia H. Johnston edited the manuscript. Mary V. Braxton typed the several drafts and prepared the paper for publication.

In accordance with CBO's mandate to provide objective and impartial analysis, this paper contains no recommendations.
 

Alice M. Rivlin
Director
July 1982
 
 

SUMMARY

CHAPTER I. INTRODUCTION

• The Aging of the Population
• Plan of the Paper

CHAPTER II. LABOR MARKET, ECONOMIC, AND BUDGETARY IMPLICATIONS OF AN AGING POPULATION

• Recent and Projected Employment of Older Persons
• Economic and Budgetary Implications

CHAPTER III. DETERMINANTS OF LABOR FORCE PARTICIPATION DECISIONS OF OLDER PERSONS

• Health Limitations
• Retirement Income Sources
• The State of the Economy
• Demand for Older Workers

CHAPTER IV. FEDERAL PROGRAMS AND POLICIES AFFECTING EMPLOYMENT DECISIONS OF OLDER PERSONS

• Direct Income Transfer and Tax Programs
• Regulation of Employer Practices
• Other Labor Market Programs

CHAPTER V. OPTIONS FOR CONTINUED EMPLOYMENT BY OLDER WORKERS

• Modify the Social Security System
• Revise Existing Regulations for Employers
• Change Other Labor Market Programs

APPENDIX A. FEDERAL OUTLAYS FOR PERSONS 65 AND OLDER

APPENDIX B. FACTORS AFFECTING BENEFITS UNDER THE

SOCIAL SECURITY SYSTEM

APPENDIX C. PRIVATE PENSION COVERAGE AND BENEFITS
 

TABLES
1.	DEMOGRAPHIC CHARACTERISTICS OF THE POPULATION, BY AGE GROUP, MARCH 1981
2.	PROJECTED DEMOGRAPHIC TRENDS, CALENDAR YEARS 1980, 2005, AND 2030
3.	LABOR FORCE PARTICIPATION RATES OF OLDER PERSONS, BY SEX AND AGE, CALENDAR YEARS 1960, 1970, AND 1980
4.	EMPLOYMENT CHARACTERISTICS BY AGE GROUP AND SEX, AND UNEMPLOYMENT STATISTICS, CALENDAR YEAR 1980
5.	PROJECTED CIVILIAN LABOR FORCE, BY AGE GROUP, CALENDAR YEARS 1979, 1985, 1990, AND 1995
6.	EMPLOYMENT BY INDUSTRY, CALENDAR YEARS 1981 AND 1990
7.	EMPLOYMENT BY OCCUPATION, CALENDAR YEARS 1981 AND 1990
A-1.	ESTIMATED FEDERAL OUTLAYS FOR PERSONS 65 AND OLDER, BY PROGRAM, FISCAL YEAR. 1982
FIGURES
1.	NUMBER OF PERSONS REACHING AGE 65, 1950 TO 2049
2.	POPULATION AGE 65 AND OLDER, 1950 TO 2040

 

The aging of the population in the years ahead--and especially the increase in the number of older persons who are not employed--has significant implications for those persons, for the economy as a whole, and for the federal government as a provider of retirement income. Persons retiring from the work force not only experience potentially large reductions in income but also may contribute to other sources of declining labor force growth in the future--a trend that could result in lower national output. Budgetary concerns arise both because of increased outlays for income support and because a smaller work force means fewer people to pay for these and other services.

In light of these concerns, the Congress may wish to review those federal policies that are partly responsible for reduced employment by many older persons. Further, it may want to consider options to enhance the employment opportunities of those older Americans who can and choose to continue to work.

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