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Don't Blame "Boomers" For Not Retiring - they simply can't afford to.
Street Talk Live ^ | 05/15/2014 | Lance Roberts

Posted on 05/15/2014 1:08:17 PM PDT by SeekAndFind

Every month when the employment data is released there is an almost immediate debate that erupts over the Labor Force Participation Rate. Like any good boxing match, both sides take to their corners. Defenders argue the decline is primarily due to retiring "baby boomers" and demographic trends while opponents suggest that it is a sign that employment remains far weaker than headlines suggest.

As I discussed previously, recent employment increases, while encouraging have been little more than a function of population growth. As the population grows, incremental demand increases caused by that increase in population will create employment needs in areas most impacted by that population growth. This is why job formation has been primarily focused in retail, service and hospitality areas.  

Employment-BLS-Population-040314

The Census Bureau and Bureau of Labor Statistics provide some fairly comprehensive data about employment that can help us understand the current state of labor force participation. Is it really just an issue of masses of baby boomers retiring?  Or is it something potentially more structural in nature.

Let's start with the retirement of the boomer generation.  Recent statistics show that the average American is woefully unprepared for retirement. On average, 40% of American families are NOT saving for retirement, and of those who are, it is primarily about one year's worth of income.  Furthermore, important to this particular conversation, one-fourth of those at retirement age postponed retirement with only 18% being confident of having enough saved for retirement.

American-Family-Financial Statistics-051414

For the purposes of this analysis, I am going to exclude all of the "seasonal adjustments" that tend to be a focal point of many of the arguments and utilize a simple 12-month average to smooth the non-adjusted data.

With 24% of "baby boomers" postponing retirement, due to an inability to retire, it is not surprising that the employment level of individuals OVER the age of 65, as a percent of the working age population 16 and over, has risen sharply in recent years. 

Employment-65-Over-051414

This should really come as no surprise as decreases in economic and personal income growth was offset by surges in household debt to sustain the standard of living.  Notice that the surge in 65-year and older employment corresponds with the decline of prosperity in the chart below.

Debt-Incomes-Savings-GDP-051414

So, since we are now fairly certainly that a large number of individuals are working well into their retirement years due to financial reasons, what about employment participation for those of working age years 16-64.  The chart below shows the 12-month average of employment as a percentage of those individuals of working age.

Employment-16-64-Rate-051414

As opposed to the Labor Force Participation Rate that is widely discussed following each labor report, this chart shows that the participation rate of 16-64 year olds remained fairly stagnant between 1988 and 2008 ranging from 71-74%. This stagnation is very much due to the structural shift in employment makeup. However, while employment participation for 16-64 year olds declined sharply in 2008 due to the financial crisis, it has only mildly recovered over the last 5 years.  It is here that the reality of job formation running at rates of population growth become clearly evident. 

When the monthly employment data is released individuals that have given up looking for work are considered to no long be part of the labor force (Not In Labor Force or NILF).  From 1977 through the turn of the century the 12-month average of the percentage of 16-64 year olds considered NILF, as a percentage of the total 16-64 aged population, had declined.  However, since the bursting of the tech bubble and the financial crisis the number the percentage of individuals that dropped out of the labor force has grown sharply.

Employment-16-64-NILF-Population-051414

What seems to be missed by the majority of employment analysis, in my opinion, is whether the economic viability for the average American has improved? The fact the social benefits as a percentage of real disposable incomes has risen to an all-time record certainly suggests that it has not.

Social-Benefits-PercentOfDPI-041514

It would seem to me that this would be a much more salient question considering 70% of economic growth in the domestic economy is driven by consumption.

While the debate over the quantity of employment is sure to continue in the months ahead, the real issue should be quality.  As I discussed recently in relation to the housing market:

"It is difficult to consider "buying" a home when full-time employment remains elusive.  Full-time employment, which pays better wages and provides benefits, leads to increases in household formations and home ownership. A lack of full-time employment remains a major impediment to the recovery story."

Employment-FullTime-JoblessClaims-050514

The problem is that while the Fed has achieved a 6.3% unemployment rate it is clearly a hollow victory. This fact was not lost on Janet Yellen recently when she pulled Fed policy away from the employment mandate suggesting "much more work needed to be done."  She is right. However, the problem is that Fed policy doesn't drive employment - employers drive employment which is only fostered through reduced regulations, taxes, and increased demand.

Bill Dunkelberg, NFIB Chief Economist, summed this up well when he stated recently:

"Small business confidence rising is always a good thing, but it’s tough to be excited by meager growth in an otherwise tepid economy. Washington remains in a state of policy paralysis. From the small business perspective there continues to be no progress on their top problems:  cost of health insurance, uncertainty about economic conditions, energy costs, uncertainty about government actions, unreasonable regulation and red tape, and the tax code.

Regardless of which side of the low labor force participation rate argument you stand on, it is hard to argue that it is simply a function of retiring "baby boomers." While political arguments are great for debate, it is the economics that ultimately drive employment. While the Fed has inflated asset prices to the satisfaction of Wall Street, as shown in the first table above, it has done little for the middle class. It is ultimately fiscal policy that will help business create employment, the problem is that businesses need less of it while government officials keep piling on more.

In the meantime, stop blaming "baby boomers" for not retiring - they simply can't afford to.



TOPICS: Business/Economy; Society
KEYWORDS: babyboomers; boomers; graphs; retirement

1 posted on 05/15/2014 1:08:17 PM PDT by SeekAndFind
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To: SeekAndFind

I don’t think America can afford FOR the boomers to retire.


2 posted on 05/15/2014 1:11:50 PM PDT by SMARTY ("When you blame others, you give up your power to change." Robert Anthony)
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To: SeekAndFind
The Census Bureau and Bureau of Labor Statistics provide some fairly comprehensive data about employment that can help us understand the current state of labor force participation. Is it really just an issue of masses of baby boomers retiring? Or is it something potentially more structural in nature.

Let's start with the retirement of the boomer generation. Recent statistics show that the average American is woefully unprepared for retirement. On average, 40% of American families are NOT saving for retirement, and of those who are, it is primarily about one year's worth of income. Furthermore, important to this particular conversation, one-fourth of those at retirement age postponed retirement with only 18% being confident of having enough saved for retirement.

PFL

3 posted on 05/15/2014 1:12:23 PM PDT by Alex Murphy ("the defacto Leader of the FR Calvinist Protestant Brigades")
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To: SeekAndFind

I could retire but the uncertainty of the future of health insurance is a huge factor.


4 posted on 05/15/2014 1:19:43 PM PDT by caver (Obama: Home of the Whopper)
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To: SeekAndFind

He’s right. I can’t afford to retire. I plan on dying in the office.


5 posted on 05/15/2014 1:29:46 PM PDT by Little Ray (How did I end up in this hand-basket, and why is it getting so hot?)
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To: SeekAndFind
Part of the plan.

De facto increase in the effective retirement age for most of the boomers who not saved up for their retirement with their own savings or investments.

People simply won't be able to afford to retire until they are in their 70s or until they are physically unable to work because inflation will have destroyed the purchasing power of their social security entitlement benefits Same with welfare recipients.

6 posted on 05/15/2014 1:31:30 PM PDT by rdcbn
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To: Little Ray

RE: He’s right. I can’t afford to retire. I plan on dying in the office.

Unfortunately I know of many businesses and companies that will LET YOU GO for your age.

They of course won’t give that as a reason ( age discrimination is illegal ), but they have WAYS of doing it.

AGEISM is rampant in America.


7 posted on 05/15/2014 1:33:17 PM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: SMARTY

RE: I don’t think America can afford FOR the boomers to retire.

Unfortunately I know of many businesses and companies that will LET YOU GO for your age.

They of course won’t give that as a reason ( age discrimination is illegal ), but they have WAYS of doing it.

AGEISM is rampant in America.


8 posted on 05/15/2014 1:33:54 PM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: rdcbn

RE: People simply won’t be able to afford to retire until they are in their 70s or until they are physically unable to work

Unfortunately, whether you can afford to or not, they WILL RETIRE YOU. Ageism is rampant in America.


9 posted on 05/15/2014 1:36:15 PM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: SeekAndFind

Many are supporting two families because of divorce. Others have children and grandchildren living with them, or they are supporting them, because the younger generations are unemployed. That’s what happen in a lousy economy.


10 posted on 05/15/2014 1:42:09 PM PDT by txrefugee
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To: SeekAndFind

I’m 67 and self-employed. I can’t be fired, so I’m free to keep working, as I’m financially compelled to do. But, I wonder when my ability to work will take a hit? I already don’t have the stamina I used to have.


11 posted on 05/15/2014 1:55:27 PM PDT by jumpingcholla34
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To: txrefugee

Plus some of them, like Sarah and Todd Palin, are only 50 years old.


12 posted on 05/15/2014 1:57:05 PM PDT by ansel12 ((Ted Cruz and Mike Lee-both of whom sit on the Senate Judiciary Comm as Ginsberg's importance fades)
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To: SMARTY

“I don’t think America can afford FOR the boomers to retire.”

If that happened, the country would almost immediately collapse, because the kids are definitely not ready for the car keys.


13 posted on 05/15/2014 2:14:31 PM PDT by The Antiyuppie ("When small men cast long shadows, then it is very late in the day.")
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To: SeekAndFind

The new phenomenon I expect to become very widespread are unrelated older Baby Boomers, and even Generation-X’ers moving in together as roommates. The logic in this:

One of them owns a house just for themselves; another has enough money that if they had a home they could have a good retirement; yet another is in good health and willing to do housework and take care of the others for room and board. Perhaps another who is still working but wants something at least somewhat like a home life.

Of course there are lots of variations on this, but all capitalize on the division of labor and mutual support and protection.

If their plan still has an empty room, they can even rent it to someone younger still, like a student.

The underlying reason is economy.


14 posted on 05/15/2014 2:26:29 PM PDT by yefragetuwrabrumuy ("Don't compare me to the almighty, compare me to the alternative." -Obama, 09-24-11)
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To: yefragetuwrabrumuy

I used to think the Baby Boomers should set up communes for seniors. Once popular in the 60s, 70s the time has come to pool resources.


15 posted on 05/15/2014 2:44:16 PM PDT by BunnySlippers (I LOVE BULL MARKETS . . .)
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To: SeekAndFind

IOW, the participation isn’t dropping because boomers are retiring. It’s dropping because the economy is really that bad.


16 posted on 05/15/2014 3:10:04 PM PDT by TwelveOfTwenty (See my home page for some of my answers to the left's talking points.)
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To: BunnySlippers

The inherent problem of communes is that those most attracted to them are least likely to want to work.

Add to that today the government wants to horn in to any kind of endeavor like small farms.


17 posted on 05/15/2014 4:08:22 PM PDT by yefragetuwrabrumuy ("Don't compare me to the almighty, compare me to the alternative." -Obama, 09-24-11)
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To: BunnySlippers
I used to think the Baby Boomers should set up communes for seniors. Once popular in the 60s, 70s the time has come to pool resources.

Interesting that, in your opinion, communism becomes our best hope.

18 posted on 05/15/2014 4:29:34 PM PDT by BfloGuy ( Even the opponents of Socialism are dominated by socialist ideas.)
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To: SeekAndFind
Don't Blame "Boomers" For Not Retiring - they simply can't afford to...ah, cry me a river - if they had followed a few simple old-fashioned rules like planning ahead for contingencies, saving some of what they earned for the future, and not living beyond their means to show the world what important people they were, they probably could afford it - the blame is theirs......
19 posted on 05/15/2014 9:27:44 PM PDT by Intolerant in NJ
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To: SeekAndFind

I love the nasty contemptuous people on a thread like this. My reality is I will work til I die to feed the federal beast. My worry is when I can’t work any more. Then I simply don’t know. Trust God I guess.

But I love the thread bullies who know it all. If someone is a boomer and retired early, they are selfish scoundrels robbing future generations, but if one is in my boat, we are fools and simpletons for not investing and planning better.

There are some really loathsome people on line.


20 posted on 05/15/2014 9:37:47 PM PDT by Luke21
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To: Mears

bfl


21 posted on 05/15/2014 9:42:07 PM PDT by Mears
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To: SeekAndFind
Between ‘93 and ‘94 I was job hunting (college degree, experience, training, everything) and had NO offers.

The whole time I was drawing my unemployment. The girl asked me one week, ‘what do you think is the reason?’.

I said, “Age discrimination. I have never been interviewed by anyone over 35 and no one in these places IS over 35. Some of them have no degree and don't want ME there with experience and education. I was sent to a place where the agency said, ‘be sure to wear a suit and be professional’... (in the meantime, I was wearing a suit while I met with HER and SHE WASN'T)!! Anyway, I went to the job she sent me to and the interviewer had on a dirty shirt that was not tucked in or ironed, he had an earring and hadn't shaved a couple of days. THEY didn't want me in their dinky minimum wage job either. It's like that.”

The girl at the unemployment office said, ‘Write that down on the form’. AS IF they'd do anything about it.

Of course age discrimination IS rampant.

22 posted on 05/16/2014 4:08:56 AM PDT by SMARTY ("When you blame others, you give up your power to change." Robert Anthony)
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To: Intolerant in NJ

“Don’t Blame “Boomers” For Not Retiring - they simply can’t afford to...ah, cry me a river - if they had followed a few simple old-fashioned rules like planning ahead for contingencies, saving some of what they earned for the future, and not living beyond their means to show the world what important people they were, they probably could afford it - the blame is theirs...... “

Well, I have to take exception to what you say. We provided very well for our retirement. I actually retired at 65, although we continued to manage some real property we have. Our investments ( mostly 401/k’s) were generating so much income that we actually were growing these investments because we didn’t need the total amounts they were generating to live on. Then 2007 happened, and immediately 30% or more “disappeared.” Now, we are using up the capital to get a bare minimum of what we need to cover our living expenses. In less than ten years, all of it will be gone at current rates of return. And now, our RE investments, which were not performing anywhere near our 401ks, are now providing the bulk of our income. We would like to be out from under the work these properties entail ( I am now 74) but when you look at selling the property, giving the government probably 30% or more in capital gains taxes, and then trying to invest what’s left, you are right back to consuming the principle because you can’t earn as much in the market as you can in RE, plus you are never sure that some bunch of banksters won’t defraud you again! So we’re going to continue to “work” probably till we die unless something happens in our economy that I don’t forsee. At least our children will inherit the RE and not have to pay the exorbitant taxes that would be levied on us. That is, unless the government once again changes the rules.


23 posted on 09/06/2014 12:49:59 PM PDT by vette6387
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