On the Plight of Older Workers

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Ezra Klein covers Pew’s new report on long-term unemployment. From the report:

Thirty percent of those who are jobless have been unemployed a year or more (long-term unemployment) as of December 2010. Equaling 4.2 million people — roughly the population of Kentucky — this is 25 percent more people affected by long-term unemployment than a year prior (December 2009, 3.4 million)….Using the CPS data, Pew calculated that the persistent problem of long-term unemployment is occurring across education and age groups but those who are older than 55 are most likely to remain jobless for a year or more. Additionally, a high level of education only provides limited protection against long-term unemployment — the rates are similar across degree attainment: 31 percent of unemployed workers with a bachelor’s degree have been out of work for a year or more, compared to 36 percent of high school graduates and 33 percent of high school drop-outs.

If you dig into the data a large number of older workers aren’t dropping out of the labor force but instead increasing their job search intensity.  Why?  The Federal Reserve Bank of San Francisco wrote in Labor Force Participation and the Future Path of Unemployment (my bold):

In the case of the labor force participation rate of older workers, secular trends generally overwhelm cyclical patterns. Labor force participation of workers 55 and over consistently fell from the 1950s through the 1990s, when Social Security, pension, and retiree health benefits increased substantially and conditions were generally favorable for early retirement. However, in the 1990s, as the value of those retirement programs eroded, older workers reversed the downward trend. Since then, their labor force participation rate has risen steadily, even through cyclical downturns. Even though their unemployment rate more than doubled over the past three years, older workers have generally stayed in or entered the labor force….The upward trend may continue in the near future. The trends in retirement and health benefits will probably remain in place and the recession’s severe shock to wealth will likely compel even greater numbers of retirement-age workers to stay in the labor force (Daly, Hobijn, Kwok 2009).

Older workers are going to keep on looking for jobs, extending very large duration of unemployment through very futile searches.   They are doing this because health care is expensive for them, their retirement wealth is weak and likely tied to an underwater home.   Why not temporarily reduce the age eligibility for Social Security?  Combine that with a Chapter M for Mortgage expedited bankruptcy if these older worker’s housing situation is to the point where they are trapped in a debtors prison of a home going into their retirement.

Also, as Digby noted, the Medicare buy-in for 55 year olds would have also solved a lot of these problems too in reducing the need for households to make pre-existing wages. I’m surprised that Joe Lieberman sabotaging this, after campaigning for it, right when it would do the most good did not come up much in the recent discussion of Lieberman leaving.

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4 Responses to On the Plight of Older Workers

  1. Billy Joe McAlester says:

    Lieberman’s an idiot.

    Allowing younger people to buy into Medicare might help a little, but unemployment is not the lavish benefit that Casey Mulligan et.al. seem to think. It would still be difficult for many if not most of the older unemployed to pay the premiums.

    I’m 55, would LOVE to retire but even if I got SS and free health care I don’t think I could.

  2. The irony in the dumping of older employees is many of these employees actually had equity in their homes and are in danger of losing it because they can’t access it unless they are working.

    This has a direct bearing on Barack Obama inflicting payback on the largest group of Hillary Clinton supporters.

  3. Jacob Davies says:

    “their retirement wealth is weak and likely tied to an underwater home”

    Don’t want to seem nitpicky, but if the retirement wealth consists of an underwater home, it is not weak, it is non-existent or negative. A *lot* of people fairly close to retirement have zero retirement savings right now; nominal “ownership” of a house with significant negative equity is not something that is going to help them out.

    Unfortunately a lot of people bought into two ideas successively: first that your home should be your primary method of saving for retirement, and second that you should be able to “tap into equity” in that home in order to fund consumption spending.

    Didn’t work out so well.

    • I also don’t buy into “a lot of people” are close to retirement and have no retirement wealth because there home is underwater.

      Many, many, many people bought homes in the 70′s, 80′s and 90′s who are approaching retirement age who probably have ample home equity. However, if they lose their job, they will not be allowed to access any of the home equity, even if the bank is in no danger of losing out if the home equity is not paid back because the home is still worth 30-40% more than what was taken out.

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