Using one standard benchmark of individual worker productivity—hourly wages—workers between 60 and 74 now earn more than an average worker who is between 25 and 59. The hourly pay premium for older men was about 22 percent in 2011. For older women it was about 10 percent. Other earnings benchmarks show a somewhat less favorable picture, but all of them show considerable improvement in the relative position of aged workers compared with the nonaged over the past two decades.
On one level, this isn’t surprising. You would expect older, more experienced workers to earn more than younger workers. But the fact that this gap is expanding, and that workers as old as 74 are benefiting from it, is a bit novel. There are two reasons for the boost in older workers’ relative earnings. First, the aging of the Boomers means that there are simply more old people than there were in the past. Second, a greater percentage of these older people are now working. This is largely due to rising education levels: workers over 60 are increasingly likely to be as educated as workers under 60.On a more basic level, the realities of retirement today mean that Americans in general need to work longer. Even a millionaire can’t retire in America safely at the traditional 65 year old age mark these days; many will have to retire abroad or delay retirement. That they will be compensated generously for their extra years of work is welcome news, and it should encourage them to shift their retirement expectations sooner rather than later. Indeed many already are working longer hours.The FT highlights what an economy increasingly run by an aging workforce will look like:
The patterns and types of work will change, too, as we have more of a knowledge economy, rather than physical. Work will become more flexible, part time; maybe people will come to work a couple of days a week. Pathways within work will change, with maybe fewer promotions as people develop laterally, not vertically.
With innovations in health care it will become possible for workers to stay productively employed even later into life, as long as employers invest smartly and wisely in the physical health of their employees. This will be good for older Americans, because working is an essential part of a full human life and a key determinant of happiness. It will be good for younger workers as well; as the aging work force reshapes the economy, young and old alike will benefit from more flexible, service-based employment.The demographic shifts we’re experiencing now present a huge policy challenge for the country in the short term, but in the long term they could be a source of strength for the US economy.[Photo of Retirees Bathing Courtesy of US National Archives’ Flickr Stream]