Working Paper: NBER ID: w3743
Authors: Phillip B. Levine; Olivia S. Mitchell
Abstract: This paper examines the likely effects of the aging of the baby boom on labor force attachment, unemployment, and wages. Labor market trends between now and 2020 are the focus of analysis, when the majority of the baby boom generation will confront its retirement decision. We begin by reviewing past labor force trends and discussing important limitations of existing projection methods. Key elements needed to project the consequences of the demographic shock facing the labor market are identified. The task of developing a fully specified economic model to examine the effect of the aging of the baby boom on the labor market is as yet incomplete. On the basis of the best available evidence, we suggest the following conclusions can be drawn: The trend towards earlier retirement will slow and perhaps reverse in the next few decades. Unemployment should fall among older workers and the aggregate full-employment unemployment rate should also decline as the baby boom ages. The aging of the baby boom will not depress wages substantially, either for older workers or for other demographic groups.
Keywords: labor force participation; unemployment; wages; baby boom generation
JEL Codes: J14; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Aging baby boom generation (J26) | Changes in labor market outcomes (J49) |
| Aging population (J11) | Fewer younger workers entering labor market (J29) |
| Trend towards earlier retirement (J26) | Slowing and potential reversal (E32) |
| Aging workforce (J26) | Decreased unemployment rates among older workers (J26) |
| Aging labor market (J26) | Little impact on relative wages (F66) |