Older Americans making up larger part of US workforce as population ages

Older Americans are making up a larger share of the total US workforce, even as the demographic's labor participation rate falls, as the nation's population overall is skewing older.

In February, the labor force participation rate for Americans aged 55 years and over was 37.3%, matching a low last hit in July 2005 and down from a pre-pandemic high of 40.5% in July 2019. The participation rate measures the percentage of people who are either employed or looking for work. Workers aged 55 and older accounted for just over 23% of the US workforce in February, up from about 16.5% two decades earlier.

That means more older Americans are in the workforce, even though workers in their age bracket are less inclined to work.

"This gives a misleading impression that older workers are less likely to participate in the labor market, while the opposite is true. It is simply a compositional effect due to aging," said Julius Probst, a senior economist at Appcast.

Life expectancy is rising, and the US population is getting older. The share of the US population aged 60 and over is projected to exceed 26% in 2030, up from 15% in 1980, according to the US Census Bureau. With many people remaining healthier as they age, older Americans are now more likely to work, the data shows.

The labor force participation rate in three groups of older workers tracked by the US Bureau of Labor Statistics is substantially higher than it was more than 25 years ago.

The participation rate for Americans aged 55 to 64 was 66.7% in February, up from 59.9% in February 2000. The rate for those aged 65 to 69 was 37.8%, up from 29.2%. For those aged 70 to 74, it was 20%, up from 13% over the same 26-year stretch.

"Even if a smaller fraction of the 100-plus million Americans over 55 choose to work, their sheer numbers dominate the labor pool," said Laura Ullrich, director of economic research in North America at Indeed.

The Bureau of Labor Statistics projects that the labor force participation rate for Americans aged 55 and older will slowly tick down over the next several years, ultimately falling to 36.9% by 2034, Ullrich said.

With US fertility rates in a decadeslong decline, the US population is rapidly aging, and the workforce is getting considerably older.

"The falling labor force participation rate for workers age 55 years and older is a natural result of the aging population," said Daniel Zhao, chief economist at Glassdoor, who noted that this age group included workers near, past and well into retirement. "As more workers aged 55 and over age into their retirement years, their labor force participation naturally falls."

With Baby Boomers now at or beyond retirement age, Zhao sees a "demographic hump" creating a surge of Americans in retirement and out of the workforce. This imbalance could have severe economic consequences as fewer workers and higher taxes must compensate for an increasingly retired population.

"An aging workforce can contribute to slower overall labor force growth, tightening the labor supply and creating hiring challenges for employers," said Ullrich with Indeed. "At the same time, it also means employers may increasingly need to rely on experienced workers remaining in the workforce longer."

The aging workforce could be exacerbated by the Trump administration's crackdown on illegal immigration, which has created additional pressure on labor force growth, Zhao said. New migration policies will likely lead to near-term worker shortages, particularly in construction, transportation, leisure and hospitality, and agriculture, and will increase price pressures in these sectors, said Probst with Appcast.

"The combination of worker shortages and higher wages might create an incentive for older workers to increase labor force participation," Probst said.