We have, on this site, focused like a laser beam on the job crisis for the young. But today, a compelling report from the GAO reminds us that among those who have lost a job, older Americans might just have it worse.
Actually, they absolutely have it worse. Americans over the age of 55 are the least likely to find another job and the most likely to take a significant pay cut for the next position.
Who they are: Since 2010, more than half of all unemployed older workers -- or 1.1 million people over the age of 55 -- have been out of a job for more than six months. Forty-two percent have been out of work for more than a year (see graph).
Even when older people find new work, the new wage is typically only 85 percent of the old salary. By comparison, typical displaced worker between the age of 20 and 54 finds a new wage that's at least 95% of the old salary.
Why they can't find work: There's the health care reason and the technology reason. Experts told the GAO that employers are reluctant to hire older workers because they "expect providing health benefits to older workers would be costly." Others said computer skills often hold back the elderly, especially when the job application is all online.
Where they go: Laid off and locked out, older Americans are increasingly likely to retire early.* About 140,000 more older workers applied for Social Security retirement benefits than the program expected in 2009. The recession has also coincided with a sharp increase in applications for disability benefits. It's clear that, in addition to the 1 million of older Americans who have been looking for work unsuccessfully for more than six months, hundreds of thousands of other older workers have dropped out and retired early.
Why retiring early is no solution: If they choose to drop out of the labor force, older Americans are faced with a slew of bad options. If they have defined contribution pensions, they will retire poorer because they will have had less income to contribute to pensions. If they have defined benefit pensions that use "years worked" in their formula, they will also retire with less to draw down on. If they choose to dip into Social Security early, the monthly retirements will be reduced permanently. And if they accept disability payments, they aren't allowed to look for work. The upshot is that, despite all of our personal and public retirement plans to prepare the elderly for retirement, each plan is weakened in an environment of high unemployment among seniors and near-seniors.
To sum up, although the young face the highest unemployment and the worse income depreciation, it is the oldest generation that faces the longest duration of unemployment. Somewhat paradoxically, older workers are both more likely to be employed and more likely to be long-term unemployed than any other group.
* Along with lower engagement among young people, early retirement is one major reason why economists are seeing lower-than-expected participation in labor markets. This makes our unemployment rate seem better than it really is, because the rate is calculated by dividing unemployed people in the labor force by the total number of people who have or want a job. When fewer people seek work, the denominator shrinks and the rate is depressed.
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