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The sheer size of the Baby Boom generation means that the number of Americans older than 60 is climbing steeply each year. And many of them are working. As the population grows older, so does the workforce. A trend toward delayed retirement has also increased the employment rate of adults between 60 and 74. Historically, older workers have made less money than their younger counterparts, so it is natural to ask whether an older workforce will also be one that earns lower wages.
At least so far, the answer is no. In the last decade, the earnings of older workers have increased significantly.
Trends in schooling are crucial for understanding recent developments. We’ve seen a steady improvement in older Americans’ educational credentials, both absolutely and in comparison to those of people still in their prime working ages. Thirty years ago people between 60 and 74 were much less likely than 40–44 year-olds to hold a college degree, but today that schooling gap has narrowed dramatically. College graduates not only are paid more than less well educated workers, but also tend to retire later, further increasing their lifetime earning potential.
Better schooling has improved older Americans’ job market position. One benchmark of the success of older workers is their earnings compared with that of younger workers. Older workers have been making steady gains in pay for more than a decade. In the late 1980s, men between 60 and 74 earned about the same average wage as men between 25 and 59. By 2011 they earned one-fifth more. Pay gains among older women have brought their average hourly earnings above those earned by younger women.
This is good news for older workers, but in a job market with excess unemployment, their good fortune may come at a price to middle age and younger workers. As older workers delay their retirement from good jobs, fewer of those jobs are available to workers just starting or in the middle of a career. In an economy with full employment, however, the improving job prospects of the elderly are good news for all of us. If entitlement reform requires us to scale back public retirement benefits for affluent workers, then well-paid older workers are helpful to have around. Delayed retirement may not be to every older worker’s liking, but later retirement will soften the financial blow and reduce the burden of public pensions.
Editors' Note: This article appeared in the July/August 2013 print issue.