The Question on People Leaving the Labor Force is 41-Year-Olds, Not 61-Year-Olds

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Friday, 06 June 2014 12:54

In his discussion of today's employment report Neil Irwin notes that the unemployment rate is considerably lower than would otherwise be the case because so many people have simply given up looking for work and are therefore not counted as being unemployed. Irwin then adds that the big question is that if the economy eventually recovers is:

"How many of the 61-year-olds who gave up looking for a job in the last few years are going to return to the labor force when they smell opportunity, and how many have retired for good?"

Actually, the story of people leaving the labor force is not primarily one of older workers who are near retirement age, it is primarily a story of prime age workers. According to data from the OECD, the employment to population ratio for workers between the ages of 25-54 is down by 3.5 percentage points from its pre-recession level. For workers between the ages of 55-64 it is only down by 0.9 percentage points.

It is difficult to envision any obvious reason why people in their prime working years would suddenly decide that they did not want to work other than the weakness of the labor market. Most of these workers will presumably come back into the labor market if they see opportunities for employment.