The Rising Fortunes of 55-to-64-Year-Olds May Not Be Good News

This is a tale of two age groups, the one overcome by a wave of economic change and the other triumphantly riding the wave —or so it might seem.

Those tumbling in the wave are 35-to-44-year-olds, the age group now filled with the youngest boomers (this year boomers span the ages from 42 to 60) and the oldest generation Xers (aged 30 to 41). Those riding the wave are 55-to-64-year-olds, the age group filling with the oldest boomers.

The socioeconomic trends among 35-to-44-year-olds are grim:
1. Men's incomes are shrinking: The median income of men aged 35 to 44 was not only lower in 2004 than in 2000, it was also 3 percent below the level of 1990, after adjusting for inflation. In contrast, the median income of the average man rose 7 percent between 1990 and 2004, according to the Census Bureau's Current Population Survey.
2. Household net worth is declining: The net worth of households headed by 35-to-44-year-olds fell 16 percent between 2001 and 2004, after adjusting for inflation—the only age group to lose ground during those years, according to the Federal Reserve Board's Survey of Consumer Finances.

In contrast, take a look at the trends among 55-to-64-year-olds:
1. Men's incomes are growing: The median income of men aged 55 to 64 grew nearly twice as fast as the average between 1990 and 2004 (up 13 percent) and even grew 5 percent between 2000 and 2004.
2. Household net worth is rising: The net worth of households headed by 55-to-64-year-olds increased by an impressive 29 percent between 2001 and 2004, after adjusting for inflation—the greatest gain among age groups and far above the paltry 1.5 percent gain for the average household during those years.

But 55-to-64-year-olds may be riding a wave into a rocky shore. Behind their growing incomes and net worth is greater labor force participation as pension benefits shrink and retirement recedes. The labor force participation rate of men in the age group rose 2 percentage points (from 67 to 69 percent) between 2000 and 2005. Among women aged 55 to 64, the labor force participation rate rose even more (from 52 to 57 percent) as career-oriented boomers filled the age group.

Working more because retirement benefits are shrinking (a de facto pay cut) is not good news for the millions without substantial retirement savings, although it will delay by a few years the rocky landing that lies ahead.

Cool Research Link: Working Papers from the 12 Federal Reserve Banks

Think you're working harder than ever? Not so, says new research from the Federal Reserve Bank of Boston. A study by Mark Agular, a senior economist at the Boston bank and Erik Hurst of the University of Chicago examines time use over five decades and finds both men and women working less and playing more. Their study, "Measuring Trends in Leisure: The Allocation of Time over Five Decades," documents the decline in hours spent working by nonretired men and women aged 21 to 65 between 1965 and 2003. Although women in 2003 work more than those in 1965, the authors find the increase in women's work hours have been more than offset by the decline in the time women spend doing housework. During those years, men's work hours declined, although the drop has been somewhat offset by an increase in the amount of time men spend doing household chores such as shopping, food preparation, and cleaning. Overall, the amount of time men and women spend in market (paid) work has dropped from 34.24 to 33.01 hours per week, a decline of 1.23 hours. The amount of time men and women spend doing household chores has dropped from 23.52 to 18.00 hours, a decline of 5.52 hours since 1965. Total hours of work per week, then, have fallen (and leisure increased) by an average of 7.60 hours among men and 6.44 hours among women. 

This is just one of many fascinating studies generated by the nation's 12 Federal Reserve Banks (in Boston, New York, Philadelphia, Cleveland,
Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco). If you burrow into each bank's Research link, you can find studies on the economic impact of early childhood education (Minneapolis), on whether black workers pay a price for having ethnic names (St. Louis), and a theory of political cycles (Richmond). Most important to many researchers is the analysis of regional economic trends generated by each bank. Those who want an in-depth exploration of how businesses and consumers are faring in a specific region should take a look at that area's Federal Reserve Bank research.  

Bet You Didn't Know

Fifty-three percent of Americans live in one of the nation's 673 coastal counties, according to the Census Bureau, down from 54 percent in 1970.

More about Women in the Labor Force

Let's talk about the labor force participation rate of women again. This time, let's look at labor force rates by Hispanic origin. Hispanic women are much less likely to work than the average American woman, and the growing presence of Hispanics among young adults in the population is reducing the labor force participation rates of young women. 

In 2005, the labor force participation rate of Hispanic women aged 20 to 24 was just 59.4 percent—much lower than the 70.1 percent labor force participation rate of all women in the age group. Subtracting Hispanics from the total lifts the labor force participation rate of women aged 20 to 24 to 72.2 percent. 

Men are not immune from these forces, although Hispanics have the opposite effect on men's rates because Hispanic men are more likely to work than non-Hispanic men. The labor force participation rate of men aged 20 to 24 was 79.1 percent in 2005. Without Hispanic men in the mix, the age group's labor force participation would have been an even lower 77.9 percent.

Between 2000 and 2005, the labor force participation rate of women aged 20 to 24 fell 3.0 percentage points (from 73.1 to 70.1 percent). The labor force participation rate of men aged 20 to 24 fell 3.5 percentage points (from 82.6 to 79.1 percent). The rates for Hispanic men and women fell by an even larger amount—down more than 5 percentage points during those years. What explains a decline in labor force participation that is greater among men than women and greater among Hispanics (who are more likely to work in low-paying entry-level jobs) than non-Hispanics? The explanation is a weak economy.

Will Social Security "Run Out"?

The steady stream of articles about the baby-boom generation's impending retirement often state as fact that funds in the Social Security system will run out as boomers collect their due. 

Not true. America's workers will still pay into the system. Yes, the Social Security surplus will disappear, but the cash flow will continue. Even without any further changes to the system, Social Security will be able to pay 71 to 81 percent of promised benefits indefinitely.

It's also important to remember that the "pig in the python" won't be stuck there forever. Eventually, boomers will exit the system, and Social Security will swing back into a better demographic balance. 

How Many Are Sleepless?

The pharmaceutical industry wants to know. And the American Time Use Survey has the answer. On an average night, 3.7 percent of Americans aged 15 or older experience sleeplessness. That's 8.5 million people tossing and turning each night. Do the multiplication and you get something like 3 billion nights of sleeplessness each year in the United States, according to unpublished data from the Bureau of Labor Statistics' American Time Use Survey.

The average American gets 8.6 hours of sleep a night (including time spent tossing and turning), with teenagers getting the most (9.5 hours) and 45-to-54-year-olds the least (8.2 hours). Who is most likely to be sleepless? Women aged 65 and older.

Bet You Didn't Know

The homeownership rate of householders under age 25 climbed from 17 to 26 percent between 1985 and 2005. The number of homeowners in the age group increased by an enormous 79 percent, to 1.7 million.

Nothing New Here

Today's New York Times reports that, after decades of steady increases, women's labor force participation "has stalled, even slipping somewhat in the last five years and leaving it at a rate well below that of men."

Every time women's labor force participation slips a bit, out come the pundits to complete the narrative arc that so enamors those longing for the good old days—women have come to their senses and are returning home to raise their children. But a number of facts don't fit nicely into this narrative, such as:

1. Between 2000 and 2005, men's labor force participation fell MORE than women's (men: down 1.5 percentage points to 73.3 percent; women: down 0.6 percentage points to 59.3 percent).

2. Between 2000 and 2005, labor force participation rates declined for both men and women in every age group under age 55 (age groups 16-17, 18-19, and five-year age groups from 20-24 to 50-54). In four of the nine age groups under age 55, the decline in men's labor force participation was GREATER than the decline in women's participation. Isn't it probable that men's and women's rates are declining for the same reason? What is the reason, and why aren't men part of the discussion? Because it doesn't fit the story.

3. During soft economic times, women with young children will be more likely to stay home if they can afford not to work. This is not a new trend; it's just common sense. That explains why the biggest drop in women's labor force participation rate since 2000 has been among married women with preschoolers.

4. What about the impact of the growing Hispanic population on women's labor force participation? Hispanic women are less likely to work than Asian, black, or non-Hispanic white women. They account for a growing share of young adults, including 22 percent of married women under age 30. The lower participation rate of Hispanic women is no doubt depressing women's overall labor force participation. Just how much remains to be seen by someone willing to stray from the storyline.

5. The Times article comments that women's labor force participation is now stalled "far below" men’s in the same age group—implying that the "cultural transformation" brought about by working women has somehow fallen short of its goal. But this is a straw dog. No demographer has ever predicted that women's labor force participation would equal men's. Biology dictates that women will be more involved in childbearing and childrearing than men. Consequently, on average they will never participate in the labor force at the same rate as men.

6. The enormous rise in women's labor force participation rate was destined to run its course. Most women who want or need to work are now in the labor force. The small ups and downs from year to year in women's participation rate are recording only the decisions of women at the margins, not heralding a return to traditional family life.

Time for a new story.

Why the Decline in Homeownership?

What accounts for the decline in the homeownership rate between 2004 and 2005? One possible explanation is the economic malaise of the past few years, with incomes stagnating and poverty increasing. Another explanation could be divorce, with homeowning couples splitting into two households—one owner and one renter. Or perhaps homeowners in some markets are cashing out.

A look at the regional statistics suggests economic stagnation is the biggest factor behind the decline. The overall homeownership rate rose in the Northeast (from 65.0 to 65.2 percent) and West (from 64.2 to 64.4 percent) between 2004 and 2005—where some of the hottest housing markets are located. The rate fell a tiny bit in the South (from 70.9 to 70.8 percent). In the Midwest, however, which has been hard hit by layoffs in the manufacturing sector, the decline in homeownership was relatively steep—falling from 73.8 to 73.1 percent between 2004 and 2005.

What's Up with Homeownership?

The Census Bureau just posted its 2005 annual average estimates of homeownership here. Interestingly, the nation's overall homeownership rate fell during the past year, dropping from 69.0 to 68.9 percent of households between 2004 and 2005. The homeownership rate was down slightly in almost every age group.

Since 2000, the overall homeownership rate has increased by 1.5 percentage points, with small declines in only two five-year age groups (among householders aged 50 to 54 and 65 to 69). Householders under age 25 saw their homeownership rate rise the most, up 4 percentage points between 2000 and 2005, to 26 percent. Householders aged 65 to 74 continue to have the highest homeownership rate, with 83 percent of householders in the age group owning their home.