The Economic Challenges Confronting Low-Skilled Older Workers Richard W. Johnson Urban Institute May...

The Economic Challenges Confronting

Low-Skilled Older Workers

Richard W. JohnsonUrban Institute

May 14, 2009

Urban Institute Retirement Policy Program www.RetirementPolicy.org

Adults with Limited Education Often Struggle Financially at Older Ages

Poverty and Near Poverty Rates, Age 55+, 2005

13.9%

5.0% 3.5% 2.4%

23.3%

8.6%5.1%

2.9%

Not HSGrad

HS Grad Some Col. Col. Grad Not HSGrad

HS Grad Some Col. Col. Grad

100% - 125%

< 100%

21.3%

7.7%6.3%

3.3%

33.2%

13.1%

7.8%

4.3%

Men Women

Household Income as % of Poverty Level

Source: Johnson (2009)


Financial Hardship Becomes More Common As People Approach 62, when Social Security Begins

Poverty and Near Poverty Rates by Age, Adults Who Did Not Complete High School Born between 1937 and 1939

22.6% 24.7% 25.4%29.3% 30.8%

24.1% 22.5%27.8%

52-54 54-56 56-58 58-60 60-61 63-64 64-66 66-68

Age

100%-125%

< 100%

31.8%

27.8% 28.5%

36.5% 36.5%

31.3% 32.8%34.6%

Household Income as % of Poverty Level

Source: Johnson & Mermin (2009)


Declines in Economic Well-Being in One’s 50s and 60s Are Tied to Employment

Pct. of Adults With Incomes Below Poverty Level, by Employment

1% 2%

4%

10%

17%

6%

9%10%

8%

25%24%

28%

23%

2%3%

11%

52-54 56-58 60-61 64-66

Age

Work FTuntil 62

Leave FTworkbefore 62Intermittentwork

Never work

Source: Johnson & Mermin (2009).


Older Men’s Employment Rates Increase with Education

Pct. of Older Men Who Are Employed, by Age and Education, 2006

35%30%

17%

52%

33%

24%

54%

38%

26%

65%

52%

36%

63%67%

77%84%

55-61 62-64 65-69 70-74

Age

Not HSGradHS Grad

SomeCollege4+ YrsCollege

Source: Johnson (2009).


Rates Also Increase for Women

Pct. of Older Women Who Are Employed, by Age and Education, 2006

22%18%

12%

45%

27%

15%

51%

33%

23%

51%

36%

23%

35%

59%

66%

75%

55-61 62-64 65-69 70-74

Age

Not HSGradHS Grad


Source: Johnson (2009).


Low-Skilled Workers Are More Likely than College Grads to Work in Difficult Jobs

Percentage of Workers in Demanding Jobs, by Education, 2006

10%

47%

10%

37%

2%

9%

17%

11%

2%

Physically Demanding Requires Flexibility orDexterity

Difficult Working Conditions

Not HSGrad

HS Grad

CollegeGrad

Source: Johnson et al. (2007).


Many Early Workforce Departures Are Involuntary, Especially for those with Limited Education

Incidence of Health and Employment Shocks Between Age 51-55 and 62 (Workers Age 51-55 in 1992)

23%21%

18%

32%

26%

17%

Work Disability Job Layoff

Not HSGrad

HS Grad

CollegeGrad

Source: Johnson et al. (2008).


Older Adults with Limited Education Tend to Have More Health Problems

than Well-Educated Older Adults

Share of Adults Age 55-61 in Fair or Poor Health, 2006

57%

31%

19%

11%

60%

27%20%

10%

Not HSGrad

HS Grad Some Col. Col. Grad Not HSGrad

HS Grad Some Col. Col. Grad

Men WomenSource: Author’s estimates from HRS.


Work Disabilities Increase Financial Hardship for Older Adults Who Did Not Complete High School

Pct. of Adults With Incomes Below Poverty Level, Among Those Who Develop Work Disabilities before Age 62

35%

44%

31%

12%

16%13%

5%3%

5%

32%

12%

3%

52-54 56-58 60-61 64-66

Age

Not HSGrad

HS Grad

CollegeGrad



About Half of Older Workers Without High School Diplomas Who Leave the Workforce Early Fall Into Poverty

Pct. of Adults With Incomes Below Poverty Level, Among Those Who Transition from Full-Work At Age 52-54 to No Work Before Age 62

32%

54%

20%

4%

9%

3%5% 5%

4%

9%

3%

0%

52-54 56-58 60-61 64-66

Age

Not HSGrad

HS Grad

CollegeGrad



Working Longer at Older Ages Also Boosts Retirement Incomes

Percent Change in Annual Retirement Income From Working Longer, By Lifetime Earnings and Additional Work Effort

16%12% 10% 8% 7%

98%

71%

61%

52%

42%

9%

56%

All Bottom Second Middle Fourth Top

Lifetime Earnings Quintile

Work OneMore Year

Work FiveMore Years

Source: Butrica, Smith, & Steuerle (2009).


As The Recession Continues, Unemployment Among Older Men with Limited Schooling Is Soaring

Unemployment Rates, Men Age 55+, by Education

4.0%

13.5%

9.0%

3.5%

7.9%

3.1%

4.3%

2.2%

0%

2%

4%

6%

8%

10%

12%

14%

Nov Jan Mar May Jul Sep Nov Jan Mar

Not HSGradHS Grad


Source: Author’s computations from the CPS.

2007 2008 2009


Unemployment Rates for Older Women With Limited Schooling Are Also High, but Lower

Than the Rates for Older Men

Unemployment Rates, Women Age 55+, by Education

6.0%

9.0%

5.9%

2.6%

6.5%

2.8%4.2%

2.4%

0%

2%

4%

6%

8%

10%

12%

14%

Nov Jan Mar May Jul Sep Nov Jan Mar

Not HSGradHS Grad


Source: Author’s computations from the CPS.

2007 2008 2009


Older Displaced Workers Face Special Labor Market Challenges

• Older unemployed workers have trouble finding jobs– Among unemployed men 65+, 27% were out of work

for 27+ weeks in 2008– For men 35-44, corresponding figure is only 22%

• Older displaced workers who find work experience large wage losses – Wage loss=50% at age 58, only 20% at age 40

(Couch et al. 2009).

• Unemployment stats may understate problem– Seniors are more likely to become discouraged


Congress Should Increase Funding For Employment and Training Services

• Government spending on employment and training programs has declined by nearly 70% since late 1970s (Holzer & Martinson 2008)

• Boost funding for Senior Community Service Employment Program (SCSEP)– only federally-funded employment program targeted

to older adults– provides training & subsidized employment to adults

age 55+ with incomes below 125% of poverty level– only serves about 100,000 clients per year


How Many Older Adults Might Participate in SCSEP if Slots Were Available?

Number of SCSEP Participants and Potential Clients, 2006 (000s)

2,395

1,893

4,288

744897

1,642

100

Participants 55-64 65-74 55-74 55-64 65-74 55-74

Source: Author’s computations from HRS data

Nonworkers, low-income Nonworkers, low-income

No disabilities

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