Saturday, January 11, 2014

Looky here at the chart I made. Might help in understanding the role of retirements in the changing nature of the US labor force. Must know the problem before we can address it...

One of the major contributors to the declining labor force participation rate in the US is the aging of the Baby Boom Generation.

Using the database from the Social Security Administration I put together this chart which shows, by quarter from 2005 to 2013, the number of people claiming Social Benefits for retirement.  There are several categories for which people can claim SS benefits but I just used "Retired Workers" for this chart.  The assumption is these are people exiting the labor force, whether they were employed or not.

A couple of observations.

(1) the RED bars are all the first quarter of the respective year (January to March).  Notice the surge EVERY 1st quarter of the year to claim benefits. In general the low quarter is the 4th quarter (October to December) of the year.

(2) The 1st quarter of 2009 seems to be a major inflection point (the HIGHEST bar).  Retirements surged that quarter and stayed elevated on average thereafter. I inserted a horizontal GREEN bar to show the quarterly average BEFORE 2009 (145,000) and AFTER (280,294).  That is a significant difference of 135,294 per quarter in new retirements (a 93% increase!).

This is not the whole story of the decrease in the Labor Force Participation, but as you can see it is not small part.

I hope this helps you in visualizing this important issue. If we don't know the facts, then we cannot address the issue with good policy.
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