© Copyright 2002 by the Wyoming Department of Employment, Research & Planning
Wyoming's Workforce: Growing Older Faster?
by: Douglas W. Leonard, Research Analyst
recent study conducted by the U.S. General Accounting Office holds that the
aging of the workforce will substantially influence the labor market over the
next decade.1 In Wyoming, certain industries are already feeling the
impact of this trend. As the baby boom segment of the population reaches
retirement age, the departure of this group from the workforce could have
several impacts, including the creation of a leadership and experience vacuum
that may inhibit organizational effectiveness and overall economic productivity.2
The problem is particularly acute in white collar (professional) and executive level positions where 23 percent of those jobs will be held by persons 55 years of age and older by 2008.3 One possible solution is to recruit these individuals back into the workforce following retirement. This approach is likely to be ineffective, as workers who retire tend to stay retired.4 The issue then becomes constructing wage and benefit packages and offering flexible work schedules to retain older and experienced workers while reducing potential negative impacts on employers. One possibility for easing employer burden involves gradually scaling back employer contributions to health plans as workers reach retirement age (if allowed by law). Some states (e.g., California, Louisiana, Ohio) anticipated retention problems and implemented proactive solutions that included extending and/or enhancing retirement benefits and contributions to retain public school teachers. However, many of these incentives are not available to private sector employers due to Internal Revenue Code rules governing anti-discrimination in retirement benefit plans.5 Therefore, private employers must focus on other methods to retain older workers, such as job sharing, seasonal arrangements, contract employment, or reducing work hours.6 The retention of older workers can be beneficial to organizations in many regards. If a goal is to retain older workers, organizations should give careful consideration to what types of employment packages are made available to individuals who are near or past traditional retirement age.
How do Wyoming's population distribution statistics compare to United States aggregate data? According to current population estimates, Wyoming's population in the 45-54 year age bracket (19.2%) is overrepresented compared to the national population (17.5%). The reverse is true for the 25-34 year age bracket (15.7%), where this group is underrepresented in Wyoming compared to the national average of 18.2 percent.7 These data indicate that the labor problems identified by the General Accounting Office may manifest themselves in Wyoming earlier and with greater impact than in the rest of the nation. Examples of Wyoming industries that have demographic proportions at the extreme ends of the spectrum include:
l Eating & Drinking Places - 59.4 percent of workers are 34 years of age or younger.
l State Government Public Administration - 51.5 percent of workers are 45 years
of age or older.
l Construction - 35.3 percent of workers are 34 years of age or younger.
How do population differences play out in Wyoming's workforce? We begin by examining employment data from 2000. The data source for all tables and figures was the State of Wyoming Unemployment Insurance (UI) Wage Records8 database and other administrative databases. The Wage Records database excludes data for self-employed individuals, as well as those working for railroads, production agriculture, and the Federal Government. Also, note that employee counts and analysis are based on each individual's primary industry.9
Table 1 shows the number of people working in Wyoming by two-digit Standard Industrial Classification (SIC) Code based on primary industry.10 The foundation for this table is all people who worked in Wyoming at any time during 2000. Figure 1 is based on Table 1 data. It shows that 64.6 percent of UI covered workers were employed in Government, Services, or Retail Trade during 2000. Further investigation of Table 1 reveals that some industry groups had a much higher proportion of workers 45 years of age and older than others. The proportions of older workers in Government; Finance, Insurance, & Real Estate (FIRE); Transportation, Communications, & Public Utilities (TCPU); Manufacturing; and Mining were at or above the 33 percent level, compared to the all industries level of 28.7 percent. Sub-industry categories with at least 33 percent of workers 45 years of age and older included coal mining (44.3%), all other mining (43.1%), health services (33.8%), and all Government delineations. Two of the most highly skewed age distributions occurred in the education subsets of State and Local Government workers, with 43.2 percent and 51.4 percent in the upper age brackets, respectively. As stated earlier, State Government Public Administration demonstrated the greatest skew toward the higher age brackets as 51.5 percent of its workers were 45 years of age or older.
We now turn our attention to those employees with a higher degree of attachment to the labor market: people working in Wyoming for two or more quarters during 2000 (see Table 2).11 More than four-fifths of people in the Wage Records database worked at least two quarters during the year (comparing totals from Tables 1 and 2). Furthermore, the removal of people working only one quarter had minimal effect on individual industry percentage shares of workers as shown in Figure 2. Figure 3 shows that the proportion of workers 45 years of age and older was more than three percent higher than that of the UI covered population as a whole (all industries value from Figure 3), indicating those with lower labor market attachment tend to be younger. Agriculture, Construction, and Services showed the largest proportional increase in the 45 years of age and older group compared to the total UI covered labor pool. Industries in Table 2 with relatively skewed age distributions (33% or more in the upper age brackets) included coal mining, all other mining, health services, engineering & management services, and all other services. Education distributions within State and Local Government showed greater skew with low attachment workers removed, as their proportions in the 45 years of age and older group increased to 46.0 percent and 54.1 percent, respectively. As a result, Local Government Other showed the greatest skew toward the upper age brackets, compared to State Government public administration in the total UI covered group.
Wage Records data also show that age distributions in the high attachment group vary substantially by gender as shown in Tables 3 and 4. Comparing the results of specific industry groups, we find that males heavily influence the age distributions in Mining, Manufacturing, TCPU, Construction, and Wholesale Trade, while the opposite is true for Retail Trade, Services, FIRE, and Government. What potential effects could such distributional differences produce? If traditionally male-dominated industries, specifically Mining and TCPU, begin to lose workers at a rapid rate due to age and do not have a sufficient labor pool in the lower age brackets to replace them, employers may hire workers away from other industries, such as construction and manufacturing.12 A similar effect could take place in traditionally female-dominated industries as well. One possible interpretation of data from the 2000 Current Population Survey is that women tend to leave the workforce at a faster rate than males as they age.13 Furthermore, women's workforce withdrawal rates exceeded those of men in the same 5-year cohort age groups from 1995 to 2000, and the retirement ages for men and women are again declining after stabilizing during the 1970s and 1980s. Just how long retirement ages will continue to decline remains uncertain because labor force participation rates for older Americans increased between 1985 and 2000.14 Hence, the labor supply issues highlighted previously may manifest themselves in areas such as local school districts (73% female in the high attachment group from Tables 3 and 4) more quickly than in traditionally male-dominated industries, forcing radical changes in recruiting, compensation, and retention strategies.
What other effects could a skewed age distribution have on Government and private sector employers? Since economic research supports the theory that health care consumption increases with age, any group with a higher proportion of older workers would see its health care costs increase more rapidly than a group with a more balanced age distribution.15 A potential result of such an increase is a phenomenon known as adverse selection, in which individuals in low risk groups (healthy or young people) opt out of health plans where risk distributions cause them to bear a disproportionate share of total health care cost.16 While this increases profitability for insurers that can attract low risk individuals to their policies, the remainder of insurers must raise premiums to cover their additional risk. Based on empirical research, we can expect the same results in any industry (or employer) that provides insurance for a larger share of high-risk individuals.17 Given the high proportions of older workers in certain Wyoming industries, we can expect this phenomenon to exacerbate current and future health insurance cost increases within the state.
Demographic analysis is a useful tool for understanding the directions the labor market is taking. While some effects of changes in the labor market may be beneficial, others such as adverse selection in health plans are not. Although the results focus on demographic changes in Wyoming, similar demographic changes are underway in the United States as a whole.18 This not only affects health care costs but also the supply of labor to fill the jobs that older workers exit. Just how employers will address this challenge is uncertain, but proactive steps must be taken to avoid severe labor shortages in the future. This is especially true in Wyoming where demographic shifts will manifest themselves more quickly than in the remainder of the United States. While this article provides an overview of how current and future demographics may affect the labor market, it is only one portion of the complete picture. Future articles could integrate other elements such as retirement data (Social Security), income data (Internal Revenue Service), and job training data (Workforce Investment Act programs). Only by combining these elements (and others) can we fully understand the nature of Wyoming's labor market and how it interacts with neighboring states and the rest of the nation.
1United States General Accounting Office, Older Workers: Demographic Trends Pose Challenges for Employers and Workers, November 2001.
2The baby boom generation is defined as individuals 35 to 54 years of age in 2000.
3United States General Accounting Office, Older Workers: Demographic Trends Pose Challenges for Employers and Workers, November 2001, p. 12.
4United States General Accounting Office, Older Workers: Demographic Trends Pose Challenges for Employers and Workers, p. 3.
5United States General Accounting Office, Older Workers: Demographic Trends Pose Challenges for Employers and Workers, pp. 28, 30.
6United States General Accounting Office, Older Workers: Demographic Trends Pose Challenges for Employers and Workers, p. 25.
7Susan Murray, U.S. and Wyoming Population Estimates, Census 2000 Supplementary Survey, compiled from Census 2000 Supplementary Survey Summary Tables, Table 1, Profile of General Demographic Characteristics: 2000, November 19, 2001, <http://www.census.gov/c2ss/www/Products/Profiles/2000/index.htm> (November 21, 2001).
8The Unemployment Insurance (UI) Wage Records database consists of all employers submitting UI tax records to the Wyoming Department of Employment, and contains employer and wage information on individuals working for employers that are required to pay Unemployment taxes.
9Primary industry is defined as the industry that was responsible for the highest proportion of a person's wages during a specified time.
10United States Office of Management and Budget, The Standard Industrial Classification Manual, 1987.
11Attachment is defined as the length of time a person was active in the Wyoming labor market. People working in all four quarters of 2000 have higher attachment than those working one quarter.
12Rich Peters, “The Importance of Major Industry to Wyoming's Gender Pay Gap Part One,” Wyoming Labor Force Trends, July 2000, pp. 1-5.
13United States Bureau of Labor Statistics Current Population Survey, Household Data Annual Averages, Employment Status of the Civilian Noninstitutional Population by Age, Sex and Race, Table 3, 2000, <http://stats.bls.gov/cps/cpsaat3.pdf> (December 27, 2001).
14Murray Gendell, “Retirement Age Declines Again in the 1990s,” Monthly Labor Review, October 2000, pp. 12-21.
15David Reisman, Market and Health, 1993, p. 65.
16See Michael Rothschild and Joseph Stiglitz, “Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information,” Quarterly Journal of Economics, November 1976, pp. 630-649 for further details on adverse selection.
17Mark Pauly and Sean Nicholson, “Adverse Consequences of Adverse Selection,” Journal of Health Politics, Policy and Law, October 1999, pp. 921-930.
18For a comparison of national and state age distributions see United States Census Bureau, “Profiles of General Demographic Characteristics,” 2000 Census of Population and Housing: United States, 2001 and “Profiles of General Demographic Characteristics,” 2000 Census of Population and Housing: Wyoming, 2001. For population projections see United States Census Bureau “Projections of the Total Resident Population by 5-Year Age Groups, and Sex with Special Age Categories: Middle Series, 2011 to 2015” at <http://www.census.gov/population/projections/nation/summary/np-t3-d.txt>.
Editor's Note: Other states have recently published information related to the topic of the nation's aging workforce. For example, South Dakota's Labor Market Information Center recently published an article entitled "The Graying American Worker" in the November 2001 edition of its Labor Bulletin publication located at <http://www.sdjobs.org/lmic/lbartolderworkers.htm>.
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