© Copyright 2002 by the Wyoming Department of Employment, Research & Planning
Wyoming's Workforce: Growing Older Faster?
by: Douglas W. Leonard, Research Analyst
A
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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