Changing Shares With Jobs: The Middle-Age Mystery

Here’s a figure showing changes in the share of those with jobs, from David H. Montgomery at the Minneapolis Fed, in “Who’s not working? Understanding the U.S.’s aging workforce” (February 27, 2023).

The 16-19 and 20-24 age groups show the biggest decline in share of population from March 2000 to March 2022. Much of this is because of increasing numbers of these age groups are spending more time in school; in addition, they have become less likely to work while in school at either part-time or full-time jobs.

The age groups over 55 all have a rising share with jobs. This shift is in part improved health for older Americans, in part incentives built-in to programs like Social Security to retire later, and a desire (especially among college-educated workers) to bear the tradeoff of later retirement in exchange for saving up a bigger nest egg before retirement.

The mystery is the declining share with jobs among what government statisticians refer as “prime age” workers, between the ages of 25-54. Montgomery doesn’t offer reasons for the decline of job-holding in this group, which are frankly mysterious. This is not a short-run phenomenon relate to the pandemic. It is primarily accounted for by a decline in job-holding among men. The decline in job-holding by prime-age men has been going on for decades, so it seems unlikely that it can be accounted for by a particular law or rule change, or by the political party in power.

The plausible theories suggest that over a period of rising wage inequality, workers who feel stuck at the bottom of the wage distribution may give up on formal work–even if they are in many cases working off-the-books. In addition, the share of adult men who are unpartnered (that is, not married or cohabitating) is high, and single men are increasingly likely to live in the homes of their parents. The disconnectedness of these prime-age adults from the labor force represents a loss of economic production, but surely more important, it represents a substantial group–many of whom have not left the labor force, but instead stuck it out in low-paid jobs–who are living their prime-age years with frustration and resignation relative to their earlier-in-life aspirations.