Workforce Planning: Aging and Employment
Module 2: Labor Markets—Barbara McIntosh, Ph.D.
Module 2: Labor Markets Overview
•
•
•
•
Labor market theory.
Labor force participation rates (LFPR) and age.
Labor markets: race and gender considerations.
Labor market alternatives: productive activity in
other venues.
Labor Market Theory: Supply
Supply curve: employees
Wⁿ
W²
W¹
L¹
L²
Lⁿ
Labor Market Theory: Demand
Wⁿ
W²
W¹
a
L¹
L²
b
Lⁿ
Employer demand curve
Equilibrium: Determined by Market
Supply/employee
Wⁿ
W²
W¹
L¹
L²
Lⁿ
Demand/employer
Individual Perspective: Two Questions
• Should I work or not?
This determines labor force participation.
• If I choose to work, how many hours do I want to
supply?
These are independent questions in theory.
This assumes the worker has a choice.
In reality, the outcome (once demand side enters in)
makes these questions very interdependent.
Individual Labor Supply Decision
Look at the worker as a consumer.
1) Labor supply is derived supply. The individual
works primarily because he/she needs income.
2) Except for the need for income, the individual would
rather not work.
Decide how much a worker will work by
recognizing there is a trade-off. The trade-off is
between work and leisure (two goods).
All leisure results in no income, and all work
(income) results in no leisure.
Individual Labor Supply Decision (2)
(Daily decision)
Work
Income
24 hours
Leisure (non-work)
Individual Labor Supply Decision (3)
Substitution effect = The price of
leisure (opportunity cost)↑, leisure is
relatively more expensive, work
more, L↑
W
I>S
S>I
L
Income effect = Can afford
more of all goods including
leisure; work less L↓
Actual Labor Supply
• Individuals do not have control over hours
(certainly not on a daily basis).
More emphasis today is on flexibility as a
mechanism to recruit and retain older workers.
Historically, 8-hour days, 50 weeks/yr.
• Income is NOT the only determinant of labor
supply. Social/psychological/intrinsic rewards of
work are very important, particularly for older
workers.
Labor Force Measurement
Population vs. Civilian Labor Force
> CPS (current population survey) data.*
> To be counted in the labor force, you must be able
and willing to work and actively seeking
employment.
> Labor force excludes children, students,
homemakers, institutionalized (mental, criminal),
retirees, military, and discouraged workers (able and
willing, but unable to find work so they are no
longer trying).
* The description of the current population survey and
links to current employment statistics can be found
at www.census.gov/cps/.
Labor Force Participation Rates
Projected Labor Force Participation Rates
Men
Women
Year
55-64
65-74
75+
55-64
65-74
75+
1994
65.5%
21.7%
8.6%
48.9%
13.6%
3.5%
2004
68.7%
26.7%
9.0%
56.3%
18.0%
4.3%
2014
68.7%
31.5%
13.1%
61.9%
22.9%
7.2%
What does this mean?
•
•
•
•
LFPR for older workers is increasing.
Cohort differences.
Gender.
Race.
LFPR in Context: Productive Activity Domains
• There are multiple alternatives regarding time use;
it is still productive activity.
• Domains:
• Paid work outside the home.
• Unpaid work at home.
• Unpaid work outside home.
See: Danigelis, N.L., & McIntosh, B.R. (1993).
Resources and the productive activity of elders:
Race and gender as contexts. Journal of
Gerontology: Social Sciences, Vol. 48, No. 4,
S192-S203.
Productive Activity Types: By Race and Gender
• For workers 60+ (across all domains):
> W females most productive (1,607 hours).
> W males least productive (1,140 hours).
(40 hours/50 weeks =2,000 hours.)
• Paid work: WM→BM→WF→BF.
• Unpaid home: WF→BF→BM→WM.
• Unpaid outside: WF→WM →BF→BM.
Productive Activity: Resource Predictors - Paid
Work
•
•
•
•
•
WM: Income, physical ability.
BM: Income, physical ability, education, assets.
WF: Being married, education, assets.
BF: Income, physical ability, assets.
Age: Significant predictor for all groups, largest
predictor for women.
Productive Activity: Resource Predictors Unpaid Work at Home
• WM: Being married, physical ability.
• BM: Household size.
• WF: Household size, physical ability, being
married.
• BF: Household size, physical ability, age.
Productive Activity: Resource Predictors Unpaid Outside the Home
•
•
•
•
WM: Education, physical ability.
BM: No significant predictors.
WF: Education, physical ability, age.
BF: Education, physical ability.
Motivation for Productive Activity
•
•
•
•
Habit
Physical needs (income)
Psychosocial needs
Other?
Volunteering in the U.S.
• 59 million (more than 25 percent of those age 16
and older).
• Gender: higher among women.
• Employment Status: more likely to be employed.
• Education Level: college graduates.
• Types of Organizations: religious, education or
youth-related organizations.
• Hours: about 52 hours per year.
Volunteering in the U.S.
• Age group most likely to volunteer: 35-54.
• Age group least like to volunteer: 65 and older, and
those in their early 20s.
• Parental status: Parents with children under 18.
• Persons 65 and older: More likely to volunteer
through religious organizations.
Volunteering in the U.S. - Types of Activities
• Teaching or coaching: 24.4 percent.
• Canvassing, campaigning or fundraising: 22.9
percent.
• Collecting, making, serving or delivering goods:
22.2 percent.
• Being a board, committee or neighborhood
association member: 16.3 percent.
The Bottom Line
• Theoretically, market forces determine labor supply
and demand.
• Conflicting pressures influence older worker
supply: substitution effect and income effect.
• Income is not the sole determinant of labor force
participation (intrinsic enjoyment of work, coworker relations, etc.).
The Bottom Line
• Older Americans remain very productive.
• Paid work.
• Unpaid work at home.
• Unpaid work outside the home.
• Race and gender are critical contexts for
looking at time allocation among elders.
• Older Americans do not have a strong
record of volunteering.