Issues in Aging: Unemployment and Older Workers
Publication Date: January 2005
Publisher: Library of Congress. Congressional Research Service
Author(s):
Research Area: Labor; Population and demographics
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Abstract:
This is one in a series of papers that explore issues of our aging society. This report examines how unemployment has a different impact on the older worker. As workers age, negative -- but previously temporary -- events such as unemployment may push otherwise firmly entrenched workers out of the labor force. While older workers are less likely than others to experience a spell of unemployment, those older workers who do experience unemployment have a higher incidence of withdrawing from the labor market. Some studies have found that unemployment in older workers contributes up to a one-third increase in the probability of retirement.
The pattern of unemployment leading to unexpectedly early retirement is not a new development. Rather, it is the relative scale of the phenomenon to the overall workforce that is new. The shifting demographics of the workforce have made what was once a fairly small policy issue grow in importance.
Depending on the age of the older unemployed workers, new alternative income sources such as retirement benefits and early Social Security benefits may be used while previous pillars of support such as unemployment compensation become less helpful in replacing income. Facing lowered expected wages and lower chances of rehire, older workers find themselves faced with new decisions: should they search for a new job; create a new job through self-employment; spend down any nonretirement personal savings they may have accrued during their working years; opt to withdraw funds from retirement savings plans, and/or opt to receive Social Security benefits?
One policy issue is how to address the inherent tensions among the Unemployment Compensation (UC) system, alternative working arrangements, and eligibility for and receipt of various types of retirement income including Social Security benefits. Another is how federal programs might better balance providing income support for older Americans with providing appropriate work incentives for those who would prefer to remain engaged in some type of work. This report will be updated as needed.