It’s easy to believe that retirement is something only old people do. After all, many of us have parents, grandparents or even great-grandparents enjoying their retirement. However, it seems that status isn’t confined to the 60-plus crowd. According to a new report from the Bureau of Labor and Statistics, more people are retiring or leaving the workforce not only at a higher rate, but also at an earlier age.
A person is considered out of the workforce when he or she doesn’t have a job and is also not looking for one. This differs from the unemployment rate, which is counted based on the number of people who are without jobs but are actively looking for one.
The Bureau of Labor and Statistics found that 35 percent of the American population simply wasn’t part of the labor force in 2014. That number is up from 31.3 percent in 2004.
While the reasons vary, including caring for ill family members to recovering from injuries while serving in the military, there’s a decent number of people in each age bracket that cite retirement as their reason for remaining outside the workforce. That seems reasonable, but surprisingly, more people between the ages of 20 and 24 state that they are retired. In fact, the number has doubled since 2004. We can’t help but wonder how these young people are defining the word “retired.”
The Federal Reserve also is quite interested to know the “why” behind these numbers. As Bloomberg Business reports, with fewer people who are able — or willing — to take jobs, we may find that the shortage of workers leads to a surge in wages. This surge could then lead to long-term inflation. “We’re going to be running out of labor as we go through time,” former Fed vice chairman and Princeton University economist Alan Blinder said on Bloomberg Television, December 31.
The Fed needs to be able to estimate how many people will be in the workforce to determine when the interest rate should be raised. The Fed on December 16 raised interest rates for the first time in seven years.
“The labor-force participation rate is still below estimates of its demographic trend,” said Federal Reserve Chair Janet Yellen, “involuntary part-time employment remains somewhat elevated, and wage growth has yet to show a sustained pickup.”
So why aren’t more people looking for jobs? A significant number of people cite “going to school” as a their reason for not joining the workforce. Perhaps some college-age individuals are living at home to offset expenses while not working.
Other people cite home responsibilities as the reason for not being in the workforce. Some of these responsibilities may include caring for a sick family member or caring for a child. The cost of childcare is high enough that, for some families, it’s just not economically feasible for both parents to be working.
Whatever the cause, fewer people are working or seeking work despite the low unemployment rate — we’re almost back to normal in terms of unemployment. The good news is, the Fed isn’t likely to raise the interest rate again soon. Hopefully, in that time, we’ll see more people interested in finding work and we’ll avoid misinterpreting economic reality and pushing ourselves into another recession.
If you are outside the workforce, why have you made that decision?
Megan Winkler is an author, historian, Neurosculpting® meditation coach, certified nutritional consultant and DIY diva. When she’s not writing or teaching a class, Megan can be found in the water, on a yoga mat, learning a new instrument or singing karaoke. Her passion for a healthy mind-body-spirit relationship motivates her to explore all the natural world has to offer.