We’re Working Longer Now, but Maybe Not Tomorrow

Americans have been working longer (in years) — and the researcher/author of this MarketWatch blog post says that is a good thing. But recent findings suggest that the primary factor has been increased educational attainment among men. With that pattern showing signs of slowing down, will the opportunities and desires to continue to remain in the workforce also be scaled back?

As a strong proponent of working longer, I have been delighted to see the increase in the labor-force participation of men age 60 to 74 in recent years.   I, and other researchers, attribute this pattern to a host of factors, including changes in Social Security (lower replacement rates as the full retirement age increases and the maturation of the delayed retirement credit); the shift from defined-benefit plans with strong early-retirement incentives to 401(k)s; an improvement in the health and education of older workers; less physically demanding jobs; the desire to postpone retirement until the availability of Medicare; and the joint decision-making of dual-earner couples.   With all these forces at play, my assumption was that we would continue to see gains in the labor force activity of older workers as they responded to declines in the retirement income system by remaining in the labor force longer.
 
A recent study by Gary Burtless of the Brookings Institution has caused me to worry.   Burtless explored the extent to which the increased educational attainment of older workers – both absolutely and relative to the attainment of prime-age workers – could explain their greater labor force participation. 
 
The gains in educational attainment among older men have been dramatic.  In 1985, only 15% of men age 60 to 74 had been to college; today that fraction has more than doubled, reaching 32%.  Similarly, in 1985, more than 40% of older men had not finished high school; today only 13% lack a high school diploma.
 
Just as important, the gap in education levels between older and younger men has largely disappeared.  For example, men in their early 60s are now as likely to have completed college as those in their early 40s.  These two groups are also similar in terms of the percentage who lack a high school diploma.  As the educational gap between older and younger workers has narrowed, so too has the wage gap.  Today, men age 60 to 74 earn about the same as their counterparts age 35 to 54.

From Not So Good to Great?

Maybe, just maybe, that Rust Belt name will find its place in history. The Midwest has been stuck with that unflattering moniker for years. Deservedly so in many ways. But the Brookings Institution, no Johnny-come-lately to the think tank game, says in a recent report that the Great Lakes region could be the economic leader going forward.

The State Science & Technology Institute (based in Ohio, giving it extra incentive in this case) analyzed the report this way (with more than a few items and initiatives that are no strangers to Indiana):

The Next Economy: Economic Recovery and Transformation in the Great Lakes Region provides a roadmap for federal, state and local stakeholders to transition the Rust Belt into a forward thinking economy. It replaces the old economy, which was driven by highly-leveraged, domestic consumption, with an export-oriented Next Economy powered by a low-carbon energy strategy and driven by innovation that benefits all Americans.

The report outlines the many resources that can position the Great Lakes region as an economic leader. They include:

Global trade networks: Many of region’s cities rank among the top cities in terms of the share of their metro output that is exported;

Clean energy/low carbon capacity: Their blue-green potential due to the Great Lakes, waterways and abundant natural wind/solar resources position the region well in renewable energy generation; and

Innovation infrastructure: The region’s metros are home to 21 of the 32 major public and private research universities, which attract substantial federal research investment. Each year almost 36% of all U.S. science and engineering degrees come from schools in the region. The region also registers almost 33% of all U.S. patents.

To achieve this economic transformation, the region will have to address the deficient transportation infrastructure for trade, the concentration of energy-intensive industries, the lack of seed capital and the low educational attainment levels. To resolve these challenges, the report provides three key Next Economy drivers that will help federal, state and metropolitan leaders to maximize the region’s promise:

Invest in the assets that matter: innovation, human capital, and infrastructure: Even though budget cuts have become a regular occurrence, the researchers argue, long-range economic health is not just a matter of spending less, but spending and investing to spur growth. The region should concentrate its efforts on developing regional innovation clusters, instituting workforce development at community colleges and smart spending on infrastructure to facilitate trade.

Devise new public-private institutions that are market-oriented and performance-driven: Government leaders should be prepared to go to voters to support bond issues or dedicated tax sources for these institutions. They also can consider reorganizing money from programs and systems that are underperforming. These institutions include new infrastructure banks, advanced manufacturing labs, regional energy research and innovation centers and a venture capital fund of funds.

Reimagine metros’ form and governance structures to set the right conditions for economic growth: To achieve growth and innovation, cities and states must overhaul their physical redevelopment strategies and local governance structures in the Great Lakes region due to their significant population and economic declines. They must focus on right-sizing communities, green development and infrastructure and governance reform.