Political Calculations: How Much Are Geezers Displacing Teens from the U.S. Workforce?

July 18, 2011

How Much Are Geezers Displacing Teens from the U.S. Workforce?

The Big Picture's Invictus points us to an interesting study, via e-mail:

You may want to have a look at this BLS research:
http://www.bls.gov/opub/mlr/2009/11/art3full.pdf
which I had referenced here one year ago at The Big Picture:
http://www.ritholtz.com/blog/2010/07/demographics-to-the-fore/

Here's what Invictus wrote in that latter blog post:

Shortly after the minimum wage was raised last year, the right-wing chorus rose up and began to assert that the rise in teen unemployment was directly attributable to the more generous pay scale. To my eye, and based on numbers I’d crunched, I thought demographics were much more at play (note: that’s “much more,” not “exclusively”), and said so here last September:
There is evidence – real, actual evidence! – that it’s the 55+ age cohort staying in – or re-entering – the job market that is much more at play than the minimum wage…Where there had been less than 2.5 workers 55+ per teen worker in the year 2000, that number has now jumped to a record 5.5…As a percent of the workforce, the 55+ age cohort has now reached a new record of 19.4%, clear evidence that older workers are squeezing younger workers from the workforce.
and here last November:
…simple demographics coupled with the damage wrought by this recession on the Baby Boom generation — in terms of both real estate and investment portfolios (particularly retirement portfolios) — is so great that many Boomers have realized they’re going to have to postpone retirement (see one story on that here, there are thousands on “postponing retirement” out there on The Google).
I reiterated that position here at TBP last month when illegal immigrants became the target of choice for stealing teen employment:
What about demographics — an aging boomer population — and a crappy economy that has the 55+ cohort postponing retirement and consequently crowding out the younger generation (parents keeping their own kids/grandkids out of the job market, as I put it a while back). The data is there for all who choose to explore it.
Well, now comes Bloomberg news with this:
Workers Over 65 Vie With Teens in Labor Market for First Time Since Truman
U.S. employees old enough to retire are outnumbering their teenage counterparts for the first time since at least 1948 when Harry Truman was president, a sign of how generations are now having to compete for jobs.

That makes for a great question - how much might these geezers (our endearing term for the older workers of the U.S. workforce) be displacing teens from the U.S. workforce?

To answer that question, we turned to the Bureau of Labor Statistics' annual reports on the Characteristics of Minimum Wage Workers. Since so many teens in the United States earn the federal minimum wage or less (in 2010, 22.7% of all working teens earned the federal minimum wage or less, representing 22.8% of the entire minimum wage earning workforce for that year), if older Americans are indeed displacing teens from the U.S. workforce, we should definitely be able to see the effects of such a phenomenon in the age-based distribution of the minimum wage earning portion of the U.S. workforce.

The bad news is that these reports only go back to 2002, however that should provide enough data to see any large scale shifts in the age distribution of minimum wage earners.

Our first chart shows the stacked percentage share of each indicated age group within the minimum wage earning portion of the U.S. workforce from 2002 through 2010:

Change in Age Distribution of Individuals Earning the U.S. Minimum Wage or Less (Stacked Area Chart), 2002 - 2010

We see that the overall percentage share of teens within the U.S. minimum wage earning workforce has fallen from 2002 through 2010, however it's difficult to tell from this chart which other age groups might have made substantial gains. We'll next take a closer look by unstacking the data in this chart:

Looking closer, we see that a number of different age groups have seen an increase in their percentage share of the U.S. federal minimum wage earning workforce in the years from 2002 through 2010, however most of these changes appear to be relatively small as compared to the apparent decline in the teen percentage share of this portion of American workers.

We'll need to dig deeper, so we'll next look at the change in the percent share of each indicated age group with respect to their level in 2002:

Change in Percentage Representation by Age for Individuals Earning the U.S. Federal Minimum Wage or Less in 2002, 2002 - 2010

That's more like it! Here, we see that the percentage representation of teens in the U.S. workforce in 2010 is 5.1% less than the level recorded in 2002. That figure confirms that teens are indeed being displaced from the U.S. workforce at the minimum wage level.

Next, we can see which age groups have done the displacing. Here they are, ranked from highest to lowest:

Age 25-29: +1.9%
Age 50-54: +1.7%
Age 45-49: +1.1%
Age 20-24: +0.7%
Age 55-59: +0.5%
Age 30-34: +0.1%

The remaining age groups, covering the Age 60+ portion of the U.S. federal minimum wage earning workforce, have also seen some displacement by the age groups listed above, as their combined percentage share in this portion of the U.S. workforce has declined by 0.9%.

In practical terms, for the 5.1% percentage decline from 2002 through 2010 in the teen share of American federal minimum wage earners, approximate half were displaced by young adults Age 20-34 (2.7%), while the remainder were displaced by geezers Age 45-59 (2.4%).

These figures assume that the geezers Age 45-59 also displaced the retirement age portion of the minimum wage earning workforce, those Age 60 or older.

So in terms of geezers competing directly with teens for minimum wage earning jobs, we find that there is some of that going on, however young adults are more likely to have displaced teens from the U.S. federal minimum wage earning workforce than older workers, but it's nearly 50-50.

Finally, we should note that for these years, what we've outlined above is really a competition by attrition as the number of employed teens in the U.S. economy has fallen sharply over this time, with the competitive edge going to pretty much anyone who has more education, skills and work experience than teens.