©SHRM 2014 Workforce Planning: Aging and Employment Module 3: Labor Markets Barbara McIntosh, Ph.D., SPHR 2014 The development of this content was made possible through the support from a grant from the Alfred P. Sloan Foundation.

©SHRM Module 3: Labor Markets Overview Labor market theory. Labor force measurement. Labor force participation rates (LFPR) and age. Labor markets; race and gender considerations. Labor market alternatives; productive activity in other venues compared to paid work.

©SHRM Labor Market Theory: Supply W¹ W² Wⁿ L¹L²Lⁿ Supply Curve: Employees

©SHRM Labor Market Theory: Demand W¹ W² Wⁿ L¹L²Lⁿ a Employer demand curve b

©SHRM Equilibrium Determined by Market W¹ W² Wⁿ L¹L²Lⁿ Supply/Employee Demand/Employer

©SHRM 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? In theory, these are independent questions, and they assume workers can really choose. In reality, the outcome—once demand enters in—makes these questions interdependent.

©SHRM Individual Labor Supply Decision View workers as consumers Labor supply is derived supply. Individuals work because they need income. Except for the need for income, individuals would rather not work. Decide how much employees will work by recognizing that 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.

©SHRM Individual Labor Supply Decision (continued) (Daily Decision) Work Income 24 hours Leisure (nonwork)

©SHRM Individual Labor Supply Decision (continued) W L S>I I>S Substitution effect = “price” of leisure (opportunity cost)↑, leisure is relatively more expensive, work more, L↑. Income effect = can afford more of all goods including leisure; work less L↓.

©SHRM Actual Labor Supply Individuals generally do not have control over hours, certainly not on a daily basis. There is more emphasis today on flexibility as a mechanism to recruit and retain older workers. Historically, 8-hour days, 50 weeks per year, were the norm. Income is not the sole determinant of labor supply. Social, psychological and intrinsic work rewards are important, particularly for older workers.

©SHRM Labor Force Measurement and Data Collection Population vs. civilian labor force Current population survey (CPS) 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 (those individuals who are able and willing but unable to find work so they are no longer trying). * The description of the CPS data and statistics can be found at

©SHRM 2014 Labor Force by Age, 2000, 2010 and Projected

©SHRM 2014 U.S. Labor Force Participation Rates Source: Bureau of Labor Statistics,

©SHRM What Does This Mean? The labor force participation rate for older workers is increasing. Cohort differences: >Gender. >Race.

©SHRM Labor Force Participation Rates by Gender 1994, 2004 and Projected 2014 Labor Force Participation Rates (2014 Projected) MenWomen 55 to 6465 to to 6465 to %21.7%8.6%48.9%13.6%3.5% %26.7%9.0%56.3%18.0%4.3% %31.5%13.1%61.9%22.9%7.2%

©SHRM 2014 Labor Force Participation Rate for Total, Men and Women,

©SHRM 2014 Labor Force by Race in 2010 and Projected

©SHRM LFPR in Context: Productive Activity Domains There are multiple alternatives regarding time use; it is still productive activity. Domains: Paid work. Unpaid work at home. Unpaid work outside home. Source: Danigelis, N. L., & McIntosh, B. R. (1993). Resources and the productive activity of elders: Race and gender as contexts. Journal of Gerontology: Social Sciences, 48, 4, S192-S203.

©SHRM Productive Activity: Types by Race and Gender For workers age 60 and older across all domains: >Working women are most productive (1,607 hours). >Working men are 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.

©SHRM 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.

©SHRM 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.

©SHRM 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.

©SHRM 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 only determinant of labor force participation (intrinsic enjoyment of work, co-worker relations, etc.).

©SHRM The Bottom Line (continued) Older Americans remain productive: Paid work. Unpaid work at home. Unpaid work outside the home. It is important to look at race and gender when considering time allocation among elders.