1. Workforce Planning: Aging and Employment Module 2: Labor Markets Barbara McIntosh, Ph.D., SPHR 2010

2. ©SHRM 2010 2 Module 2: Labor Markets Overview Labor market theory. Labor force participation rates (LFPR) and age. Labor markets; race and gender considerations. Labor market alternatives; productive activity in other venues.

3. ©SHRM 2010 3 Labor Market Theory: Supply W¹ W² Wⁿ L¹L²Lⁿ Supply Curve: Employees

4. ©SHRM 2010 4 Labor Market Theory: Demand W¹ W² Wⁿ L¹L²Lⁿ a Employer demand curve b

5. ©SHRM 2010 5 Equilibrium Determined by Market W¹ W² Wⁿ L¹L²Lⁿ Supply/ Employee Demand/ Employer

6. ©SHRM 2010 6 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.

7. ©SHRM 2010 7 Individual Labor Supply Decision View workers as consumers 1) Labor supply is derived supply. Individuals work because they need income. 2) 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.

8. ©SHRM 2010 8 Individual Labor Supply Decision (2) (Daily Decision) Work Income Leisure (non-work) 24 hours

9. ©SHRM 2010 9 Individual Labor Supply Decision (3) 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↓.

10. ©SHRM 2010 10 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. Income is not the sole determinant of labor supply. Social, psychological and intrinsic work rewards are important, particularly for older workers.

11. ©SHRM 2010 11 Labor Force Measurement 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 www.census.gov/cps.

12. Labor Force Participation for Men Aged 55 and Older from 1963-2006 ©SHRM 2010 12

13. ©SHRM 2010 13 Projected Labor Force Participation Rates MenWomen 55 to 6465 to 7475+55 to 6465 to 7475+ 199 4 65.5%21.7%8.6%48.9%13.6%3.5% 200 4 68.7%26.7%9.0%56.3%18.0%4.3% 201 4 68.7%31.5%13.1%61.9%22.9%7.2%

14. ©SHRM 2010 14 What Does This Mean? The labor force participation rate for older workers is increasing. Cohort differences: > Gender > Race

15. ©SHRM 2010 15 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. Danigelis and McIntosh (1993).

16. ©SHRM 2010 16 Productive Activity: Types by Race and Gender For workers aged 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.

17. ©SHRM 2010 17 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.

18. ©SHRM 2010 18 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.

19. ©SHRM 2010 19 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.

20. ©SHRM 2010 20 Motivation for Productive Activity Habit. Physical needs (income). Psycho-social needs. Other?

21. ©SHRM 2010 21 Volunteering in the U.S. 61.8 million volunteered in 2008. 27 percent of Americans volunteer. 8.1 billion hours of service. 34.7 hours per resident. Less formal ways of serving in communities has increased. Thirty one percent more Americans worked with a neighbor in 2008 compared with 2007. Gender? Employment status? Education level? Types of organizations? Hours?

22. ©SHRM 2010 22 Volunteering in the U.S. (continued) Age group most likely to volunteer? Age group least likely to volunteer? Parental status? Persons aged 65 and older?

23. ©SHRM 2010 23 Volunteering in the U.S.: Types of Activities Fundraising: 11.4 percent. Tutoring or teaching: 10.1 percent. Collect, prepare, distribute food: 9.1 percent. Professional or managerial assistance, including serving on a board or committee: 7.9 percent. These activities vary by gender, age, ethnicity and marital status.

24. ©SHRM 2010 24 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.).

25. ©SHRM 2010 25 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. Older Americans do not have a strong record of volunteering.