Order Code RL33661
Retiring Baby-Boomers = A Labor Shortage?
Updated April 24, 2007
Linda Levine
Specialist in Labor Economics
Domestic Social Policy Division

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Retiring Baby-Boomers = A Labor Shortage?
Summary
Today’s low unemployment rate suggests a resumption of the tight labor market
conditions that preceded the 2001 recession and that are related to long-running
demographic trends. The oldest members of the baby-boom generation turned age
60 at the end of 2006, and every year thereafter, more of this large birth-cohort will
move into the ages when workers traditionally have retired. Consequently, the
business community in particular has asserted that the future supply of labor will fall
short of employer demand and that U.S. economic growth and competitiveness would
be put in jeopardy.
Based upon a CRS analysis of the current employment patterns of baby-boomers
across industries and occupations and of occupational employment projections within
industries, many industries throughout the economy (e.g., insurance, manufacturing,
mining, public administration, real estate, transportation, wholesale trade, utilities)
appear to be highly dependent on baby-boom workers and to face the prospect of
tightening labor market conditions as more of them move into the traditional
retirement ages. Baby-boom dependent industries that seek both to replace all
boomers who retire from occupations critical to their operations and to increase
employment in those fields could face the most intense competition for workers in
the near term (e.g., educational services and health care services).
An actual shortage of workers is unlikely in the long run because companies can
be expected to take various actions in response to the accelerating slowdown in labor
force growth — although it appears few have yet done so. A key assumption of the
labor shortage scenario is that firms must have more workers in the future than at
present for the economy to continue to grow. Proponents of this viewpoint thus are
asserting that rates of output growth and labor force growth are closely and directly
linked. But, the economy historically has been able to expand faster than the labor
supply by more efficiently utilizing the available pool of workers.
Another assumption underlying the shortage scenario is that baby-boomers will
sharply curtail their work activity once in their sixties. The degree to which older
persons participate in the workforce already has risen due, in part, to changes that
Congress made to the Social Security retirement system and age discrimination law.
Some have urged Congress to make further modifications to encourage more older
individuals to continue working and more employers to hire and retain them.
Similarly, Congress has been urged to further amend immigration law to permit more
foreign labor to be brought into the country to fill jobs for which U.S. workers are
deemed to be in short supply.
Additionally, those who assert that the need to replace retiring baby-boomers
will result in a shortage of workers usually consider only the labor supplied by the
baby-bust generation. This 45 million birth-cohort, which immediately followed the
76 million baby-boomers into the labor force, is not the only source of replacement
workers: the 72 million members of the echo-boom began to enter the workforce
during the 1990s. Access to foreign labor through offshore outsourcing, in addition
to guest worker programs, also is often overlooked in the context of shortages.

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Contents
A Slowdown in the Supply of Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Which Employers Are Most Likely to be Affected? . . . . . . . . . . . . . . . . . . . . . . . 5
Baby-Boom Dependent Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Baby-Boom Dependent Occupations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
A Baby-Boom Induced Shortage of Labor? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
An “Adequate” Number of Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
The Supply of Labor Domestically and Internationally . . . . . . . . . . . . . . . . 19
The Baby-Boom Generation in “Retirement” . . . . . . . . . . . . . . . . . . . 19
The Echo-Boom Generation as Workers . . . . . . . . . . . . . . . . . . . . . . . 22
Immigration and Offshoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
List of Figures
Figure 1. Labor Force Participation by Age Group . . . . . . . . . . . . . . . . . . . . . . . . 4
List of Tables
Table 1. Civilian Labor Force by Age Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 2. Baby-Boom Dependent Industries by
Selected Baby-Boom Dependent Occupations . . . . . . . . . . . . . . . . . . . . . . 10

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Retiring Baby-Boomers
= A Labor Shortage?
U.S. employers again have turned their attention to the shortage of labor they
anticipate will occur in the not-too-distant future. Concern about this possibility
waned when the historically low unemployment rates from 1998 to 2000 rose during,
and for some two years after, the March-November 2001 recession. In 2006,
however, the national unemployment rate has remained consistently below 5%.1 This
suggests resumption of the tight labor market conditions that preceded the cyclical
slowdown and that are related to long-running demographic trends. The oldest
members of the baby-boom generation will reach 60 years of age by the end of 2006,
and every year thereafter, more of the 76 million persons born between 1946 and
1964 will move into their early 60s, when most workers traditionally have retired.2
As a consequence, observers — particularly members of the business community —
have expressed the belief that the supply of U.S. labor will fall short of employer
demand in coming decades.3
While the public budgetary effects of the aging of the baby-boom cohort have
been much studied,4 the implications for the private economy have been less
thoroughly researched. Proponents of the labor shortage scenario assert that the
nation’s rate of economic (output) growth will slow because worker-starved U.S.
firms would be unable to produce the quantity of goods and services demanded by
U.S. consumers. They further argue that the competitive position of U.S. industries
will suffer because foreign companies would expand sales not only to the domestic
market but also to other markets now supplied by U.S. firms. Even if businesses
1 Labor force data are available in the U.S. Bureau of Labor Statistics (BLS), Employment
and Earnings, or at the BLS website [http://stats.bls.gov].
2 According to (1) a measure of the average age of initial receipt of Social Security
retirement benefits and Social Security disability benefits for workers 50-65 years old and
(2) a measure of the median age of withdrawal from the labor force for workers age 50 and
older based upon Current Population Survey data, people usually retired at about age 63
during the 1970s and 1980s and at about 62 during the 1990s. For more information see
Murray Gendell, “Retirement Age Declines Again in 1990s,” Monthly Labor Review,
October 2001.
3 See, for example, the Aspen Institute, Grow Faster Together, or Grow Slowly Apart, 2002;
John A. Challenger, “The Coming Labor Shortage,” The Futurist, September/October 2003;
Paul Kaihla, “The Coming Job Boom,” Business 2.0, September 2003; and the U.S.
Chamber of Commerce, The State of American Business 2006.
4 Budgetary effects chiefly relate to the solvency of Social Security, Medicare, and
Medicaid. For additional information, see CRS Report RS22008, Federal Spending for
Older Americans, by April Grady, Bob Lyke, and Richard Rimkunas, and CRS Report
RL32981, Age Dependency Ratios and Social Security Solvency, by Laura Shrestha.

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CRS-2
were able to coax more individuals into the U.S. labor force by bidding up wages, it
is claimed that a similar end-result could occur. Employers would try to pass the
increased cost of production onto buyers, resulting in higher prices that, among other
things, would diminish the purchasing power of U.S. workers’ wages. The market
share of U.S. businesses could shrink as well, if domestic and foreign purchasers
react to these higher prices by switching to less costly goods and services from other
countries.
This frequently voiced view omits actions that employers could take, other than
raising wages, to ameliorate the labor market tightness they expect to occur when
baby-boomers stop working. It also assumes that baby-boomers will behave
similarly to preceding generations of older workers in terms of the rate at which they
participate in the labor force and the length of their working lives. The scenario
similarly does not consider that Congress might take legislative action to mitigate the
effect on the private economy of a perceived shortfall of workers — something it has
done in the recent past (e.g., loosening and raising the cap on H-1B visas for foreign
workers in professional occupations). In addition, shortage proponents often paint
firms with a broad brush, raising the question of whether each firm is as likely as the
next to be affected by the baby-boomers’ retirement.
This report takes a close look at the labor shortage scenario prompted by baby-
boomers moving from the work phase to the retirement phase of their lives. It first
sets forth past and projected trends in the supply of labor available to U.S. businesses
in general. The potential impact of the baby-boom generation’s withdrawal from the
workforce on different industries, and the occupations within them, is then analyzed.
The report concludes with an examination of factors that could affect the likelihood
of an imbalance between labor supply and demand in the coming years.
A Slowdown in the Supply of Labor
With 149 million persons employed or actively seeking employment in 2005,
the labor force more than doubled in size since 1965. (See Table 1.) Within the 40-
year period, however, the pace of growth fell by almost half during the most recent
compared to the first 20 years.
The diminished rate of labor force growth in recent decades is related, in part,
to the substantially reduced number of births in the United States. The cohort of
some 76 million individuals born between 1946 and 1964 was aptly dubbed the baby-
boom generation. As the members of this very large group entered the workforce 16
or more years after birth,5 the baby-boomers greatly increased the aggregate supply
of labor: by 25.9% between 1965 and 1975, and by 23.1% between 1975 and 1985.
(See column 2 of Table 1.) The baby-boom generation was followed into the labor
force by the suitably named baby-bust cohort, which totals some 45 million persons
5 The official definition of the labor force covers those aged 16 and older.

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CRS-3
born between 1965 and 1976.6 The small size of the baby-bust group contributed to
the 9.2% decrease in young workers and the marked ebbing of overall labor force
growth (to 14.6%) in the 1985-1995 period.
Table 1. Civilian Labor Force by Age Group
Year
Civilian labor force (numbers in thousands)
Total,
16-24 years
25-54 years
55 years and
16 years and
old
old
older
older
1965
74,455
14,169
46,829
13,458
1975
93,775
22,621
56,851
14,303
1985
115,461
23,619
76,944
14,898
1995
132,304
21,453
95,172
15,680
2005
149,320
22,290
102,773
24,257
Period
Change in size of the civilian labor force (percent)
1965-1975
25.9
59.7
21.4
6.3
1975-1985
23.1
4.4
35.3
4.2
1985-1995
14.6
-9.2
23.7
5.2
1995-2005
12.9
3.9
7.9
54.7
Source: U.S. Bureau of Labor Statistics data from the Current Population Survey.
During the 1990s, the baby-boomers continued to buoy the overall supply of
labor. By 1989, the youngest baby-boomers had reached 25 years of age, and the
oldest members of the group were 43 years of age. The entire cohort thus was in the
prime work-age group (25-54 years old), which historically has had the highest rate
of participation in the labor force. (The labor force participation rate, shown by age
over time in Figure 1, below, is the share of the civilian noninstitutional population
that is employed or actively seeking employment.) In 2005, for example, more than
4 of every 5 persons in the population aged 25-54 were members of the labor force;
in contrast, about 3 of every 5 individuals aged 16-24 had a job or were looking for
one, while still fewer persons 55 years and older — less than 2 in 5 — were attached
to the workforce. The advancement of the numerous baby-boomers into the prime
work-ages consequently offset, in part, the baby-bust’s dampening impact on the
supply of labor during the 1990s.
6 Karl Hartig, “Generation Gaps: Population Growth Affects History’s Course,” Wall Street
Journal classroom edition, 1996, available at [http://karlhartig.com/chart/demographic.pdf].
(Hereafter referred to as Hartig, Generation Gaps.)

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CRS-4
Figure 1. Labor Force Participation by Age Group
Source: U.S. Bureau of Labor Statistics data from the Current Population Survey.
After 2000, however,
a segment of the baby-boomer population passes into the 55-years-and-older
group and thus moves from a group with a high participation rate in the labor
force to an age category with a much lower participation rate, causing the overall
participation rate to decrease.7
The aging of female baby-boomers already has contributed to the seeming end of the
decades-long rise in women’s labor force participation.8 The recent movement of
older baby-boomers into the age range of low rates of supply to the labor force is
shown in column 5 of Table 1.
The youngest members of the baby-boom cohort will have turned 55 years old
by 2019, which could cause the workforce to grow more slowly between 2000 and
2019 than it did between 1980 and 2000. Indeed, the U.S. Bureau of Labor Statistics
(BLS) projects that the decelerating rate of increase in the labor supply could
continue through 2020. Although the labor force is projected to expand from 141
million people in 2000 to 165 million people in 2020, the gain will steadily dwindle
7 Mitra Toossi, “Labor Force Projections to 2014: Retiring Boomers,” Monthly Labor
Review, November 2005, p. 30. (Hereafter referred to as Toossi, Labor Force Projections
to 2014.)
8 Timothy Schiller, “After the Baby Boom: Population Trends and the Labor Force of the
Future,” Business Review, fourth quarter 2005.

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CRS-5
— falling from 1.1% annually over the 2000-2010 period to 0.6% annually over the
2010-2015 period to 0.2% annually over the 2015-2020 period.9
Further contributing to the slowdown is the progress of the small baby-bust
group into the age range with strong attachment to the labor force. The oldest
members of the baby-bust generation turned 25 years of age in 1990; the youngest,
in 2000. They will be among those replacing the entire baby-boom generation in
2020, when it will have aged out of the 25- to 54-year-old group. Despite the high
rate of labor force participation for those in the prime work-ages shown in Figure 1,
the small number of baby-bust workers means that they
will not be able to compensate for the large cohorts of baby boomers leaving the
prime-aged group and moving into a group with much lower participation rates.
The result is a decrease in the overall labor force participation rate and a slower
rate of growth of the labor force.10
Which Employers Are Most Likely to be Affected?
The slowdown in the supply of labor that employers have begun to encounter
has led them to worry about how much harder it will become to hire replacements for
baby-boomers as more of them reach the retirement phase of their lives during the
coming decades. The ebbing of labor force growth could present more of a difficulty
for some firms than others, depending on the age composition of their current
workforces. For example, mature industries (e.g., steelmakers) in contrast with
emerging industries (e.g., biotechnology) did much of their hiring many years ago;
hence, baby-boomers probably comprise a larger share of the workforces of mature
than emerging industries. Still other industries are known for having fairly young
workforces (e.g., leisure and hospitality), and are less likely to have many jobs to fill
as a result of retirements. (Instead, these other industries probably are more
concerned about the relatively small additions to the youth labor force shown in
Table 1, which is affected by more than demographic trends.11)
The first step in assessing the comparative hiring needs of employers associated
with the retirement of the baby-boom generation was to calculate baby-boomers’
share of employment, overall and by industry in 2005, utilizing Current Population
9 Mitra Toossi, “A Century of Change: the U.S. Labor Force, 1950-2050,” Monthly Labor
Review, May 2002. (Hereafter referred to as Toossi, A Century of Change.)
10 Toossi, Labor Force Projections to 2014, p. 30.
11 One such factor is the rate of school enrollment among 16- to 24-year-olds. Because
school enrollment has risen since the mid-1980s and because students historically have
worked to a lesser extent than nonstudents, the overall labor force participation rate of 16-
to 24-year-olds has fallen. In addition, the decline in youth’s labor force participation has
been steeper among students. Helen McEwen, Pia Orrenius, and Mary Wynne, “Opting Out
of Work: What’s Behind the Decline in Labor Force Participation?”, Southwest Economy,
no. 6, November/December 2006.

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CRS-6
Survey (CPS) data.12 The industries estimated to have employed a significantly
above-average percentage of baby-boomers in 2005 (more than 42.1% of 41- to 59-
year-olds) are considered the most prone to the effect of the group’s withdrawal from
the labor force.13 Within each of the “baby-boom dependent industries,” CRS next
estimated the baby-boomers’ share of employment by occupation to determine the
job categories most likely to develop vacancies due to retirements. (The size of the
CPS sample limits the degree of detail by occupation within industries that could be
estimated accurately.)
In addition to identifying baby-boom dependent industries and the occupations
within them, the section immediately below discusses possible reasons for them
having a very high prevalence of 41- to 59-year-olds. What the impending retirement
of baby-boomers might actually mean for the industries’ future occupational staffing
requirements is analyzed thereafter.
Baby-Boom Dependent Industries
Some 24 of the 51 industries included in the analysis employed a significantly
above-average share of baby-boomers in 2005.14 Although half of the 24 industries
are in manufacturing, baby-boom dependent industries span the economy — from the
following industries in the goods-producing sector —
! forestry, fishing, and hunting;
! mining, including oil and gas extraction; and
! 12 manufacturing industry groups (i.e., textile, apparel, and leather
manufacturing; paper and printing; petroleum and coal products;
chemical manufacturing; plastics and rubber products; nonmetallic
mineral product manufacturing; primary metal and fabricated metal
12 The latest annual data at the time the study originally was undertaken were for 2005.
Substantially the same results are likely based on 2006 data.
13 The CPS is a monthly sample of about 50,000 households drawn from the civilian
noninstitutional population. Estimates of employment and other variables derived from the
CPS thus are subject to sampling error. Researchers utilizing the CPS generally construct
confidence intervals, which provide information about the accuracy of the estimates.
Confidence intervals were calculated for the differences, in 2005, between the percentage
of all workers who were baby-boomers and the percentage of workers in each industry and
occupation who were baby-boomers. The text of this report discusses only those industries
and occupations in which the estimated share of employment accounted for by baby-
boomers is significantly greater than their estimated share of total employment (i.e., the
differences are not likely due to sampling error).
14 Among the 51 industries included in the study, those that employed lesser shares of baby-
boomers in 2005 included agriculture; construction; four manufacturing industries (wood
products, furniture and fixtures, food, and beverage and tobacco products); retail trade;
publishing industries (except Internet); motion picture and sound recording; broadcasting
(except Internet); Internet publishing and broadcasting; telecommunications; Internet service
providers and data processing services; finance; rental and leasing services; professional and
technical services; administrative and support services; waste management and remediation
services; social assistance; arts, entertainment, and recreation; accommodation; food
services and drinking places; repair and maintenance; and personal and laundry services.

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CRS-7
products; machinery manufacturing; computer and electronic
products; electrical equipment, appliance, and component
manufacturing; transportation equipment manufacturing; and
miscellaneous manufacturing);
to the following industries in the service-producing sector —
! wholesale trade;
! transportation and warehousing;
! utilities;
! insurance;
! real estate;
! educational services (e.g., public and private elementary and
secondary schools);
! hospitals, private and public;
! health care services, except hospitals;
! membership associations and organizations; and
! public administration (excluding public schools and hospitals).
The utilities industry (e.g., private and public establishments that provide
electricity, natural gas, and water) has the highest proportion of baby-boomers, with
almost 3 of every 5 workers between 41 and 59 years old in 2005. (See column 2 of
Table 2.) One possible reason for the marked incidence of baby-boomers in the
industry is its comparatively high unionization rate. While just 12.5% of all persons
employed in 2005 were union members, according to CPS data, the figure among
utilities workers was more than twice that, at 28.8%. Older workers are likely to be
more prevalent in highly unionized industries that “thus favor seniority and generally
have lower turnover rates due to higher wages and better benefits than nonunion
jobs.”15 In terms of retirement benefits in particular, the type of pensions that unions
historically have negotiated with management — defined-benefit plans —
encourages long job tenure because its benefit formula typically is based on a
combination of peak-years’ earnings and years of service.
Unionization probably also explains, in part, why 50.4% of employees in the
transportation and warehousing industry (e.g., railroads and airlines) and 49.3% of
employees in the 12 manufacturing industries combined are members of the baby-
boom generation.16 (See column 2 of Table 2.) In addition, the baby-boom
15 Arlene Dohm, “Gauging the Labor Force Effects of Retiring Baby-Boomers,” Monthly
Labor Review, July 2000, p. 20. (Hereafter referred to as Dohm, Gauging the Labor Force
Effects of Retiring Baby-Boomers.)
16 The unionization rate in transportation and warehousing was 31.9% in 2005, according
to CRS estimates derived from CPS data. A still slightly above-average share of
manufacturing workers were union members in 2005 (13.0%), following a steady decline
in the unionization rate from more than 30% during the 1970s, when some baby-boomers
were deciding whether to follow in the footsteps of their factory-worker parents. Data on
trends in union membership can be found in Barry T. Hirsch and David A. Macpherson,
Union Membership and Earnings Data Book, Washington, DC: Bureau of National Affairs,
(continued...)

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CRS-8
dependent manufacturing industries did much of their hiring many years ago and
have grown their workforces little, if at all, since then. As an example, consider
transportation equipment manufacturing: When the first members of the baby-boom
generation were born in 1946, the industry employed 1.2 million production and
nonsupervisory workers; it was an abundant source of jobs for young workers during
the next two decades, but since factory employment peaked at 2.1 million in 1968,
many more workers have been permanently let go than have been hired.17 The order
in which unionized employees usually are laid off — namely, in an inverse
relationship to seniority (last-hired, first-fired) — has served to reinforce the marked
presence of baby-boomers on these manufacturers’ payrolls. So, too, has
manufacturing’s image reportedly dissuaded younger persons from considering the
field when making career decisions.18
More than three out of every 10 persons employed by federal, state, and local
governments were union members in 2005, despite variability across jurisdictions in
whether and which employees (e.g., education and public safety) can be organized.19
Variability also exists in the scope of negotiable subjects, with all levels of
government often excluding leave and benefit policies from the collective bargaining
process.20 In these instances, legislators have passed laws that prescribe human
resources policies or the precepts that underlie them. With regard to retirement
benefits, elected officials usually have provided defined-benefit pensions to public
employees; as noted above, traditional pensions encourage lengthy job tenure and
hence, older workforces. Almost all full-time state and local government workers
(including teachers at public elementary, secondary, and postsecondary institutions)
were covered by defined-benefit plans in 1994, which enable them to retire with
unreduced benefits at age 55 or younger and typically after 30 years of tenure.21 All
federal employees also are eligible for a defined-benefit pension plan. Like their
state and local counterparts,
16 (...continued)
2006.
17 According to the BLS Current Employment Survey (CES), production worker
employment in the transportation equipment industry was 1.3 million in 2005. (There is a
break in data consistency starting in 2003, when the CES switched from the Standard
Industrial Classification to the North American Industrial Classification system.)
18 See the U.S. Department of Labor, Employment and Training Administration, Advanced
Manufacturing Industry, which is available at [http://www.doleta.gov/BRG/pdf/Advanced%
20Manufacturing%20Report%2011.1.05.pdf].
19 The unionization rate in public administration in 2005 was 31.4%, according to CRS
estimates derived from CPS data. It was 34.0% in educational services (which include but
are not limited to public elementary, secondary, and postsecondary institutions).
20 Morris A. Horowitz, Collective Bargaining in the Public Sector, NY: Lexington Books,
1994.
21 U.S. Bureau of Labor Statistics, Employee Benefits in State and Local Governments,
1994,” DC: U.S. Govt. Print. Off., 1996.

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CRS-9
“[m]any federal employees become eligible to retire at age 55 with 30 years of
service, and the average retirement age was 60.4 in 2004, according to OPM
data.”22
A little over one-half of public employees (excluding school personnel) and 48.7%
of workers in the (public and private) educational services industry were baby-
boomers in 2005, as shown in column 2 of Table 2. But in that year, just 20%-25%
of baby-boom employees might have been retirement-eligible, based on their age
(i.e., at least 55 years old).23 Going forward, then, retirements could rise considerably
in the public administration and educational services industries as many more of
these employees reach the ages associated with pension eligibility.
Yet the impact of baby-boomers’ withdrawal from the labor force can be
expected to differ across industries, depending on their future employment trends.
Those industries that reduce the size of their workforces will not need to fill every
vacancy. A number of baby-boom dependent industries in the goods-producing
sector are projected to employ fewer workers in 2014 than they did in 2004: mining;
10 of the 12 manufacturing industries; and forestry, fishing, and hunting.24 The only
baby-boom dependent industry in the service-producing sector projected to
experience declining employment is utilities. However, even industries in which
total employment is projected to decrease might need to replace employees who retire
from particular occupations. In other words, industries with declining aggregate
employment (e.g., paper and chemical manufacturers) may, at a minimum, maintain
employment levels in certain occupations (e.g., engineers, sales and customer service
representatives, and assemblers and fabricators).25
22 Stephen Barr, “Federal Diary,” The Washington Post, July 11, 2006, p. D4.
23 Calculated by CRS from 2005 CPS data.
24 The two baby-boom dependent manufacturing industries that BLS projected could create
new jobs between 2004 and 2014 are nonmetallic mineral products and transportation
equipment. See Jay M. Berman, “Industry Output and Employment Projections to 2014,”
Monthly Labor Review, November 2005.
25 BLS, National Matrix, Employment by Industry, Occupation, and Percent Distribution,
2004 and Projected to 2014, available at the BLS website [http://stats.bls.gov]. (Hereafter
referred to as BLS, National Matrix.)

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Table 2. Baby-Boom Dependent Industries
by Selected Baby-Boom Dependent Occupations
Baby-boom dependent industries by baby-
Baby-boomers as
Distribution of
boom dependent occupations1
a share of total
baby-boomers
employment, by
within
industry and
industries by
occupation2
occupation3
Forestry, fishing, and hunting industry
52.3
—
Farming, fishing, and forestry
52.0
28.5
occupations
Mining industry
50.5
—
Manufacturing industry4
49.3
—
Management occupations
59.3
7.6
Business and financial operations
49.8
1.7
occupations
Architecture and engineering
50.4
3.9
occupations
Sales and related occupations
49.4
1.7
Office and administrative support
48.7
4.8
occupations
Installation, maintenance, and repair
54.7
2.6
occupations
Production occupations
47.3
19.5
Wholesale trade industry
44.9
—
Management occupations
52.8
4.8
Sales and related occupations
49.8
18.2
Transportation and warehousing industry
50.4
—
Management occupations
55.6
3.9
Office and administrative support
54.2
13.8
occupations
Installation, maintenance, and repair
55.5
3.1
occupations
Transportation and material moving
47.6
23.8
occupations
Utilities industry
59.8
—
Management occupations
73.0
7.8

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CRS-11
Baby-boom dependent industries by baby-
Baby-boomers as
Distribution of
boom dependent occupations1
a share of total
baby-boomers
employment, by
within
industry and
industries by
occupation2
occupation3
Office and administrative support
52.8
9.8
occupations
Construction and extraction occupations
50.9
5.5
Installation, maintenance, and repair
60.4
9.2
occupations
Production occupations
63.0
11.3
Insurance industry
47.7
—
Management occupations
55.3
5.0
Business and financial operations
48.0
11.3
occupations
Sales and related occupations
48.9
13.4
Real estate industry
44.8
—
Management occupations
45.6
12.2
Business and financial operations
55.4
3.0
occupations
Sales and related occupations
46.3
16.8
Educational services industry
48.7
—
Management occupations
57.6
4.4
Business and financial operations
51.3
0.7
occupations
Community and social service
57.2
1.3
occupations
Education, training, and library
47.6
27.1
occupations
Health practitioner and technical
53.2
0.9
occupations
Food preparation and serving related
56.1
1.8
occupations
Building and grounds cleaning and
59.8
2.7
maintenance occupations
Office and administrative support
47.8
4.5
occupations

---

CRS-12
Baby-boom dependent industries by baby-
Baby-boomers as
Distribution of
boom dependent occupations1
a share of total
baby-boomers
employment, by
within
industry and
industries by
occupation2
occupation3
Installation, maintenance, and repair
52.3
0.6
occupations
Hospital industry
47.9
—
Management occupations
62.4
3.6
Health care practitioner and technical
48.3
24.3
occupations
Building and grounds cleaning and
52.6
1.9
maintenance occupations
Office and administrative support
47.3
7.3
occupations
Health care services (except hospitals)
45.4
—
industry
Management occupations
58.2
3.3
Life, physical, and social service
51.5
0.8
occupations
Health care practitioner and technical
50.9
16.2
occupations
Membership associations and organizations
46.8
—
industry
Management occupations
52.2
7.0
Community and social service
48.8
16.2
occupations
Office and administrative support
48.4
9.4
occupations
Public administration industry
51.8
—
Management occupations
63.9
5.9
Business and financial operations
56.2
4.5
occupations
Computer and mathematical science
55.5
1.9
occupations
Architecture and engineering
56.4
1.5
occupations

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CRS-13
Baby-boom dependent industries by baby-
Baby-boomers as
Distribution of
boom dependent occupations1
a share of total
baby-boomers
employment, by
within
industry and
industries by
occupation2
occupation3
Life, physical, and social service
52.9
1.7
occupations
Community and social service
49.2
2.5
occupations
Legal occupations
53.2
2.1
Health care practitioner and technical
50.6
1.5
occupations
Office and administrative support
54.1
11.0
occupations
Construction and extraction occupations
68.7
1.1
Installation, maintenance, and repair
57.8
1.3
occupations
Source: CRS estimates from 2005 Current Population Survey data.
Note: Only occupations within each industry that employed at least 60,000 baby-boomers are
included.
1. Baby-boom dependent industries and baby-boom dependent occupations are those in which the
share of 41- to 59-year-olds is significantly greater than average (i.e., 42.1%). In 2005, baby-boomers
were between 41 and 59 years of age.
2. The column displays the proportions of all workers in an industry who are between 41 and 59 years
old and the proportions of the industry’s workers in an occupation who are baby-boomers. For
example, baby-boomers comprise 44.9% of all workers in the wholesale trade industry and baby-
boomers comprise 52.8% of the industry’s managers.
3. The column displays the proportions of industry employment accounted for by 41- to 59-year-olds
working in particular occupations. For example, baby-boomer managers represent 4.8% of all workers
in the wholesale trade industry.
4. The 12 manufacturing industries are textile, apparel, and leather manufacturing; paper and printing;
petroleum and coal products; chemical manufacturing; plastics and rubber products; nonmetallic
mineral product manufacturing; primary metal and fabricated metal products; machinery
manufacturing; computer and electronic products; electrical equipment, appliance, and component
manufacturing; transportation equipment manufacturing; and miscellaneous manufacturing.

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CRS-14
Baby-Boom Dependent Occupations
Almost all baby-boom dependent industries have staffed their management
ranks with substantial shares of baby-boomers, as shown in column 2 of Table 2. In
fact, 41- to 59-year-olds accounted for a significant portion of managers economy-
wide in 2005, at 52.8%, on average.26 If BLS projections of the creation of some 1
million new management positions between 2004 and 2014 prove correct, then the
effect of the baby-boom’s retirement from the occupational group could be
widespread.27
Whether it would be difficult to replace retired managers is another matter. One
case study of a large manufacturing firm estimated that increased retirements among
senior management would result in an almost imperceptible decrease in job tenure
and slightly faster promotions from the ranks one step down the corporate ladder, if
all replacements were internal. “This is true for most organizations, and the reason
is because in a typical pyramidal-shaped organizational chart, the levels below have
many more incumbents than those above.”28 There is anecdotal evidence, as well, of
baby-boomers who survived corporate restructuring (which pared the number of
executive positions) not being in a hurry to retire. According to a survey of senior-
level managers, 44% planned to continue working past age 64.29 The phenomenon
of older workers failing to make way for others to advance is referred to as the “gray
ceiling,” and it seemingly extends beyond management occupations (to lawyers, for
example).
Many of the baby-boom dependent industries also rely heavily on 41- to 59-
year-olds to fill office and administrative support jobs, as shown in column 2 of
Table 2. The 12 manufacturing industries, wholesale trade, and government
(excluding public educational institutions) are projected to employ fewer office and
administrative support personnel over the 2004-2014 period.30 These industries
consequently could utilize the retirement of baby-boomers as the least painful way
of coping with reduced occupational demand.
Other occupational groups with a very high incidence of baby-boomers appear
to be more industry-specific. For example, the retirement of baby-boomers from
production jobs (e.g., machinists) could create difficulties for manufacturers. Not
only did baby-boomers comprise almost one-half of production employment in baby-
boom dependent manufacturing industries in 2005, but 41- to 59-year-old production
workers also accounted for a large share (about one-fifth) of the industries’
workforce. (See columns 2 and 3 in Table 2.) Although manufacturers’ demand for
26 CRS estimates derived from CPS data.
27 Daniel E. Hecker, “Occupational Employment Projections to 2014,” Monthly Labor
Review, November 2005.
28 Peter Cappelli, “Will There Really Be a Labor Shortage?,” Organizational Dynamics, vol.
32, no. 3, p. 226. (Hereafter referred to as Cappelli, Will There Really Be a Labor
Shortage?.)
29 Anne Fisher, “Are You Stuck in Middle Management Hell?” Fortune, August 9, 2006.
30 BLS, National Matrix.

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CRS-15
production workers generally is projected to decrease between 2004 and 2014,
several of the baby-boom dependent manufacturing industries could increase
employment in specific occupations (e.g., machine setters, operators, and tenders).31
Much the same can be said about transportation and material moving
occupations (e.g., drivers and stock movers) in the transportation and warehousing
industry. Baby-boomers made up nearly one-half of transportation and material
moving workers in the industry in 2005, and 41- to 59-year-olds in the occupational
group accounted for close to one-fourth of the industries’ workforce. (See columns
2 and 3 of Table 2.) In this case, the industry is projected to add 331,000 workers
in transportation and material moving occupations over the 2004-2014 period, with
much of the job growth accounted for by motor vehicle operators (e.g., heavy and
tractor-trailer truck drivers).32

Similarly, the retirement of baby-boomers from health care practitioner and
other related technical occupations (e.g., physicians, nurses, therapists, and health
technologists) could pose supply problems for the health care services industry.
About one-half of the individuals employed in this occupational group by hospitals
and other health care services establishments were aged 41-59 in 2005. (See column
2 of Table 2.) These baby-boomers represented 24.3% of total employment at
hospitals and 16.2% of total employment at other health care services enterprises
(e.g., nursing and residential care facilities), as shown in column 3 of the table. In
addition, the health care services industry employed the majority of persons working
as health care practitioners and in related technical occupations in 2004, and the
industry is projected to increase employment in these occupations by more than 1.3
million between 2004 and 2014.33
For the same reasons, the retirement of baby-boomers from educational,
training, and library occupations could cause difficulties for the educational services
industry (public and private) in particular. Baby-boomers in 2005 comprised 47.6%
of the industry’s employment in the occupational group, of which elementary and
secondary school teachers are a large part. These baby-boomers also are important
to the functioning of the industry, accounting for more than one-fourth of its total
employment. (See columns 2 and 3 of Table 2.) Moreover, state and local
government educational agencies and private providers of educational services are
projected to increase their employment of educational, training, and library workers
by about 1.4 million between 2004 and 2014.34 Speaking more generally, the
retirement of baby-boomers could have a substantial effect on the educational
services industry because of its large number of baby-boom dependent occupations.
Public administration also appears to have many baby-boom dependent
occupations. “[T]he wide variety of jobs and differing growth among the three
branches of government, with employment projected to decline in Federal
31 Ibid.
32 Ibid.
33 Ibid.
34 CRS calculations based on the BLS National Matrix.

---

CRS-16
government and to grow in State and local government,” makes it difficult to gauge
the impact of baby-boomer retirements on the industry, however.35
A Baby-Boom Induced Shortage of Labor?
Thus, many industries throughout the economy are very dependent on baby-
boom workers and seemingly face the prospect of tightening labor market conditions
as these individuals move toward the typical retirement ages. Employers with older
workforces that seek not only to replace all baby-boomers exiting occupations critical
to their operations, but also to increase employment in those fields, could face
especially intense competition for labor in the short run.
An actual shortage of labor is unlikely in the long run, however, because
businesses can be expected to raise wages, thereby
! prompting some pension-eligible baby-boomers to continue
working,
! enticing those outside the labor force (e.g., discouraged workers)36
to enter, or those employed part-time to increase their work hours,37
! encouraging individuals qualified for jobs that are in particularly
high demand, but who are employed in other fields, to change
positions, and
! motivating youngsters attending school and unemployed persons,
among others, to prepare for these now more lucrative occupations.
Admittedly, these accommodations to the new labor market realities could take
some time to occur. The adjustment period could be prolonged if companies are
slow to make non-wage changes as well, such as relaxing hiring standards or
providing training to persons who, but for the tight labor market, would not have
been hired (e.g., high school dropouts) or retained (e.g., employees with outdated
skills). In addition, firms will vary in their ability to alter compensation and other
human resources policies, making them unequal competitors in their attempt to
attract and retain an adequate number of workers.
35 Dohm, Gauging the Labor Force Effects of Retiring Baby-Boomers, p. 24.
36 There were 7.6 million persons in the labor force who lacked jobs in 2005, according to
BLS data. Only workers who have actively sought employment in the four-week period
before the monthly CPS is conducted are considered to be unemployed. Unemployment data
thus understate the degree of slackness in the labor market partly because they do not
include discouraged workers, who numbered 436,000 in 2005. Discouraged workers are
individuals who want a job and looked for one within a year’s time but are not currently
searching because they believe no jobs are available or none for which they are qualified.
37 There were 32.3 million persons working part-time (i.e., less than 35 hours a week) in
2005, according to BLS data. Most (27.9 million, or 86.5%) chose to work short schedules
because they were in school or had family obligations, for example. The remainder were
involuntarily employed part-time — that is, they would have preferred to work longer hours.

---

CRS-17
An “Adequate” Number of Workers
An underlying assumption of the labor shortage scenario is that, in order for the
U.S. economy to continue growing, companies must have more workers on their
payrolls in the future than at present. Proponents of this viewpoint essentially are
arguing that the rate of economic growth is closely and directly linked to the pace
of labor force growth. The U.S. economy generally has been able to expand faster
than the labor supply, however, by more efficiently utilizing the available pool of
workers. Former Federal Reserve Chairman Alan Greenspan noted that
An expansion of labor-force participation by immigrants and the healthy elderly
offers some offset to an aging population. However, it is heightened growth of
output per worker that presents the greatest potential to boost the growth of gross
domestic product.38
Confronted with a bidding war for relatively scarce workers, businesses could
well try to increase productivity through substitution of less expensive capital for
labor and initiation of organizational and technological innovations. Indeed, a good
deal of empirical research indicates that past slowdowns in labor force growth have
been accompanied by acceleration in productivity growth.39 This historical
relationship provides some optimism for future increases in the productivity growth
rate partly offsetting the diminishing pace of labor force growth in coming decades.
There are factors in addition to the rate of increase in the size of the workforce
that affect the growth rate of labor productivity. A key variable is the quality of labor
— that is, the amount of knowledge embodied in a nation’s workers. One analysis
tentatively estimated that, while business investment in traditional kinds of capital
(e.g., expenditures on plant and equipment) might have accounted for a little more
than 27% of the growth in output per hour worked between 1995 and 2003, business
investment in intangible forms of capital (e.g., expenditures on employee training)
and changes in labor composition (e.g., educational attainment) might have
accounted for 38% of the increase in labor productivity over the period.40
It has been suggested that the human capital characteristics of recent migrants
to the United States and their descendants might attenuate the historically inverse
relationship between labor force and productivity growth, however. The United
States has been experiencing a shift in the countries of origin of immigrants, from
European toward Mexico and other Latin American countries. Because Latin
American immigrants generally have completed fewer years of school than European
38 Testimony of Federal Reserve Chairman Alan Greenspan before the Special Committee
on Aging, U.S. Senate, Hearing on Aging Global Population, February 27, 2003, available
at [http://www.federalreserve.gov/boarddocs/testimony/2003/20030227/default.htm].
39 Jane Sneddon Little and Robert K. Triest, “The Impact of Demographic Change on U.S.
Labor Markets,” New England Economic Review, first quarter 2002, p. 56-57. (Hereafter
referred to as Little and Triest, The Impact of Demographic Change on U.S. Labor Markets.)
40 Carol Corrado, Charles Hulten, and Daniel Sichel, “Intangible Capital and Economic
Growth,” Finance and Economics Discussion Series Working Paper, Federal Reserve
Board, April 2006.

---

CRS-18
immigrants, the change in country mix has lowered the average educational
attainment of recent immigrants. The impact this will have on the human capital
possessed by future members of the U.S. labor force depends of such factors as trends
in source countries’ educational attainment and the rate of convergence in years of
schooling completed by immigrants’ descendants and the native-born population.
Although there have been marked gains in high school completion among recent
cohorts of Mexican migrants to the United States, the wide gap in educational
attainment between native-born and Mexican workers is likely to persist for quite
some time. Years of school completed by U.S.-born Hispanics (i.e., second- and
subsequent-generation Hispanics) also are expected to remain well below the U.S.
average. These findings led Little and Triest to surmise that the average level of
educational attainment among U.S. workers could be dampened as a result of the
labor force’s increasingly Hispanic composition, unless the educational status of
Hispanic youth changes dramatically.41
In contrast, Census Bureau staff who developed projections of educational
attainment based upon alternative assumptions — continued immigration and no
immigration — found the net impact of immigrants on overall schooling levels in the
future to be indeterminate. The counterfactual case (zero immigration) showed an
increase of a few percentage points in the rate of high school completion, while the
impact on college completion was uncertain. The continued immigration case
showed little difference in future educational attainment. Because still other
projections by ethnicity revealed that all groups could have rising levels of schooling,
Day and Bauman surmised “that changes in ethnic composition [of the U.S.
population toward Hispanics, for example] do not suppress educational attainment
to the extent some observers have feared.”42
Some analysts are not sanguine about the economy’s ability to achieve rates of
productivity growth sufficient to fully compensate for the slowdown in labor force
growth. Nyce and Schieber projected labor supply, based on continuation of current
patterns of labor force participation by age, and labor demand over the 2000-2010
period under four scenarios of productivity growth: 1.5% annually, which was the
average rate of increase over the past three decades; 1.75% and 2.0% annually, which
mark the range of increases in labor productivity in the past decade; and 2.23%
annually, which is a rate last surpassed in the 1950s and 1960s but not again attained
for any long period thereafter. They estimated that the United States could be faced
with a shortfall of labor unless output per hour worked grows by 2.23% for a
sustained period of time or patterns of labor force participation change — for
example, if more members of the population join the labor force and current workers
retire later.43
41 Little and Triest, The Impact of Demographic Change on U.S. Labor Markets.
42 Jennifer Cheeseman Day and Kurt J. Bauman, “Have We Reached the Top? Educational
Attainment Projections of the U.S. Population,” Census Bureau Working Paper Series, no.
43, May 2000, p. 13.
43 Steven A. Nyce and Sylvester J. Schieber, “The Decade of the Employee: The Workforce
Environment in the Coming Decade,” Benefits Quarterly, first quarter 2002.

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CRS-19
The Supply of Labor Domestically and Internationally
The Baby-Boom Generation in “Retirement”. Another assumption
underlying the labor shortage scenario is that members of the baby-boom generation
will sharply curtail their involvement in the labor force once in their 60s. Surveys
of boomers suggest that many intend to work during the typical retirement ages,
however.44
The labor force participation rate of older workers actually began increasing in
about the mid-1980s, but rose to a much greater extent among 55- to 64-year-olds
between 1995 and 2005 than in the prior 10-year period, climbing 5.7 percentage
points, from 57.2% to 62.9%. The comparably large increase in workforce
participation among 65- to 74-year-olds meant that, in 2005, more than one in five
persons in the group (22.9%) were labor force members. It is anticipated that these
trends will continue going forward: in 2014, when baby-boomers will be between
50 and 68 years old, the BLS projects that the labor force participation rate of 55- to
64-year-olds could reach 65.2%, while that of 65- to 74-year-olds could surpass one
in four (26.9%). In light of the large size of the baby-boom population, even a small
increase in the percentage continuing to work at older ages would greatly affect the
supply of labor.
Many variables have come together to spur the ongoing increase in labor force
participation among older workers. Improvement in the population’s health has
increased the ability of individuals to work at older ages, should they desire. The
decrease in physically demanding jobs operates in the same direction.45 The life span
of individuals has lengthened as well, which could make the extension of one’s years
in the labor force a financial necessity — particularly for those with limited savings
and retirement benefits. The tendency of employers to eliminate health benefits
coverage for retirees also could be prompting older workers to remain in the labor
force, at least until they qualify for Medicare.46 So, too, could the movement of
employers away from traditional (defined-benefit) pensions to defined-contribution
retirement plans. The latter, which employers began to offer in the 1980s after
section 401(k) was inserted in the Internal Revenue Code (IRC), are age-neutral and
do not pay out a guaranteed level of benefits.
In addition to changes in the IRC, Congress has enacted and amended other
laws over the years that encourage older workers to remain engaged in the labor force
and remove obstacles to their continued participation. Several such changes were
made to the public pension system, including gradually raising from 65 the age at
which workers can receive full retirement benefits, increasing the reduction in
benefits for those who retire between 62 and the full retirement age, and enhancing
the delayed retirement credit for those who forgo benefits receipt until after they have
44 For summaries of findings from various surveys, see Sara E. Rix, Aging and Work — A
View from the United States, Washington, DC: AARP, February 2004.
45 Richard W. Johnson, “Trends in Job Demands Among Older Workers, 1992-2002,”
Monthly Labor Review, July 2004.
46 The Urban Institute, Work and Retirement: Facts and Figures, August 2006.

---

CRS-20
attained full retirement age.47 Most recently, Congress loosened the earnings test for
employed beneficiaries between 62 and the full retirement age and eliminated it for
those at or above the full retirement age.48 If policymakers become convinced that
a labor shortage is imminent, they might consider additional modifications of the
public pension system, such as further relaxing or eliminating the earnings test for
workers between 62 years old and the full retirement age. The results of empirical
research are mixed, however, on whether removal of the earnings test for employed
beneficiaries at or above the full retirement age has increased the labor supply.49
Some regard federal policies that ban age-based discrimination in the workplace
and virtually eliminate mandatory retirement to be among the leading reasons for the
increase in labor force participation among older members of the population.50 When
the Age Discrimination in Employment Act of 1967 (ADEA) was passed, it barred
employers from discriminating against people between 40 and 65 years old on the
basis of age. Thus, firms still were permitted to include involuntary retirement
clauses in their pension plans as long as they were not applied to persons under age
65. In 1978, the ADEA was amended to protect individuals up to 70 years old from
workplace discrimination; the age restriction was removed by amendment of the
ADEA in 1986. As a result, most private pension plans no longer can include
involuntary retirement provisions.51
Nonetheless, it appears that older workers who lose long-held jobs have limited
reemployment opportunities due, perhaps, to age-based hiring discrimination and
lawful considerations of employers.52 Individuals who willingly retire from their
career jobs but who would like to continue working for another company on a part-
time basis, for example, could face similar employer reluctance to hire them.
Legal statutes, such as the Employee Retirement Income Security Act (ERISA),
were cited as an obstacle by almost 12% of companies that consider their aging
workforces an issue that needs to be dealt with.53 Provisions in ERISA and the IRC
arguably dampen employer demand for older workers who would prefer to phase into
47 For additional information, see CRS Report RL30629, Older Workers: Employment and
Retirement Trends, by Patrick Purcell. (Hereafter referred to as CRS Report RL30629,
Older Workers.)
48 The earnings test limits the amount that can be earned without reduction of Social
Security retirement benefits, thus potentially curbing a person’s hours of work or
participation in the labor force.
49 For additional information, see CRS Report RL32757, Issues in Aging: Unemployment
and Older Workers, by Julie M. Whittaker.
50 Toossi, Labor Force Projections to 2014.
51 William J. Wiatrowski, “Changing Retirement Age: Ups and Downs,” Monthly Labor
Review, April 2001.
52 For additional information, see CRS Report RL33054, Older Displaced Workers in the
Context of an Aging and Slowly Growing Population, by Linda Levine.
53 Ernst & Young LLP Human Capital Practice, The Aging of the U.S. Workforce: Employer
Challenges and Responses, January 2006. (Hereafter referred to as Ernst & Young, The
Aging of the U.S. Workforce.)

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CRS-21
retirement rather than fully withdraw from the labor force. Currently, a company can
only retain older employees and distribute pension benefits to them if they have
reached the plan’s normal retirement age which, by law, cannot be above age 65. An
employer can make pension distributions to employees who have reached the plan’s
early retirement age (e.g., age 62) only after they leave the firm. Thus, a business
cannot compensate employees between 62 and 65 years old who would like to
continue at the firm, but work fewer hours or weeks, through a combination of
reduced wages and partial pension distributions. Companies have asserted that
amending the law to permit in-service pension payments would make them more
willing to provide phased-retirement arrangements. However, the net impact of
allowing in-service distributions at the early retirement age on labor force
participation and hours worked among older employees is unknown.54
Another reason suggested for employers being reticent about hiring older
workers is that the group is thought to be comparatively expensive to cover under
health insurance plans.55 Companies that provide health benefits must offer all
employees, including those at least 65 years old who are eligible for Medicare, the
same plan. If newly hired older workers accept employer-sponsored health benefits,
Congress requires that Medicare be the secondary payer. Firms with health benefit
packages might be more inclined to hire Medicare-eligible job applicants were their
own plans instead designated the secondary payer. While this policy change might
raise employer demand for older workers seeking new career jobs or bridge-to-
retirement jobs, it also would increase the costs of the Medicare program.56
However, the majority of U.S. companies do not appear to have yet focused on
the implications of an aging labor force. Human resources (hr) practitioners who are
cognizant of the importance of recruiting and retaining baby-boom employees have
urged companies to reexamine and change their attitudes toward older workers as
they did, with a lag, when women began entering the labor force in large numbers
during the 1970s.57 According to a survey of hr staff, some 40% reported that their
organizations were just becoming aware of the possibility of a worker shortage
associated with retirement of baby-boom employees and a similar share indicated that
they were just at the start of reviewing their policies and practices accordingly. As
of 2005, only 11% had made changes to prepare for a potential labor shortage.58 It
54 Although an employer is permitted legally to rehire its own early retirees on a part-time
or temporary basis, or as contractors, this approach is risky for both parties because neither
is obligated to resume the employment relationship. See CRS Report RL30629, Older
Workers, which also addresses in-service distributions from defined-contribution retirement
plans.
55 Rudolph G. Penner, Incentives for Older Workers to Remain in the Workforce, posted
December 12, 2005 at [http://www.urban.org/url.cfm?ID=900904].
56 For more information, see CRS Report RL33587, Medicare Secondary Payer —
Coordination of Benefits, by Hinda Chaikind.
57 Diane Piktialis and Hal Morgan, “The Aging of the U.S. Workforce and Implications for
Employers,” Compensation and Benefits Review, January/February 2003, vol. 35, no. 1.
58 Jessica Collison, 2005 Future of the U.S. Labor Pool, Alexandria, VA: Society for
(continued...)

---

CRS-22
thus appears that corporations have been directing their attention to matters they
consider more pressing at the moment. A survey conducted in late 2005 suggests that
the situation may change between now and 2010: nearly one-half of survey
respondents reported that the aging of the workforce would be important or very
important to the goals and strategies of their organizations over the next five years.59
In the meantime, however, survey results released in March 2007 indicate that only
25.8% of employers had analyzed the age makeup of their workforces and only
33.8% had projected retirement rates of their employees. Accordingly, 34.9% of
employers had not developed “strategies to encourage late-career employees to work
past the normal retirement age.”60
The Echo-Boom Generation as Workers. Proponents of the labor
shortage viewpoint usually look just at the very different size of two groups, namely,
the baby-boom and baby-bust generations. The much smaller cohort that
immediately followed the baby-boomers into the workforce is not the only source of
replacements for retirees, however.
The baby-boom produced numerous offspring, who have been labeled the echo-
boom generation. Variously defined as having been born starting during the mid-to-
late 1970s, and ending sometime during the mid-to-late 1990s, the echo-boom — at
about 72 million — approaches the size of its parents’ generation.61 The oldest
members of the echo-boom joined the labor force during the 1990s, and were
responsible for the turnaround in the size of the youth labor force over the 1995-2005
period shown in Table 1. Members of the echo-boom started to turn 25 years old
and enter the prime work-age group (25-54) — with its high rates of labor force
participation — during the early years of the current decade, just when their parents
began to leave the group.
Rather than an actual shortage of labor, some observers thus have suggested that
the labor market may develop “an experience problem.”62 Employers might indeed
demand that individuals have many years of work experience to fill certain positions
(e.g., managers), but they may not feel the same way about other jobs. Companies
might, for example, prefer to hire recent college graduates for occupations that have
been changed substantially by technology (e.g., skilled blue-collar jobs in
manufacturing) rather than upgrading the skills of experienced middle-aged workers
who have, at most, a high school diploma.
58 (...continued)
Human Resource Management, June 2005.
59 Ernst & Young, The Aging of the U.S. Workforce.
60 The Center on Aging & Work at Boston College, The National Study Report: Phase II of
the National Study of Business Strategy and Workforce Development, Research Highlight
04, March 2007, p. 17.
61 Hartig, Generation Gaps.
62 Ronald A. Wirtz, “Help Wanted, Again,” Federal Reserve Bank of Minneapolis
fedgazette, January 2005, available at [http://minneapolisfed.org/pubs/fedgaz/05-
01/cover.cfm].

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CRS-23
Immigration and Offshoring. Even if U.S. demographics were such a
strong determinant of the supply of labor,
the US is not a closed economy dependent only on domestic labor to produce
goods and services. In the global economy, demographic and labor conditions
in other countries affect the US labor market. Globalization gives US firms
access to labor overseas through foreign direct investment, offshoring, or
subcontracting and access to foreign-born labor that immigrates to the US. The
claims of a coming labor shortage must be assessed in a global context.63
If globalization were to continue at its current pace, one prominent labor economist
expects
US firms to be able to meet potential shortfalls in domestic labor supplies for
tradable goods and services by hiring labor overseas, and to seek immigrant labor
to ameliorate potential labor shortages in the production of non-traded goods or
services.64
The limited availability of U.S. computer programmers to make the
technological fixes necessary for a smooth transition into the 21st century (i.e., the
Y2K crisis) and the ready supply of qualified foreign workers sparked firms to obtain
H-1B nonimmigrant professional specialty visas,65 which allowed them to
temporarily bring these individuals into the country.66 The perceived scarcity of
information technology workers (e.g., computer systems analysts and engineers) in
the domestic labor force prompted the 105th and 106th Congresses to raise the H-1B
visa cap from FY1999 to FY2003, and the 106th and 108th Congresses to create
permanent exemptions from the visa limit. In addition, the 107th Congress passed
legislation to allow H-1B nonimmigrants to remain beyond the statutory limit on
their time in the country if their employers petition for them to become legal
permanent residents (LPRs) of the United States.67 Employers continue to urge
63 Richard B. Freeman, “Labor Market Imbalances: Shortages, or Surpluses, or Fish
Stories?” Global Imbalances — As Giants Evolve, Boston Federal Reserve Economic
Conference, Chatham, MA, June 14-16, 2006, p. 7-8.
64 Richard B. Freeman, “Is A Great Labor Shortage Coming? Replacement Demand in the
Global Economy,” National Bureau of Economic Research Working Paper Series, Working
Paper 12541, September 2006, p. 8.
65 A professional specialty occupation requires the application of highly specialized
knowledge, the attainment of at least a bachelor’s degree (or its equivalent), and the
possession of a license or other credential to practice the occupation if required. Besides
computer-related occupations, employers recently have obtained relatively large numbers
of H-1B visas for architects and engineers, administrative specializations, and educators.
66 For additional information, see CRS Report RL31973, Programs Funded by the H-1B
Visa Education and Training Fee, and Labor Market Conditions for Information
Technology (IT) Workers, by Linda Levine.
67 For additional information, see CRS Report RL30493, Immigration: Legislative Issues
on Nonimmigrant Professional Specialty Workers, by Ruth Ellen Wasem. (Hereafter
referred to as CRS Report RL30493, Immigration: Legislative Issues on Nonimmigrant
Professional Specialty Workers).

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Congress to reexamine the H-1B visa program to enable them to bring into the
country greater numbers of skilled guest workers.68
Businesses similarly have turned to temporary and immigrant labor to fill jobs
in other occupations when U.S. workers are deemed to be in short supply (e.g.,
landscape laborers and nurses). In view of the ongoing tightening of the U.S. labor
market, firms will likely intensify their pressure on Congress to allow them even
greater access to this pool of less skilled labor. Some Members have expressed
support for proposals that would raise ceilings on current visa categories for guest
workers and would expand existing or establish new exemptions from nonimmigrant
visa caps.69 Yet the labor market effects of immigration and the ability to link, in a
timely manner, migrant inflows with U.S. labor market conditions remain unsettled
issues.70
Another means of augmenting the domestic labor supply available to U.S.
businesses is offshoring or offshore outsourcing. Initially, the principal U.S. firms
sending work to be performed in other countries were manufacturers, which meant
that most of the jobs first offshored involved blue-collar occupations such as the
industry’s baby-boom dependent production jobs shown in Table 2. More recently,
the widespread availability of technologies that permit low-cost, good-quality, high-
speed transmission of voice and data communications has enabled companies in the
service sector to tap into the supply of white-collar workers residing in other nations.
Although good data on the extent and nature of offshoring are limited, estimates
suggest that some of the baby-boom dependent occupations shown in Table 2 have
characteristics that make their duties amenable to export (e.g., office and
administrative support, and business and financial operations).71
68 See, for example, “Gates Urges Change in H-1B Visa Program as Step to Preserve U.S.
Competitiveness,” Daily Labor Report, March 8, 2007.
69 For additional information, see CRS Report RL32044, Immigration: Policy
Considerations Related to Guest Worker Programs, by Andorra Bruno; and CRS Report
RL30493, Immigration: Legislative Issues on Nonimmigrant Professional Specialty
Workers.
70 For additional information, see CRS Report 95-408, Immigration: the Effects on Low-
Skilled and High-Skilled Native-Born Workers, by Linda Levine; and Cappelli, Will There
Really Be a Labor Shortage?
71 For additional information see CRS Report RL32292, Offshoring (a.k.a. Offshore
Outsourcing) and Job Insecurity Among U.S. Workers, by Linda Levine.

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The core activities of several baby-boom dependent industries could make it
difficult for them to utilize labor living outside U.S. borders (e.g., truck drivers in the
transportation industry, sales agents in the real estate industry, elementary and
secondary school teachers in educational services, and nurses in hospitals). Public
sentiment also has prompted policymakers to try to limit offshoring of activities
traditionally performed by employees of baby-boom dependent industries (e.g.,
public administration).72
crsphpgw
72 “Bidders on Pennsylvania Service Contracts To Get Extra Points for Using U.S.
Workers,” Daily Labor Report, September 18, 2006; “Poll Shows Americans Believe
Government Should Prevent Jobs From Being Outsourced,” Daily Labor Report, September
8, 2006; “New Jersey Governor Inks Bill Barring Offshore Outsourcing of State Contracts,”
Daily Labor Report, May 12, 2005; and “Several Governors Issue Executive Orders to Limit
Outsourcing of State Contracts,” Daily Labor Report, April 27, 2004.

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