Present:

The State of the Workforce Changes, Challenges, & Opportunities

in the 495/MetroWest Region

The Graying of Massachusetts:Aging, the New Rules of Retirement,

and the Changing Workforce

The State of the Workforce:

Changes, Challenges, and Opportunities in the 495/MetroWest Region

3

Three critical questions as the baby boomers approach retirement:

• What does the upcoming demographic shift look like?

• How well prepared are families for retirement?

• What are the labor market implications of this demographic shift?

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Massachusetts is Aging

• In 2000, Massachusetts was the 12th oldest state in the nation, with 13.5% of residents older than 65. That number will jump to more than 18% by 2025.

• The Commonwealth’s two oldest counties – Barnstable and Berkshire – both have a larger share of seniors than Florida.

• The 1.87 million baby boomers in Massachusetts – those born between 1946 and 1964 – will start retiring in less than 5 years.

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MetroWest/495 Region Demographics

Ten Oldest MetroWest/495 Region CommunitiesShare of Population Age 65 and Over

0%

4%

8%

12%

16%

• State share of population 65 and over: 13.5%• MetroWest/495 region share of population 65 and over: 11.0%

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MetroWest/495 Region Demographics

Ten Youngest MetroWest/495 Region CommunitiesShare of Population Age 65 and Over

0%

4%

8%

12%

16%

• State share of population 65 and over: 13.5%• MetroWest/495 region share of population 65 and over: 11.0%

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Preparing for Retirement

• Since the mid-1980s, the average retirement age has hovered in the early 60s.

• Social Security is the primary source of retirement income.

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Preparing for Retirement

• The age at which people collect full benefits is rising from 65 to 67.

• Today, the majority of people start collecting before age 65.

• The personal savings rate (just over 2% in 2001) is at its lowest point since the Great Depression.

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Preparing for Retirement

• About one-third of full-time workers in Massachusetts have no access to any type of pension coverage (traditional or 401(k)-style) at their current workplace.

• For those with pension coverage, the nature of pensions has changed dramatically over the last decade.

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How well prepared are Massachusetts families?

Some advantages compared to national peers. But general lack of preparedness means retiring in early 60s no longer a choice.

Good news• Our workers: healthier and

better-educated. Our jobs: less physically demanding

• Older workers have higher labor force participation

• Our incomes higher

Bad news• Our homeownership rates

lag the nation’s

• Older women most at risk for old-age poverty

• Our cost-of-living higher

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Labor Market Implications

• A decline of prime-age workers means that all the growth in the Massachusetts labor force will come from older workers.

• Potential labor shortages ahead.

Massachusetts Population, 1980-2025, by selected age group

15-24 25-54 55-64 Total (15-64)

1980 1,110,141 2,147,705 588,349 3,846,195

2000 820,016 2,863,136 546,047 4,229,559

2025 919,815 2,599,192 834,412 4,353,419

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Labor Market Implications

• Traditional supplemental labor sources (immigrants, women, domestic migrants) are unlikely to fill the labor supply gap.

• Increased employment of older workers can help employers facing labor shortfalls.

• Increased employment of older workers can help older households facing retirement income shortfalls.

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Impediments to Hiring Older Workers

• Older workers are expensive – higher earnings and more costly fringe benefits.

• Employment policies encourage early retirement.

• Older workers may not have required skills.

• Employers resist part-time employment.

• Age discrimination may still exist.

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Recommendations

• Increase access to retirement savings accounts for full-time workers (e.g. through business associations or the state’s 457 plan).

• Increase employee participation in existing plans.

• Improve financial education and initiate on-going statewide conversation.

• Improve job training opportunities for older workers.

The State of the Workforce Changes, Challenges, & Opportunities

in the 495/MetroWest Region