U.S. workforce ages fast, reshaping economy and jobs market

MARYLAND, UNITED STATES — The American workforce is undergoing a profound demographic transformation, growing older at an unprecedented rate and creating new challenges for the nation’s economic landscape. 

According to a new United States Census Bureau survey, workers aged 55 and older are now the fastest-growing segment of the labor force, a shift that is reshaping industries, states, and the country’s capacity for job creation.

“In 2006, 45 million workers were employed by firms with less than 10% older workers. But as the workforce aged, this number fell to around 32 million in 2022,” the survey notes.

Older workers cluster in utilities, manufacturing, and older states

The trend is driven by population ageing, and the same tendency is observed in the metropolitan setting: the number of people aged 65 and beyond in almost all 387 metro areas across the country has increased over the period between 2020 and 2023.

This population explosion is unequally distributed across sectors of the economy and geographical regions, leading to inequalities within local worlds.

The most change has been in the utilities sector, where 80% of jobs are at companies with at least 25% of workers aged 55 or older, a 35% increase from 2006. 

The same significant growth in the number of older workers is observed in manufacturing and wholesale trades. 

The geographic difference is also drastic: Maine, the state with the oldest median age of 44.7, has 39% of its employment in firms with a high proportion of older workers, whereas Utah, with a median age of 32, has 14%.

Aging workforce linked to slower U.S. job creation

The lack of economic dynamism and job creation is one of the most important survey outcomes, closely linked to the high concentration of older employees. 

The trend is clear in the statistics: companies with the highest percentage of elderly workers are not growing or even declining, whereas those with the lowest median age are increasing exponentially.

In particular, companies that contain 25 to 50% of employees older than 55 years have, on average, reduced by 2% each year. In sharp contrast, companies with less than 10 percent of older employees have increased by about 2 percent every year.

This aging workforce is an issue that spans a long period of time, affecting local economies and national employment development, because the population trends driving the problem are embedded.

The economic gap between younger and older workers is growing as younger workers in their 20s and 30s are flocking to start-ups, which have historically been an important source of employment creation. In addition, metro-level data indicate that in 80% of metropolitan regions, the number of children decreased from 2014 to 2020, suggesting that the pool of young workers in the future is becoming smaller.

In turn, aging populations in states and cities like Maine and large hubs like New York, Los Angeles, and Chicago can experience endemic headwinds to job creation. Meanwhile, younger Utah and Texas metros are better positioned to grow their labor forces in the future.

The interminable increase in the number of older workers, although a positive sign of long life expectancy and changing retirement trends, has complicated consequences for innovation, entrepreneurship, and the dynamism of local labor markets. Business leaders and policymakers are now faced with the challenge of operating in a labor market with rich experience. 

However, the historical reasons for job creation and the establishment of new businesses are increasingly in the hands of the country’s younger generation. Such a lopsided geographic and sectoral distribution of the aging trend means its impact will be unevenly felt across America, and this may even widen economic disparities among regions in the years to come.

As the report concludes, “If these trends continue, the economic environments experienced by younger and older workers will continue to diverge. In addition, some firms may face challenges as a large share of their workers reach traditional retirement age.”