# Presentation: 924391

## A presentation for the 
White House Conference on Aging
Policy Committee

July 20, 2005

Barbara D. Bovbjerg
Director
Education, Workforce, and Income Security

**White House Conference on Aging**
**Policy Committee**
**July 20, 2005**
**Barbara D. Bovbjerg**
**Director**
**Education, Workforce, and Income Security**

**Older Workers:****Challenges Created by An Aging Workforce**

## Aged Population as a Share of Total U.S. Population Continues to Grow

- 2

**Percent of total population**

**Population aged 65 and over**

- Note:  Projections based on the intermediate assumptions of the 2005 Trustees’ Reports.
- Source: Office of the Chief Actuary, Social Security Administration.

## Life Expectancy at Age 65

- Source:  Felicitie C. Bell and Michael L. Miller, “Life Tables for the United States Social Security Area 1900-2100,” Actuarial Study No. 116, http://www.ssa.gov/OACT/NOTES/as116/as116TOC.html.

**Years**

-   3

## Fertility Rate Hovers Around the Replacement Rate

-   4

- Source: U.S. National Center for Health Statistics, Vital Statistics of the United States, annual; and unpublished data as reported in the *Statistical Abstract of the United States*, 2004-2005, Table No. 75.
- Note: The total fertility rate is the number of births that 1,000 women would have in their lifetime if, at each year of age, they experienced the birth rates occurring in the specified year.

## Number of Workers per Elderly Dependent Expected to Continue to Decline

*Source*: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, *World Population Prospects: The 2004 Revision* and *World Urbanization Prospects: The 2003 Revision*, _[http://](http://esa.un.org/unpp)__[esa.un.org/unpp](http://esa.un.org/unpp)_.
- Note: This ratio is the ratio of the population aged 15 to 64 years to the population aged  65 and over.

- 5

**Number of workers**

## U.S. Labor Force Growth Will Continue to Decline

- Note:  Percentage change is calculated as a centered 5-yr moving average of projections based on the intermediate assumptions of the 2005 Trustees Reports.
- Source: GAO analysis of data from the Office of the Chief Actuary, Social Security Administration.

**Percentage change (5-yr moving average)**

-  6

## Composition of Spending as a Share of GDPUnder Baseline Extended

**Composition of Spending as a Share of GDP****Under Baseline Extended**

**Revenue**

**Social Security**

**Medicare & Medicaid**

**Net Interest**

**All other spending**

**Percent of GDP**

- Notes:  In addition to the expiration of tax cuts, revenue as a share of GDP increases through 2015 due to (1) real bracket creep, (2) more taxpayers becoming subject to the AMT, and (3) increased revenue from tax-deferred retirement accounts.  After 2015, revenue as a share of GDP is held constant.
- Source:  GAO’s March 2005 analysis.

-   7

## Composition of Spending as a Share of GDPAssuming Discretionary Spending Grows with GDP after 2005 and All Expiring Tax Provisions are Extended

**Revenue**

**Social Security**

**Medicare & Medicaid**

**Net Interest**

**All other spending**

**Percent of GDP**

- Notes:  Although expiring tax provisions are extended, revenue as a share of GDP increases through 2015 due to (1) real bracket creep, (2) more taxpayers becoming subject to the AMT, and (3) increased revenue from tax-deferred retirement accounts.  After 2015, revenue as a share of GDP is held constant.
- Source:  GAO’s March 2005 analysis.

-   8

## Key Dates Highlight Long Term Challenges of the Social Security System 

| Date | Event |
| --- | --- |
| 2009 | Social Security cash surplus begins to decline |
| 2017 | Annual benefit costs exceed cash revenue from taxes |
| 2027 | Trust fund ceases to grow because even taxes plus interest fall short of benefits |
| 2041 (SSA)
2052 (CBO) | Trust fund exhausted, annual revenues sufficient to pay about 74% – 78% of promised benefits |

- Sources: Social Security Administration, *The 2005 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds*. Washington, DC, March 2005. Congressional Budget Office, *The Outlook for Social Security: Potential Range of Social Security Outlays and Revenues Under Current Law*. Washington, DC, June 2004 (updated March 2005).

## Social Security, Medicare, and Medicaid Spending as a Percent of GDP

- Note:  Social Security and Medicare projections based on the intermediate assumptions of the 2005 Trustees’ Reports.  Medicaid projections based on CBO’s January 2005 short-term Medicaid estimates and CBO’s December 2003 long-term Medicaid projections under mid-range assumptions.
- Source:  GAO analysis based on data from the Office of the Chief Actuary, Social Security Administration, Office of the Actuary, Centers for Medicare and Medicaid Services, and the Congressional Budget Office.

**Percent of GDP**

**Medicare**

**Medicaid**

**Social Security**

- 10

## Economic Security in Retirement

**Adequate retirement income**
- Social Security
- Pensions
- Savings
- Earnings from continued employment (e.g., part-time)
**Affordable health care**
- Medicare
- Retiree health care
**Long-term care (a hybrid)**

## Pension SystemFaces Variety of Challenges

- Significant coverage gaps and pre-retirement leakage
- Long term decline in the number of DB plans and active participants and change in the nature of DB plans
- Recent and prospective large plan terminations by bankrupt sponsors have placed Pension Benefit Guaranty Corporation (PBGC), the federal agency insuring benefits, in financial jeopardy
- Plan funding rules have proven to be inadequate
- Certain PBGC premium insurance issues need to be reviewed
- Selected other issues also require attention (e.g., lump sums, bankruptcy laws)

## Participation Rates in Employment-Based Retirement Plans Are Converging for Men and Women, but Only about Half Have Coverage

- 13

- Source: Employee Benefit Research Institute estimates from the 1988-2004 March Current Population Surveys

**Percentage of Wage and Salary Workers Ages 21-64 who Participated in an Employment-Based Retirement Plan, by Gender, 1987-2003**

**Notes:**
Data from the Employee Benefit Research Institute indicates that the gap in the rate of pension coverage between men and women has declined since 1987.  Even still, less than half of the women in the workforce participate in an employer-based pension plan.  In addition, the the value of wealth accumulated in pension accounts continues to be dramatically lower for women than for men.   

## Labor Force Participation Rate at Older Ages is Projected to Rise Slightly 

**1987**

**1988**

**1989**

**1990**

**1991**

**1992**

**1993**

**1994**

**1995**

**1996**

**1997**

**1998**

**1999**

**2000**

**2001**

**2002**

- Source: United States Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey.
- http://www.bls.gov/data/home.htm.

- 14

**Notes:**
Data from the Employee Benefit Research Institute indicates that the gap in the rate of pension coverage between men and women has declined since 1987.  Even still, less than half of the women in the workforce participate in an employer-based pension plan.  In addition, the the value of wealth accumulated in pension accounts continues to be dramatically lower for women than for men.   

## Factors Affecting Decision to Retire

**Eligibility Rules**
**Social Security**
**Employer Provided Pensions**
**Health Status**
**Health Insurance**
**Personal Preference**
**Spouse’s Employment Status**
**Alternative Work Arrangements**
**Employment Opportunities**

## Ongoing Work on Older Workers

**Research Questions**
**Which areas of the labor market will be most affected by the aging of the workforce? **
**What factors most influence the timing of older workers’ retirement? and **
**What are employers  doing to hire and retain older workers?**

## Ongoing Work on Older Workers

**Methodology**
**Focus groups held with retirees and near retirees**
**Analysis of work and retirement trends with HRS and CPS data**
**Review of employer surveys and employer roundtable **

## Consider Policies To:

**Encourage continued work**
**Discourage early retirement**
**Help those who can’t work longer**