UNEMPLOYED OLDER 

WORKERS

Many Face Long-Term 

Joblessness and Reduced 

Retirement Security

Statement of Charles A. Jeszeck, Director 

Education, Workforce, and Income Security

Testimony 

Before the Special Committee on Aging, 

U.S. Senate

For Release on Delivery 

Expected at 2:30 p.m. EDT

Tuesday, May 15, 2012

GAO-12-724T

United States Government Accountability Office

GAO
 

Page 1 GAO-12-724T 

Chairman Kohl, Ranking Member Corker, and Members of the 

Committee:

I am pleased to be here today to discuss the status of unemployed older 

workers. The most recent recession, which began in 2007 and ended in 

2009, was the worst since the Great Depression, and has been 

characterized by historically high levels of long-term unemployment.

1

My remarks today summarize a report that we prepared for this 

committee and released today.

While it is crucial that the nation help people of all ages return to work, 

long-term unemployment has particularly serious implications for older 

workers (age 55 and over). Job loss for older workers threatens not only 

their immediate financial security, but also their ability to support 

themselves during retirement.

2

To examine changes in the employment status of older workers since the 

start of the recession, we analyzed nationally representative 

unemployment and demographic data from the Bureau of Labor Statistics 

(BLS), including January 2007 through April 2012 data from the Current 

Population Survey (CPS) and the 2008 and 2010 Displaced Worker 

Supplement (DWS). To learn about older workers’ challenges in finding 

new jobs, we conducted focus groups with unemployed older workers in 

four metropolitan areas, and interviewed staff at one-stop career centers 

My testimony will focus on (1) how the 

employment status of older workers age 55 and over has changed since 

the recession, (2) older workers’ challenges in finding new jobs, (3) how 

periods of long-term unemployment might affect older workers’ retirement 

income, and (4) what other policies might help unemployed older workers 

regain employment and what steps the Department of Labor (Labor) has 

taken to help unemployed older workers.

 

1

The recession of 2007-2009 started in December 2007 and ended in June 2009, 

according to the Business Cycle Dating Committee of the National Bureau of Economic 

Research (NBER). According to NBER, “a recession is a significant decline in economic 

activity spread across the economy, lasting more than a few months, normally visible in 

production, employment, real income, and other indicators. A recession begins when the 

economy reaches a peak of activity and ends when the economy reaches its trough.” In 

addition, this recession occurred in the context of a significant decline in major financial 

markets, which dramatically reduced the value of major assets. 

2

GAO, Unemployed Older Workers: Many Experience Challenges Regaining Employment 

and Face Reduced Retirement Security, GAO-12-445 (Washington, D.C.: April 25, 2012).

 
 

Page 2 GAO-12-724T 

in each of the four areas.3

http://www.gao.gov/multimedia/video/#video_id=590295

(For audio clips from GAO’s focus groups with 

unemployed older workers, use this link: 

.) Further, we 

interviewed experts on older workers’ issues and reviewed studies. To 

assess how periods of long-term unemployment might affect older 

workers’ retirement income, we used microsimulation models, and 

interviewed officials at the Social Security Administration (SSA). To 

identify what policies might help unemployed older workers regain 

employment and what Labor has done to help older workers, we 

interviewed experts on policy proposals previously identified through a 

review of the literature and interviewed Labor officials.

We conducted this performance audit from October 2010 through April 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence we obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives.

Social Security retirement benefits are paid to eligible workers under the 

Old-Age, Survivors, and Disability Insurance (OASDI) program 

administered by SSA. The level of monthly retirement benefits an 

individual will receive depends on factors such as work and earnings 

history and the age at which the beneficiary chooses to begin receiving 

benefits.4 Generally, individuals may begin receiving Social Security 

retirement benefits at age 62; however, the payments will be lower than if 

they wait to receive benefits at their full retirement age, which varies from 

65 to 67, depending on the individual’s birth year.5

 

3

The Workforce Investment Act of 1998 provided for the establishment of local one-stop 

centers to provide access to employment and training services under a number of 

programs, including those administered by the Departments of Labor, Education, Health 

and Human Services, and Housing and Urban Development. Pub. L. No. 105-220, § 121, 

112 Stat. 936, 963.

Social Security also 

provides benefits to eligible workers who become disabled before 

4

42 U.S.C. §§ 402, 415.

5

42 U.S.C. § 402(q)(1); 20 C.F.R. §§ 404.409 to 404.410.

Background 
 

Page 3 GAO-12-724T 

reaching retirement age, as well as children, spouses, and widow(er)s of 

eligible workers.

Employer-sponsored retirement plans fall into two broad categories: 

defined benefit (DB) plans and defined contribution (DC) plans. DB plans 

promise to provide a benefit that is determined by a formula based on 

particular factors specified by the plan, such as salary or years of service. 

Typically, DB plans provide annuity payments to retirees on a monthly 

basis that continue as long as the recipient lives.6 Under DC plans, 

workers and employers may make contributions into individual accounts.7

At retirement, participants’ distribution options vary depending on the 

plan, but often include leaving their money in the plan or taking a full or 

partial distribution. In order to preserve the tax benefits from their DC plan 

savings, many participants choose to roll plan savings into an individual 

retirement account (IRA). IRAs are personal retirement savings 

arrangements that allow individuals to make contributions to an individual 

account and receive favorable tax treatment.8

Unemployment rates for workers of all ages have risen dramatically since 

the start of the recent recession in December 2007, and workers age 55 

and over have faced particularly long periods of unemployment. As 

shown in figure 1, the seasonally unadjusted unemployment rate for older 

workers increased from 3.1 percent in December 2007 to a high of 7.6 

percent in February 2010, before it decreased to 6.0 percent in April

 

6

A DB plan may also provide benefits to a surviving spouse, if the plan participant is 

married and took these benefits.

7

The most common type of DC plan is the 401(k) plan, which typically allows workers to 

choose to contribute a portion of their pretax compensation to the plan. Some 401(k) plans 

may also provide for employer contributions, and Roth 401(k) plans may accept after-tax 

employee contributions.

8

The tax treatment differs depending on the type of IRA. For example, with traditional 

IRAs, individuals who meet certain conditions can take an income tax deduction on some 

or all of the contributions they make to their IRAs, but they must pay taxes on amounts 

they withdraw from the IRA. Individuals below certain income limits may also contribute to 

Roth IRAs, which do not provide an income tax deduction on contributions, but permit taxfree withdrawals.

Long-Term 

Unemployment for 

Older Workers Has 

Increased 

Substantially since 

the Start of the 

Recession 
 

Page 4 GAO-12-724T 

2012.9 As in prior recessions, smaller percentages of workers age 55 and 

over became unemployed in comparison with younger workers. Some 

researchers attribute older workers’ lower unemployment rates to the fact 

that older workers tend to have longer job tenure, and are consequently 

less likely to be laid off than younger workers.10

Figure 1: Estimated Unemployment Rates by Age, January 2007 to April 2012

Notes: Estimates have 95 percent confidence intervals within plus or minus 0.5 percentage points of 

the estimate itself. Recession dates obtained from the NBER estimates are not seasonally adjusted.

 

9

This figure, along with all others describing characteristics of workers, is based on 

sample data and subject to sampling error. For example, we are 95 percent confident that 

the unemployment rate for workers age 55 and older was between 5.5 and 6.4 percent in 

December 2011. Estimated labor force statistics in this report are based on analysis of 

microdata, which beginning in January 2011 may diverge slightly from BLS published 

estimates. Because we analyzed a variety of labor force outcomes for several subgroups 

of the population that had small sample sizes, we did not attempt to seasonally adjust any 

of the estimates. 

10A recent study, however, suggests that older workers with less than 4.6 years of tenure 

are actually more likely to be laid off than their otherwise similar younger counterparts. 

See Richard Johnson and Corinna Mommaerts, Age Differences in Job Loss, Job Search, 

and Reemployment, the Urban Institute (Washington D.C.: January 2011).
 

Page 5 GAO-12-724T 

Although older workers are less likely than younger workers to lose their 

jobs, it generally takes older job seekers longer to find new work. Since 

2007, many job seekers of all ages have experienced long-term 

unemployment, but individuals age 55 and over have consistently 

experienced longer durations of unemployment than younger workers.11

 

11BLS defines long-term unemployment as being unemployed for more than half a year 

(27 weeks or more). 

Moreover, the median length of unemployment has more than tripled for 

older workers since the recession started, increasing at a greater rate 

than that of younger workers. Prior to the recession, the median duration 

of unemployment for job seekers age 55 and over was 10 weeks 

compared with 9 weeks for job seekers aged 25-54. By 2011, the median 

duration of unemployment for older job seekers had increased to 35 

weeks compared with 26 weeks for younger job seekers. In 2007, less 

than a quarter of unemployed older workers were unemployed for longer 

than 27 weeks, as shown in figure 2. By 2011, this number had increased 

to 55 percent. Moreover, by 2011 over one-third of all unemployed older 

workers had been unemployed for over a year.
 

Page 6 GAO-12-724T 

Figure 2: Growth in Estimated Long-Term Unemployment of Older Workers (55 and Over), 2007-2011

Note: All estimates in this figure have 95 percent confidence intervals within plus or minus 3 

percentage points of the estimate itself. There was a statistically significant change between 2007 

and 2011 in the proportion of unemployed older workers in each of the categories shown in the figure. 

Specifically, (1) the proportion of unemployed older workers who were unemployed for under 5 

weeks, for 5-14 weeks, and for 15-26 weeks each declined significantly from 2007 to 2011, and (2) 

the proportion of unemployed older workers who were unemployed for 27 weeks to a year, and for 

more than 1 year, each increased significantly from 2007 to 2011. Some bars do not sum to 100 

percent because of rounding.

Rates of unemployment for older workers varied across demographic 

groups. Unemployment rates for older men were comparable to those of 

women in 2007 but were significantly higher for men by 2011.12

 

12One possible explanation for men’s greater increase in unemployment since 2007 is the 

particularly steep increase in unemployment in the manufacturing and construction 

industries, which tend to employ higher percentages of men than women. 

In 

addition, black and Hispanic older workers had significantly higher 

unemployment rates than white older workers in both 2007 and 2011. 

Regarding education level, older workers without a high school diploma 

were more likely to be unemployed before and after the recession than 
 

Page 7 GAO-12-724T 

those with a high school diploma.13

Across several different demographic groups, once unemployed, older 

workers were similarly likely to remain unemployed for more than half a 

year (27 weeks or more) in 2011. For example, in 2011 older unemployed 

workers with at least a bachelor’s degree were similarly likely to face 

long-term unemployment as those older workers with less education. In 

addition, older workers in each racial or ethnic group who became 

unemployed were equally likely to face long-term unemployment in 2011. 

Even older women—who in 2007 had lower rates of long-term 

unemployment than men—were similarly likely to face long-term 

unemployment after the recession.

However, the unemployment rate for 

workers with at least a bachelor’s degree approximately doubled by 2011 

from its 2007 level, just as it did for those older workers with less 

education.

We analyzed the earnings of workers who regained employment after 

being displaced from their jobs from 2007 to 2009 and found that older 

workers generally sustained greater earnings losses than younger 

workers.14 When comparing earnings before and after displacement, the 

median earnings replacement rate for workers aged 55-64 who were 

displaced from 2007 to 2009 was only 85 percent, compared with 

approximately 95 percent for workers aged 25-54 and over 100 percent 

for workers aged 20-24.15

 

13One possible explanation of the increase in unemployment among less educated older 

workers is that unemployment rates in manufacturing and construction increased 

dramatically in the recent recession, and these industries tend to employ a higher 

percentage of less educated workers than do many other industries. Also, a recent study 

of the long-term unemployed aged 18-64 also found that the long-term unemployed are 

less likely to hold a college degree. Kaiser Family Foundation/NPR Long-Term 

Unemployed Survey. 

Further, an estimated 70 percent of reemployed 

displaced older workers sustained earnings losses (an earnings 

14Displaced workers are those who indicated that they lost a job for economic reasons 

(such as plant closures or their position being eliminated) during the previous 3 calendar 

years. Displaced workers are surveyed by the Census Bureau every 2 years, with the 

most recent survey interviewing people who lost their jobs during the recession period 

(January 2007-December 2009), and the previous survey interviewing people who 

predominantly lost their jobs prior to the recent recession (January 2005-December 2007).

15This analysis is restricted to long-tenured displaced workers (workers with 3 or more 

years of tenure on the job they lost or left) who lost full-time, salaried jobs and were 

reemployed in full-time, salaried jobs at the time of the survey. 
 

Page 8 GAO-12-724T 

replacement rate of less than 100 percent) compared with 53 percent of 

reemployed individuals aged 25-54.

Focus group participants told us that they believed employer reluctance to 

hire older workers was their primary reemployment challenge, and 

several cited job interview experiences that convinced them that age 

discrimination was limiting their ability to find a new job. Moreover, many 

experts, one-stop career center staff, and other workforce professionals 

we interviewed said that some employers are reluctant to hire older 

workers. Because of legal prohibitions against age discrimination, 

employers are unlikely to explicitly express a lack of interest in hiring 

older workers;16 however, one workforce professional told us that local 

employers had asked her to screen out all applicants over the age of 40.17

According to experts we interviewed, a key reason employers are 

reluctant to hire older workers is that employers expect providing health 

benefits to older workers would be costly. Several surveys of employers 

corroborate this concern.18

 

16The Age Discrimination in Employment Act of 1967, as amended, prohibits employment 

practices that discriminate against people who are age 40 or older. Pub. L. No. 90-202, 81 

Stat. 602, codified at 29 U.S.C. §§ 621-634.

A few focus group participants we spoke to 

who had handled their previous employer’s health insurance or had been 

involved in hiring decisions said they had seen that older workers 

substantially increased insurance costs, which provided a disincentive to 

hire older workers. For example, one focus group participant told us that 

his prior employer had told him not to hire anyone older than him. In 

addition to increased health insurance costs, according to experts, 

workforce professionals, and our focus group participants, some 

employers may be hesitant to hire older workers because of the higher 

17For information about evidence that employers discriminate against older job applicants, 

see Joanna N. Lahey, “Do Older Workers Face Discrimination?” Center for Retirement 

Research at Boston College, Issue Brief Number 33, July 2005.

18See Marcie Pitt-Catsouphes, Michael A. Smyer, Christina Matz-Costa, and Katherine 

Kane, “The National Study Report: Phase II of the National Study of Business Strategy 

and Workforce Development,” Center on Aging and Work/Workplace Flexibility at Boston 

College Research Highlight 04, March, 2007, 21. Also, see The Real Talent Debate: Will 

Aging Boomers Deplete the Workforce? A WorldatWork Research Report, April 2007, 4. 

Employer Reluctance 

to Hire Older Workers 

Is Perceived as One of 

Several 

Reemployment 

Challenges for Older 

Workers 
 

Page 9 GAO-12-724T 

wages that many older workers earned in their previous jobs.19

Another challenge that some older workers face in finding new jobs is that 

they may lack up-to-date computer skills. Some noted that after a long 

spell of unemployment, even those older workers who had previously 

been proficient with computer technology might find their technology skills 

outdated. Some experts we interviewed said that employers might 

hesitate to hire and retrain older workers because they assume that older 

workers will not want to work much longer, so the employer would not get 

a good return on the training investment.

Also, 

according to experts we interviewed, employers may believe that an older 

worker who previously held a high-level position will be overqualified and 

therefore unhappy in a lower-level position.

According to workforce professionals, an ongoing trend among 

employers—to require job seekers to submit all applications and résumés 

online—creates difficulties for many older workers, particularly those with 

few or no computer skills. Further, workforce professionals told us that 

many online job applications require applicants to disclose information 

that readily reveals the applicant’s age—such as the year the job seeker 

graduated from high school—and that applications cannot be submitted 

until such fields are completed. Workforce professionals also said that 

even workers seeking jobs that require little or no computer use could get 

those jobs only by completing a long online application. For example, 

workforce professionals told us that individuals seeking positions as 

maids and janitors in national chain hotels could apply for those positions 

only online and that the older workers seeking those positions were often 

unfamiliar with such applications.

 

19A recent study using data from the Survey of Income and Program Participation found 

that between 1996 and 2007, the median hourly wage for reemployed displaced workers 

was lower at ages 50 to 61 than at ages 35 to 49. The authors of the study suggest that 

“concern over the expense of hiring older workers may be overblown.” See Johnson and 

Mommaerts, Age Differences in Job Loss, Job Search, and Reemployment.
 

Page 10 GAO-12-724T 

Job loss can result in fewer years of work over a worker’s lifetime, which 

can lower the worker’s retirement income in several ways. For example, 

fewer years of work can prevent a worker who is covered by a traditional 

DB plan from having enough years of work with an employer to vest in 

(that is, earn a nonforfeitable right to receive) employer-funded retirement 

benefits.20 And even if a worker who is covered by a traditional DB plan 

has enough years of work to earn a right to the benefits, fewer years of 

work can reduce a worker’s final retirement benefit if the number of years 

worked is used in the formula for calculating retirement benefits. For 

workers with DC plans, having fewer years of work can limit the amount 

of yearly employee and employer contributions that accumulate in a 

worker’s account. Moreover, Social Security retirement benefits may be 

reduced as a result of fewer years of work because the benefits are 

based, in part, on a calculation of the worker’s average monthly earnings 

over 35 years. The 35 years used for the calculation are those with the 

worker’s highest earnings, adjusted for changes in wage levels. If a 

worker has less than 35 years of earnings, then zeros would be used for 

earnings in the missing years, and this will result in a lower calculated 

benefit.21

At the same time, long-term unemployment can motivate older workers to 

file for early Social Security retirement benefits. Many unemployed older 

workers in our focus groups said that they were planning to claim Social 

Security retirement benefits as soon as they were eligible or had already 

done so because they needed a source of income to help pay for living 

expenses. Moreover, a 2012 study found that high unemployment 

increases Social Security retirement claims among men with limited 

 

20The terms of an employer-sponsored retirement plan may specify when the employee 

has earned a nonforfeitable right to employer-funded benefits (called vesting), typically 

after the employee reaches a certain age or has completed a certain period of service. 

Federal vesting requirements may apply to some plans. For example, to qualify for 

favorable tax treatment, private sector DB plans are generally required to vest their 

employees within a maximum of 7 years if they use graded vesting, in which the employee 

is vested in an increasing percentage of the benefits over time. If the plan does not use 

graded vesting, employees must be 100 percent vested within 5 years. In addition, 

employees must be vested upon reaching retirement age (typically age 65 or earlier, if 

defined by the plan), and federal law limits the ability of plans to disregard an employee’s 

prior years of service after breaks in service of less than 5 years. 29 U.S.C. § 1053(a)-(b). 

However, plans sponsored by public sector employers are not generally subject to these 

requirements, although state laws may apply.

21For more information on how Social Security retirement benefits are calculated, see 

online illustration at http://www.ssa.gov/oact/ProgData/retirebenefit1.html. 

Job Loss Can Lead to 

Lower Private 

Retirement Income, 

Early Social Security 

Claims, and 

Exhaustion of 

Retirement Savings
 

Page 11 GAO-12-724T 

education.22 The spike in claims for Social Security retirement benefits 

that occurred in 2009 after large increases in unemployment rates offers 

support for the study’s findings. According to estimates from SSA’s Office 

of the Chief Actuary, in fiscal year 2009 about 139,500 (about 6 percent) 

more older workers applied for Social Security retirement benefits than 

would have been expected in the absence of a recession.23

The recession also led to an increase in applications for disability benefits 

from the Social Security Disability Insurance program. In turn, the 

percentage of individuals in the population age 50 and over who have 

been awarded disability benefits has increased since the recession 

started.

Because 

Social Security retirement benefits claimed before full retirement age are 

reduced to account for the longer period of time that the benefits will be 

received, early claiming will cause individuals and their survivors to have 

lower monthly retirement benefits for the rest of their lives.

24 Older workers who lost their jobs in the recession and had 

significant injuries or health problems, and were not old enough to claim 

Social Security retirement benefits, have strong incentive to apply for 

Social Security disability benefits. If they are awarded benefits, they will 

receive monthly payments and, after a 24-month waiting period, they will 

be eligible for health insurance from the Medicare program.25

 

22The researchers estimate that the recession of 2007-2009 increased Social Security 

retirement claiming for men with limited education by about 40 percent. See Owen Haaga 

and Richard W. Johnson, Social Security Claiming: Trends and Business Cycle Effects, 

Center for Retirement Research at Boston College (Chestnut Hill, MA: February 2012).

 Also, 

23When the Office of the Chief Actuary made estimates in December 2008 for the number 

of retirement benefit claims SSA would receive in fiscal year 2009, it did not factor 

recessionary effects into the estimates because, at that time, it did not know if the 

recession would increase or reduce the number of applications SSA would receive for 

retirement benefits. Therefore, according to the Office of the Chief Actuary, comparing the 

estimates for retirement benefits applications for fiscal year 2009 that were made in 

December 2008 with the actual number of applications received in fiscal year 2009 

provides a reasonable estimate of the effect of the recession on Social Security 

applications in fiscal year 2009.

24According to the Office of the Chief Actuary, applications did not increase as a result of 

the recession for Aged benefits under the Social Security Supplemental Security Income 

(SSI) program. To be eligible for SSI Aged benefits, individuals must be 65 or over and 

have very low income and few assets. Such individuals may have already been 

unemployed before the recession, which could help explain why the recession did not 

increase applications for SSI Aged benefits. 

25Receipt of disability benefits is generally subject to a 5-month waiting period beginning 

with the month the applicant was both insured for disability and disabled, as defined by 

statute. 42 U.S.C. § 423, 20 C.F.R. § 404.315. 
 

Page 12 GAO-12-724T 

receiving Social Security disability benefits gives unemployed older 

workers an alternative to claiming Social Security retirement benefits 

early.

Unemployed older workers who have a retirement account may also end 

up using some or all of those savings to cover living expenses while 

unemployed. Indeed, just over half of the older workers in our focus 

groups who reported having retirement savings in an IRA or a DC plan 

also reported that they had used some or all of these savings to pay for 

expenses while they were unemployed. More specifically, focus group 

participants described using retirement savings to cover expenses such 

as mortgage and car payments, medical bills, a child’s college tuition, and 

moving to more affordable housing. A survey of unemployed workers 

conducted in March 2010 also found that a high percentage of individuals 

55 and over reported using savings set aside for retirement or other 

purposes to help make ends meet.26 In addition, an October 2010 survey 

of workers age 50 and over found that nearly a quarter reported that they 

had used all their savings in the previous 3 years.27

These recent developments are particularly troubling considering the fact 

that the earlier a worker stops working and cashes out DC plan savings, 

the lower the savings will be and the shorter the period that the savings 

are likely to last. Depending on the level of savings, the length of time the 

worker spends unemployed, and the worker’s other financial resources, a 

worker may be at risk of using a large percentage of DC plan savings 

during unemployment. If, however, the worker is fortunate enough to find 

another job that includes an employer-sponsored retirement plan or pays 

enough to enable the worker to save some earnings in an IRA, the worker 

may be able to resume saving for retirement. Figure 3 illustrates how a 

worker’s retirement savings of $70,000 in a 401(k) plan could change 

after 2 years of unemployment, depending on how much the worker 

 

26Maria Heidkamp, Nicole Corre, and Carl E. Van Horn, The “New Unemployables” Older 

Jobseekers Struggle to Find Work During the Great Recession, Sloan Center on Aging 

and Work, Boston College (Chestnut Hill, MA: 2010). 

27Sara E. Rix, AARP Public Policy Institute, “Recovering from the Great Recession: Long 

Struggle Ahead for Older Americans” (Washington, D.C.: May 2011). This study surveyed 

adults aged 50 and over who had been in the labor force at some point during the 

previous 3 years. 
 

Page 13 GAO-12-724T 

withdrew from the account while unemployed.28

 

28We used $70,000 as the starting point for this illustration because it is about the median 

level of DC plan savings for employed workers age 55 and over who have a DC plan 

account from a current or past employer. For purposes of this illustration, we decided to 

round this median to the nearest $10,000. Based on 2007 Survey of Consumer Finances 

data, the estimated median is $70,800 and its 95 percent confidence interval is within plus 

or minus $13,204, or between $57,596 and $84,004. 

The figure also shows 

how the account value could increase if the worker became reemployed 

and resumed saving for retirement. As shown in figure 3, if the worker did 

not make any withdrawals during the period of unemployment, savings 

could have reached nearly $110,000 by age 62, after becoming 

reemployed. On the other hand, if the worker withdrew 50 percent of the 

retirement account balance while unemployed and became reemployed 

at age 57, the worker would need to work past age 62 before the account 

balance got back to the level it was when the worker was 55.
 

Page 14 GAO-12-724T 

Figure 3: How Drawdowns from Retirement Savings during Unemployment Can Affect Amounts Saved at Time of Retirement 

if a Worker Became Reemployed and Resumed Saving

Note: This illustration is based on an individual who was born at the beginning of 1953, turned 55 in 

2008, and retires at 62 in 2015. To calculate changes in the account balance over time, we used the 

interest and rate-of-return assumptions as reported in past and projected under the intermediate cost 

assumptions in the 2011 Annual Report of the Board of Trustees of the Federal Old-Age and 

Survivors Insurance and Federal Disability Insurance Trust Funds (also known as the OASDI 

Trustees’ Report). We used scaled earnings for medium annual earners as reported in past and 

projected in the 2011 OASDI Trustees’ Report. We assumed the employee contributions to the 

retirement account are 6 percent of the individual’s wages and that the individual received a 3 percent 

employer matching contribution.

Experts GAO interviewed selected various policies that have been 

proposed to help address unemployed older workers’ reemployment 

challenges. Experts selected these policies from a broad list of policies 

that GAO compiled from previous academic studies. For example, two of 

the policies that experts selected would provide incentives such as 

temporary wage or training subsidies for employers to hire long-term 

unemployed older workers. Another policy experts selected would require 

long-term unemployed workers to enroll in training to remain eligible for 

unemployment insurance benefits. In the current context of high 

Federal Government 

Policy Options and 

Actions Labor Has 

Taken to Help 

Unemployed Older 

Workers 
 

Page 15 GAO-12-724T 

unemployment and slow job creation, the impact of such policies is likely 

to be muted by limited job openings.

In 2006, Labor convened an interagency Taskforce on the Aging of the 

American Workforce (the Taskforce), in part, in response to a request 

from this committee and its current chairman, Senator Herb Kohl.29 After 

the Taskforce issued its report in 2008, Labor implemented several 

strategies the report recommended. For example, in 2008, Labor 

expanded a demonstration project designed to assist individuals in 

creating or expanding their own businesses. Also, in 2009, Labor 

awarded approximately $10 million in grants to 10 organizations to test 

new ways of providing training and other services to connect older 

Americans with employment opportunities in high-growth, high-demand 

industries. According to Labor officials, the onset of the 2007-2009 

recession shifted Labor’s focus away from implementing strategies 

recommended in the Taskforce report to responding to greatly increased 

demand for services.

Although long-term unemployment hurts job seekers of all ages, it poses 

particular challenges for older workers. Older workers tend to be out of 

work longer than younger workers, threatening their retirement savings 

during a period of their lives when they have may have less opportunity to 

rebuild them. Even when they are able to obtain reemployment, they 

often do so at lower wages, making it even more difficult to replenish the 

lost earnings and reduced retirement savings that they suffered. For 

those long term unemployed workers who cannot find work, they may 

leave the labor market altogether and claim Social Security retirement

benefits earlier than they would have otherwise, leaving them with less 

retirement income each month for the rest of their lives. As such, the 

effects of the recent recession highlight the limitations of our current 

retirement security system.

While Labor took steps to implement some of the 2008 Taskforce 

recommendations, Labor officials understandably shifted their focus away 

 

29Labor also convened the Taskforce to respond to GAO recommendations in two reports: 

GAO, Older Workers: Demographic Trends Pose Challenges for Employers and Workers, 

GAO-02-85 (Washington, D.C.: Nov. 16, 2001), and Older Workers: Labor Can Help 

Employers and Employees Plan Better for the Future, GAO-06-80 (Washington, D.C.: 

Dec. 5, 2005). 

Concluding 

Observations 
 

Page 16 GAO-12-724T 

from the report’s findings when the recent recession caused a dramatic 

increase in demand for workforce services. Still, older workers remain a 

critical and growing segment of the workforce, and a renewed focus is 

now needed to identify strategies to help address older workers’ 

significant reemployment challenges. In our report, we recommended that 

Labor consider what strategies are needed to address the unique needs 

of older job seekers, in light of recent economic and technological 

changes. In its comments on our draft report, Labor agreed with our 

recommendation.

Chairman Kohl, Ranking Member Corker, and Members of the 

Committee, this completes my prepared statement. I would be happy to 

respond to any questions you may have at this time.

Charles Jeszeck (202) 512-7215 or jeszeckc@gao.gov

In addition to the above, Laura J. Heald, Lucas Alvarez, Laurel E. 

Beedon, James E. Bennett, Amy Buck, David M. Chrisinger, William 

Colvin, Sarah C. Cornetto, Cynthia L. Grant, Gene G. Kuehneman Jr., 

Kathy D. Leslie, Douglas A. Manor, Jaclyn Nidoh, Rhiannon Patterson, 

Kathy Peyman, Mark F. Ramage, David M. Reed, Nyree M. Ryder Tee, 

Aron E. Szapiro, Frank Todisco, and Walter K. Vance made key 

contributions to this testimony.

GAO Contact

Staff 

Acknowledgments 

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