Office of the Chief Actuary 

Perspective on the Report of the 

Technical Panel on Labor Supply to 

Inform the Trustees’ Projections

June 30, 2017
Technical Panel Reports

• Highly valuable additional advice

• But rationale for recommendations is paramount

• The opportunity to discuss views and the potential range of 

possibilities with panel experts is highly important

• This panel recommends lower LFPR

• The 2011 and 2015 panels recommended higher ultimate LFPR

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Long-Term Implications of Near-Term Changes

• Perspective on long-term projections

• Incremental changes 

• Requires an understanding of a “permanent” change

• Example: mortality 2000-2009, and more recently

• “Permanence” of recent recession effect

• Recovery has been slow, but not necessarily over

• We have assumed permanent effects on productivity

• But labor force participation and employment are different

• We do not yet have a convincing rationale for permanent lower employment

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Drivers of Past Trends and Future Projections

• Must understand the drivers of past changes and make assumptions 

about their persistence

• Male LFPR has declined for several decades, and female increased

• Female LFPR has moved much closer to male

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OCACT Model Explains Decline in Male LFPRs

• OCACT has examined factors influencing pre-recession LFPR trends

• For males ages 25-54, two factors are the primary drivers:

• Marital status: increase in single never married has reduced LFPRs

• Disability prevalence: increase in disability prevalence has reduced LFPRs

• OCACT does not expect these two trends to continue in the future

• Panel’s Figure 6 shows OCACT model a good fit for males

• Focus on 2000-2007 period 

• Discrepancies are small for each age group and are offsetting in total

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OCACT Model Explains Decline in Male LFPRs

• OCACT has examined factors influencing pre-recession LFPR trends

• For males ages 25-54, two factors are the primary drivers:

• Marital status: increase in single never married has reduced LFPRs

• Disability prevalence: increase in disability prevalence has reduced LFPRs

• OCACT does not expect these two trends to continue in the future

• Panel’s Figure 6 shows OCACT model a good fit for males

• Focus on 2000-2007 period 

• Discrepancies are small for each age group and are offsetting in total

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Education Effect

• We must do more

• But caution is required in interpreting trends

• Distribution by educational attainment has been changing and has 

undoubtedly affected the trends by category

• Consideration by percentile of educational attainment is better

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Bottom Line

• Some good suggestions from this panel

• Education, employment rates rather than LFPR

• But we believe it is too early to assume recovery in LFPR is over

• The recent recession was extreme and so recovery might be slower

• Frequent swings in projections are not desirable (75 year horizon)

• Might be too early for model re-estimation due to incomplete business cycle

• If LFPR and employment are permanently lowered, what basis?

• Is economy permanently restructured? Less demand for labor?

• Will workers/population decline in the face of population aging?

• While this is possible, no firm basis for justifying change at this point 

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