Baby Boomers Employment

Transcription

1 e-labor News No. 131 Issue paper Baby Boomers Employment Joyup Ahn and Bogsoon Kim Introduction Since members of the baby boom generation began reaching retirement age in 2010, serious concerns have been expressed about a possible labor shortage as they retire in large numbers. There are also concerns about their impact on the self-employment industry. If those who retire before reaching the National Pension benefit age move on to self-employment in order to sustain their livelihood, it is likely to pull down the profitability of self-employment in general given that demand tends to be consistent for the mostly non-tradable goods or services offered by self-employed businesses. This could jeopardize the self-employment industry across the board, creating a cycle of baby boomer retirement, business start-up, and bankruptcy. Consolidation in the self-employment industry, ongoing since 2003, began an upward trend in August 2011, showing a year-to-year increase of 123,000 as of August Many are concerned that this trend is a manifestation of these fears. The baby boom generation (those born during the period ) 1 accounted for 17.8% of the productive population as of Their level of economic activity, together with Korea s low birthrate and aging population, is expected to have a considerable impact on the overall labor supply. This paper compares the employment status of the baby boom generation with that of the generations immediately before (those born during the period ) and after (those born during the period ), based on a number of labor market indicators, to review the intergenerational changes in patterns of economic activity. This paper also reviews the jobs occupied and lost by the baby boomers, as well as those reacquired. This is a translated version of a paper published in the Monthly Labor Review (KLI, October 2012). Joyup Ahn, Senior Research Fellow, Korea Labor Institute (jyahn@kli.re.kr); Bogsoon Kim, Senior Researcher, Korea Labor Institute (seesaram@kli.re.kr). 1 A baby boom generation is a demographic cohort born during a period when the cumulative birthrate remains above 3.0. One such period is the years 1946 through 1964 in the United States and the years 1947 through 1949 in Japan, where they are called the Dankai generation. In this paper, the period is limited to the years 1955 through

2 Baby Boomers Lifetime Work Baby Boomers Position in the Labor Market Table 1 and Table 2 show the recent economic activity of the baby boomers. As of 2011, they accounted for 17.8% of Korea s total productive population, and their economic participation rate and employment rate were relatively high, at 76.8% and 75.3% respectively. At the same time, non-employed baby boomers, at 1,804,000 increased by 9,000 from the previous year, but their growth appears to be slowing. Of non-employed baby boomers, 581,000, or 32.2%, had experienced job displacement within the previous year. Table 1. Baby Boomers Main Labor Market Indicators (In thousands) August 2012 Productive population 7,245 ( 34) 7,326 (80) 7,292 ( 34) 7,268 (26) Economically active population 5,628 ( 100) 5,660 (32) 5,603 ( 57) 5,534 (64) (Economic participation rate) 77.7 ( 1.0) 77.3 ( 0.4) 76.8 ( 0.4) 76.1 ( 0.6) Employed 5,491 ( 122) 5,531 (40) 5,488 ( 43) 5,420 (67) (Employment rate) 75.8 ( 0.1) 75.5 ( 0.3) 75.3 ( 0.2) 74.6 ( 0.1) Unemployed 137 (22) 129 ( 7) 116 ( 14) 114 ( 3) Economically inactive 1,617 (66) 1,666 (48) 1,688 (23) 1,734 ( 38) Non employed (= Displaced + Inactive) 1,754 (88) 1,795 (41) 1,804 (9) 1,848 ( 41) Displaced (within previous year) 556 (52) 578 (22) 581 (3) 609 ( 30) Note. Numbers in parentheses ( ) indicate year-to-year change. By employment-contract type, the number of wage-earning baby boomers decreased by 20,000 in 2011 from the previous year, but their share actually increased, mostly among permanent workers. In comparison, the number of daily workers among baby boomers stood at 476,000 as of 2011, showing an ongoing trend of decline. Meanwhile, in 2011 the number of non-wage workers among baby boomers was 2,065,000, or 37.6% of the employed (Table 2). There was a decline of 23,000 from the previous year mainly in the number of self-employed with employees (employer) and unpaid family workers. But the trend in self-employment without employees reversed, increasing by 18,000 from the previous year. This appears to reflect the trend in Korea overall; restructuring in the self-employment sector turned around in August 2011, when those over 50 actively began starting their own businesses. The growth in self-employment that began in the second half of 2

3 2011 continued into 2012, but the trend among baby boomers fluctuated during the same period, remaining stagnant from year to year in 2012 (January August average). Table 2. Employment Growth and Share Among Baby Boomers, by Employment Type (In thousands, %) August 2012 Employed 5,491 ( 122) 5,531 (40) 5,488 ( 43) 5,420 ( 67) Wage workers 3,364 ( 35) 3,443 (78) 3,423 ( 20) 3,379 ( 31) Permanent 1,827 (53) 1,930 (103) 1,935 (5) 1,969 (48) Temporary 989 ( 38) 1,011 (22) 1,012 (1) 956 ( 64) Daily 549 ( 50) 502 ( 47) 476 ( 25) 454 ( 15) Non wage workers 2,127 ( 87) 2,088 ( 39) 2,065 ( 23) 2,041 ( 36) Self employed w/employees 566 (1) 543 ( 24) 504 ( 39) 490 ( 13) Self employed, no employees 1,181 ( 74) 1,173 ( 8) 1,192 (18) 1,203 ( 3) Unpaid family workers 380 ( 13) 373 ( 7) 370 ( 3) 348 ( 20) Share of employed Wage workers 61.3 (0.7) 62.2 (1.0) 62.4 (0.1) 62.3 (0.2) Permanent 33.3 (1.7) 34.9 (1.6) 35.3 (0.4) 36.3 (1.3) Temporary 18.0 ( 0.3) 18.3 (0.3) 18.4 (0.2) 17.6 ( 1.0) Daily 10.0 ( 0.7) 9.1 ( 0.9) 8.7 ( 0.4) 8.4 ( 0.2) Non wage workers 38.7 ( 0.7) 37.8 ( 1.0) 37.6 ( 0.1) 37.7 ( 0.2) Self employed w/employees 10.3 (0.2) 9.8 ( 0.5) 9.2 ( 0.6) 9.0 ( 0.1) Self employed, no employees 21.5 ( 0.9) 21.2 ( 0.3) 21.7 (0.5) 22.2 (0.2) Unpaid family workers 6.9 ( 0.1) 6.7 ( 0.2) 6.7 (0.0) 6.4 ( 0.3) Share of wage workers Permanent 54.3 (2.1) 56.1 (1.8) 56.5 (0.5) 58.3 (1.9) Temporary 29.4 ( 0.8) 29.4 (0.0) 29.6 (0.2) 28.3 ( 1.6) Daily 16.3 ( 1.3) 14.6 ( 1.7) 13.9 ( 0.7) 13.4 ( 0.3) Share of non wage workers Self employed w/employees 26.6 (1.1) 26.0 ( 0.6) 24.4 ( 1.6) 24.0 ( 0.2) Self employed, no employees 55.5 ( 1.2) 56.2 (0.6) 57.7 (1.5) 59.0 (0.9) Unpaid family workers 17.9 (0.1) 17.8 (0.0) 17.9 (0.1) 17.1 ( 0.7) Note. Numbers in parentheses ( ) indicate year-to-year change in employment and share of employment. Table 3 shows the employment rate, self-employment, and permanent-worker shares for baby boomers and the previous generation by birth cohort and age. These employment numbers are comparatively favorable for the baby boomers. Those born in 1955, who have just started to 3

4 retire, have a higher employment rate than the previous generation at the same age. In particular, the employment rate for those 55 years old (the age at which they start retiring) is 2.9 percentage points higher than that for the previous generation. Of the employed, both the share of wage workers and the share of permanent workers out of wage workers are higher than in the previous generation, whereas the share of self-employment is slightly lower. Born Born Born 1955 Born Born 1950 Figure 1. Employment-rate patterns by birth cohort and age (%). Table 3. Lifetime Work, by Birth Cohort (%) Birth cohort and age Birth year and age Employment rate Self employment among the employed Permanent workers among wage workers Note. Self-employment is the sum of those with employees and those without. The difference in employment rates between the baby boomers and the previous generation derives in large part from women s employment, as can be seen in Figure 2. 4

5 Men Born Born 1955 Born 1950 Born Born Women Born Born 1955 Born 1950 Born Born Figure 2. Employment-rate patterns by birth cohort, gender, and age (%). The employment rate for women born in 1955 is 58.5% at age 55, 6.3 percentage points higher than the rate for women at age 55 who were born in 1950 (52.2%), a much bigger gap than the 2.2 percentage points between the male generations (Table 4). For permanent workers, the employment rate is considerably higher, especially for women. 5

6 Table 4. Lifetime Work, by Birth Cohort and Gender (%) Birth cohort and age Birth year and age Men Employment rate Self employment among the employed Permanent workers among wage workers Women Employment rate Self employment among the employed Permanent workers among wage workers Note. Self-employment is the sum of all self-employed, with and without employees. Figure 3 shows the share of self-employment out of the employed and the share of wage workers out of permanent workers for the period January 2010 (when they began turning 55) through August 2012 for those born in 1955, in comparison with the period January 2005 through August 2007 (when they began turning 55) for those born in As the figure shows, the self-employment rate for those age 55 and 56 does not shoot up from the 35% level, as their employment rate remains relatively stable despite the global financial crisis. In fact, it is quite low compared with that for the previous generation at age 55 and 56. The rate appears to increase in 2011 as the baby boomers turn 57, but its pattern is still different from that for the previous generation, when it shot up to over 40%. The share of permanent workers out of wage workers, at around 55%, does not drop sharply after age 55 (although there are some seasonal fluctuations), maintaining a relatively high level compared with the previous generation. 6

7 44.0 Self-employed (incl. 취업자대비 employer) 자영업자 ( 고용주 among + 자영자 ) 비중 the employed (%) Permanent workers 임금근로자 among 대비상용직 wage 비중 workers (%) Born 1950년생 1950 Born 1955년생 Born 1950 년생 1950 Born 1955 년생 Figure 3. Share of self-employment and permanent workers by birth cohort and age (%). Data for those born in 1950 reflect the period January 2005 August 2007, and for those born in 1955, the period January 2010 August Self-employment is the sum of all self-employed, with and without employees. Source: National Statistical Office of Korea, Economically Active Population Survey, raw data. What Are the Baby Boomers Experiencing? The cohort analysis in the preceding section indicates that baby boomers are much better off than the previous generation in terms of their level of economic activity. In particular, the share of permanent workers at age 55, when they start retiring, is considerably higher than for the previous generation, and their employment rate is also significantly higher, led mostly by women. In the industrial distribution in 2010, when the baby boomers born in 1955 started retiring, the share of manufacturing, health and social services increased more than in 2005, when those born in 1950 turned 55. Then what is the number of non-employed among baby boomers who have not secured a job in the labor market? And the number of those who recently became unemployed during the past one month? 2 The number of non-employed among the baby boomers, at 217,000 as of August 2012, is larger than the 165,000 for the previous generation; however, the non-employment rate for baby boomers is still lower. Figure 4 illustrates this point. Cohort analysis also reveals that the 2 Data from December 2009 to August 2012 were used for those born in 1955 for non-employment and 1-month unemployment among baby boomers; data from December 2004 to August 2007 were used for those born in

8 share of the economically inactive population among the middle-aged/older baby boomers over 50 is lower than that for the previous generation at the same age Born 년생 (left) ( 좌 ) 1955 (left) 년생 ( 좌 ) 1950 (right) 년생 ( 우 ) 1955 (right) 년생 ( 우 ) 0.0 Figure 4. Number and trends of non-employment in the 1950 and 1955 cohorts by age (In thousands, %). 8

9 Born 1950 년생 (left) ( 좌 ) 1955 (left) 년생 ( 좌 ) 1950 (right) 년생 ( 우 ) 1955 (right) 년생 ( 우 ) Figure 5. Numbers for and trends in 1-month unemployment in the 1950 and 1955 cohorts by age (In thousands, %). 1-month unemployment indicates the state of going from being employed in the month prior to the survey month to being unemployed or economically inactive at the month of the survey. Of baby boomers born in 1955, the 1-month unemployment number was 9,000, or 1.6% of those employed in the month prior to the survey. This figure is slightly higher than that for 55-year-olds born in 1950, but the trend is largely the same. Causes of 1-month unemployment are also similar to those for the previous generation. Figure 6 shows a similar intergenerational trend in the percentage of 1-month unemployment for involuntary reasons. 9

10 Born 년생 (Jan.2005-Aug.2007) ( ) Born 년생 (Jan.2010-Aug.2012) ( ) Figure 6. Share of involuntary displacement in baby boomers and previous generation (for 1-month unemployment) (%). Involuntary causes of displacement include mandatory retirement due to age, workplace shutdown, honorary/early retirement, downsizing, temporary/seasonal completion of work, no jobs, and business downturn. Table 5. Figures for 1-Month Unemployment and Involuntary Displacement Age (Jan. Aug. avg.) 56 (Jan. Aug. avg.) Year of birth N % N % N % N % month unemployment 11 (3.3) 9 (2.9) 9 (2.9) 10 (2.8) Involuntary displacement 6 (56.6) 6 (61.3) 6 (60.1) 6 (65.1) Employed this year month unemployment 13 (2.4) 14 (2.5) 15 (2.7) 14 (2.6) Involuntary displacement 8 (57.9) 8 (55.0) 8 (52.0) 8 (56.5) Employed this year Note. 1-month unemployment indicates those who are unemployed or economically inactive in the survey month but who were employed in the previous month. Cohort analysis reveals that the patterns of non-employment and 1-month unemployment and the causes of unemployment are similar to those for the previous generation at the same age, indicating that there are no big differences in employment patterns for the baby boomers. 10

11 What Is the Quality of Jobs Held by the Baby Boomers? The baby boomers economically active status is relatively better than the previous generation s, and the two groups rates of non-employment and 1-month unemployment are more or less similar. Then what is the income level for the jobs currently held by baby boomers? Of those born in 1955, low-income workers accounted for 29.5% of wage workers as of March 2012, a decrease from 2011, and an indication that this generation is not yet retiring in large numbers and continues to occupy decent jobs, mostly as permanent workers. In contrast, the ultra-low-income group, earning less than a third of the median hourly wage, grew to 3.7% of wage workers. In addition, the share of the ultra-low-income group among reemployed baby boomers in the month of reemployment jumped to 15.8%. This percentage is much higher than that for 2009, when the job market was suffering from the repercussions of the global financial crisis, and indicates that for this generation, those who hurriedly sought wage work after being displaced from the labor market entered into insecure and unfavorable jobs Under 1/3 Under 2/3 Over 2/3 under 3 median Over 3 median Figure 7. Wage levels among wage workers born in 1955 and in the month of reemployment. Wage level is median hourly wage. Source: National Statistical Office of Korea, Supplementary Survey to the Economically Active Population Survey, raw data. Of the non-wage-earning baby boomers (as of August 2011), those who started their own business after January 2010 accounted for 13.7%, much lower than the 28.8% of those born in 1950 (when they started retiring in January 2005). And baby boomers business start-ups after 2010 are mostly concentrated in the service sector. In particular, there has been a sharp increase in other personal services and finance and insurance, indicating a much brisker business start-up rate in the service sector than for the previous generation. 11

12 The majority of baby boomers starting a business after January 2010 reported either that they funded their start-ups with money that I or my family saved up (time deposit, severance pay, honorary retirement pay, etc.) (59.6%) or that no capital [was] needed (business inheritance, start-up with no capital) (26.6%). In other words, most baby boomers started their own business with their severance pay or honorary retirement pay, or did so with no capital requirement. For them, start-up funding from the financial sector was found to be tight, as loans from banks, insurance companies, and mutual credit finance have significantly declined for this generation. Most of the self-employed who started businesses after 2010 have done so with small capital amounts of less than 20 million Korean won, mostly in the areas of wholesale/retail, finance/insurance, and other personal services. Table 6. Distribution of Non-Wage Workers (Self-Employed With Employees + With No Employees), by Start-Up Period and Industry Year of birth and start up period (In thousands,, %) Industry Before Jan. 10 After Oct. 10 Before Jan. 05 After Jan. 05 All 158 (100.0) 25 (100.0) 79 (100.0) 32 (100.0) Agriculture, forestry, fishery 20 (12.9) 1 (3.6) 21 (26.9) 5 (16.3) Construction 11 (6.9) 0 (0.0) 4 (5.4) 3 (8.3) Manufacturing 16 (9.8) 3 (11.6) 7 (8.3) 1 (3.9) Service 111 (70.3) 21 (84.8) 47 (59.4) 23 (71.5) Wholesale/retail 37 (23.1) 4 (15.7) 14 (17.1) 5 (16.5) Transport 34 (21.5) 4 (14.0) 14 (17.9) 6 (18.3) Restaurant/hotel 18 (11.6) 2 (8.1) 9 (11.9) 2 (7.5) Finance/insurance 1 (0.4) 3 (10.1) 0 (0.0) 1 (1.6) Other personal services 10 (6.6) 8 (32.2) 6 (7.0) 7 (21.4) Note. Numbers in parentheses ( ) are percentages. Source: National Statistical Office of Korea, Supplementary Survey to the Economically Active Population Survey, raw data. Conclusion Employment indicators confirm that Korean baby boomers (born ) level of economic activity is better than that of the previous generation. Because they have yet to retire in large numbers, the share of permanent workers is relatively higher for baby boomers than for 55- year-olds born in 1950, and baby boomers non-employment rate is lower. In particular, the employment rate reviewed through cohort analysis was found to be higher than the previous 12

13 generation s, thanks largely to women s contribution. But as was ascertained by the intergenerational employment-rate patterns, their employment rate is likely to fall dramatically (just as with previous generations) as they begin to retire in droves, potentially causing a labor shortage. Another concern is the possible draining of the skills and functions they have accumulated over a long time, for which the mechanism of transfer should be improved so that the succeeding generation can inherit them. To prevent the serious labor shortage that might result from the baby boomers retirement, it will be necessary to discuss realistic and effective means such as extension of the mandatory retirement age. And efforts should be made to help create jobs for older adults by promoting industries that are friendly to them. References Kim, Yong-Ha, & Lim, Seong-Eun. (2011). Baby boomers: The population size, impact on the labor market and intergenerational transfer. Health and Society Study, 31(2), Hwang, Soo-Kyeong. (2011). Baby boomers retirement and implications for the labor market. Human New Deal Study Series,