Editor's Note: Below is an excerpt from a new Demography Unplugged research note written by our analyst Neil Howe. To learn more about this new research product click here.

A new WSJ article examines rising labor force participation among those age 55 and older, which is helping to offset the drag on growth of aging populations. From the U.S. to Japan to Germany, older workers are giving advanced economies a much-needed boost, in part because retirement rules have been tightened. 

This is absolutely right. Throughout the high-income world, the rising labor force participation (LFP) of older workers has helped to mitigate the rapid deceleration in the growth rate of the "prime" working-age population (age 25 to 55).

In America, for example, older workers have been responsible for just about all of the net employment expansion over the last recovery. From 2007 to 2018, the number of prime-age employees has grown by a mere 300,000--that is, by +0.3%.

Meanwhile, the number of total employees has grown by over 10 million--that is, by +7.3%. In Europe, as the article points out, many more of these economies would have experienced outright recession without the benefit of these older workers.

In Europe (see chart below), the big story has been the dramatic rise in the LFP of workers age 55-64 since 2000. In many of these countries, generous early retirement and unemployment benefit formulas once allowed workers in their late 50s to quit work with few or no income penalties. Policy reforms in the early 2000s drastically tightened these rules, resulting in a lot more employment. In Italy, the LFP of this age group nearly doubled, from 29% in 2000 to 56% today.

In France, it has jumped from 37% to 56%. In Germany, from 43% to 74% (now higher than in the United States).

A broader generational story is the tendency of workers born since the mid-1930s and especially since the mid-1940s (Boomers) to opt for later retirement rather than earlier retirement.

In America, the turnaround toward higher LFP began for the 55-64 age bracket in the mid-1980s and for the 65+ age bracket in the mid-1990s. As we have explored elsewhere, the drivers behind this trend include both choice (Boomers deriving more satisfaction from their work) and necessity (Boomers having less savings and fewer safety nets). 

Yet older workers may not come to the rescue of aging demographics for much longer. In many European countries, populist leaders are promising to roll back the stricter retirement rules that boosted employment. Furthermore, the large demographic "Boom" that has swelled the number of 50- and 60-something workers over the past twenty years is starting to age further into their late-70s. At that age, employment rates are so low that the overall LFP of the elderly are nearly certain to peak and start declining again. 

Older Workers Are Giving Advanced Economies Much-Needed Boost - zen 1

Older Workers Are Giving Advanced Economies Much-Needed Boost - zen 2