Outlook for Baby Boomers Reaching Retirement Age

April 14, 2006 - How will the job market be affected by the wave of baby boomers reaching retirement age? One good piece of advice for most of them: "(1) Lower your spending in anticipation of retirement, and then (2) don't retire."

This is the topic of an article in the Washington Post today, "Working To Fix Our Fiscal Woes, by C. Eugene Steuerle, of the Urban Institute-Brookings Tax Policy Center. The main concern he addresses is that

[W]orries about ... imbalances in Social Security's bankbook [is] largely a work-related fiscal woe, as the number of workers supporting each retiree falls by an estimated one-third over the next 30 years. ... [A] postwar boom in the U.S. labor force is just now ending. Since around 1950, the percentage of adults who worked rose almost every year except in recessions. But now the great swell of working boomers is starting to retire, and most of the gain in female labor force participation is over. If Americans keep retiring at the same ages they do today, the share of adults who are working will fall markedly. The effect on the economy will be roughly equivalent to increasing the unemployment rate by 3/10 of 1 percent every year for 20 years straight starting in 2008. That means a lower rate of growth for workers, goods, services, and government revenues.

Steuerle spells out the fiscal implications of Americans working an average of five years more than they do today, say from 62 to 67 years old.

Since a typical 62-year-old couple today is likely to have at least one spouse who lives another 25 years, most couples need to line up resources for 30 years or more to play it safe. In short, the most important financial decision facing most people in their 60s is when to retire. ... Working longer helps the nation, too. Additional time on the job increases national income, while boosting the revenues needed to float government programs, including those serving the elderly. ... Workers on average would have an annual income 55 percent higher if they retired for five fewer years, saved some of their additional earnings, and delayed receipt of Social Security benefits.

Along the way, the problems with the funding of Social Security would, he says, be largely solved.

[L]ook out about four decades, when fiscal and Social Security problems are projected to be the most severe. ... Five more years of work would generate more in additional taxes to the government (including Social Security and income taxes) than the amount of the shortfall. That same five years would produce enough additional Social Security taxes alone to cover half of the shortfall, if benefits were kept constant.

With personal and national interests pointing toward working longer - is American business ready for the implications of this? What will it mean to have a workforce that stays on the job another five years?

This column is one of a series. Every other weekday it edits a column is submitted by ten prominent think tanks on a rotating basis (each think tank chooses its authors and topics) - American Enterprise Institute Brookings Institution Cato Institute Center for American Progress Center for Strategic and International Studies Council on Foreign Relations Heritage Foundation New America Foundation RAND Corporation Urban Institute.

IT Jobs by State - First Quarter of 2005

At CityEconomist we have been perusing data on IT jobs in the first quarter of 2006 and were surprised to find that Arizona, Illinois and Connecticut have been growing these jobs fastest of the 15 states with the largest IT vacancies. We have been looking at a two-year span, comparing this last quarter with the first quarter of 2004.

The data come from corporate web sites tracked daily with a web spider developed by my colleague Henning Seip of Skillproof. He checks on a quarter of a million job vacancies every day. We have been especially interested in IT jobs because IT is crucial in driving business innovation.

Arizona IT job vacancies grew 217 percent, Illinois vacancies grew 143 percent and Connecticut vacancies grew 136 percent between the first quarter of 2004 and the first quarter of 2006.

The next seven fastest-growing states were, in order, Washington, Massachusetts, New York, California, Texas, Florida and New Jersey. Only one state, Maryland, showed a decline in jobs (14 percent). The other four, slower-growing, states were Georgia, Pennsylvania, Virginia and the District of Columbia.

On the same basis as the state data, the U.S. metro areas with the fastest-growing IT vacancies over the past two years were Phoenix, where the vacancies doubled; San Jose, where they grew 170 percent, and San Francisco and Seattle, where they grew 130 percent. They grew 157 percent in the Chicago area and 122 percent in the Minneapolis area.

Only one of the 15 metropolitan areas with the most IT vacancies has lost ground in the last two years. That is Baltimore.

The growth rate has been slower in 2005-2006 than the previous year. Two metro areas in southern California – San Diego and Los Angeles – have registered a decline in IT job vacancies in 2005-2006.

The growth in job vacancies has been led by IT sales and marketing, which grew 132 percent over the two years and 42 percent during the most recent year, from the first quarter of 2005 to the first quarter of 2006.

It was followed in both periods by IT process design and IT management. What this suggests is that the IT jobs that are growing fastest are close to business operations – sale, process design and management of IT services.

U.S. jobs seem to be growing to keep pace with growth among IT service providers overseas.

New York City exemplifies the shift in demand for IT skills. Employer demand has increased 50 percent or more in eight skills areas in the first quarter of 2006 compared with a year earlier.

In order of available jobs, the skills that are gaining in demand are: Linux, Sybase, Perl, C# (Microsoft’s C Sharp), Peoplesoft, Offshore team coordination, SOAP and MCSE.

Meanwhile, demand for other skill areas has declined.

In order of available jobs, the declines are in: SAPDB2 (IBM), Websphere (IBM), Windows NT/2000/2003, MQSeries, Weblogic (BEA) and Wireless.

Programmers skilled in Java, Unix, SQL and HTML are in the greatest demand, with an increase of 24 percent or more openings for each skill in the first quarter than a year earlier.
Although software development is not growing as fast as other skill categories, it is still the largest category of skills required by employers.