Healthcare, Manufacturing, Construction, Education, Science, Transportation and Utility Industries Among the Hardest Hit Sectors
U.S. employers will need to hire on average more than 240,000 people a month for the next five years just to replace jobs being left by those retiring from the workforce, according to a recent study on the economic impact of Peak Baby Boomer retirements.
“We are in the early stages of the largest retirement-driven, workforce turnover in our nation’s history,” said Jason Fichtner, who commissioned the study as executive director of the Alliance for Lifetime Income’s Retirement Income Institute (RII). “These retirements have already begun and will continue to have significant impact on our economy.”
The labor force analysis by RII looks at the largest and final cohort of the Baby Boomer generation – the 30.4 million “Peak Boomers” who were born between 1959 and 1964 and will be turning 65 years old this year through 2029.
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The analysis shows 18 economic sectors are likely to experience a loss on average of 10.1 percent of their current workforce over the next five years as 14.8 million Americans are anticipated to retire from their jobs.
On a percentage basis of the current labor force, the hardest hit sectors include utilities (16.7% in anticipated workforce retirements), manufacturing (11.8%), construction (10.5%), transportation and warehousing (9.6%) and healthcare and social assistance (9.6%).
Notably, the healthcare sector is expected to lose 2.135 million workers, the largest number of employees of any sector, at a time of greater need for healthcare services because of the influx of Baby Boomers approaching 70 years old.
“A historic surge in retirement age Americans coincides with a historic turnover in workers who serve older Americans, thereby creating a labor gap with far-reaching societal and economic implications,” said Fichtner.
Other industries expected to lose more than 1 million workers are manufacturing (1.841 million), construction (1.249 million), education (1.236 million), scientific and technical services (1.220 million), and retail trade (1.002 million).
The study was conducted by Robert J. Shapiro, a renowned economist and former Undersecretary of Commerce for Economic Affairs at the U.S. Commerce Department, and Luke Stuttgen of Sonecon on behalf of RII. They found that 55% of Peak Boomers say they will retire in the next five years, but the actual number will be substantially higher because people tend to retire a couple of years sooner than planned either due to illness, an unexpected change in the job including layoffs or simply a change of mind on when to stop working.
“Never before has our nation had to deal with so many workplace retirements at the same time,” said Fichtner. “This is a big challenge for businesses and will put added pressure on recruitment and training of younger workers and the expanded application of automated intelligence in the workplace. The U.S. would also benefit from a more thoughtful immigration process than we currently have in place to help fill many of these jobs.”
The study noted, “by raising recruitment and training costs for U.S. businesses, the large numbers of peak boomer retirements could dampen productivity, investment, and wage and salary growth in the most affected industries.”
Overall, Peak Boomer retirements could lead to a 1.3% decline in productivity, which would be offset “by technological progress, capital investment and the additional year of experience gained by everyone who continues to work,” the study noted.
“Our labor force will adjust to the Boomer exodus, but there will be challenges along the way,” added Fichtner.
Just as the labor force is adjusting to work without them, many Boomers are adjusting to entering retirement without benefit of an employer-sponsored pension, unlike previous generations. An interesting twist to this development, as highlighted in the RII study, is that middle-class families are turning to annuities to in effect create their own form of a pension. “Most annuity owners are middle-class,” the study notes. “The median household income of people owning annuities was $79,000 in 2022, including 25 percent with incomes below $50,000 and 70 percent with incomes below $100,000.”
“Private sector pension plans were once prevalent in our economy but are now rare and Boomers are the first generation of U.S. workers to retire without a pension plan as a base of retirement income,” Fichtner noted. “As a result, many middle-income retirees are using annuities to generate protected and predictable income in retirement.”
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