Gen Xers are kings of an uncertain job market

Amid uncertain times in the job market one thing stands out — Americans in their 50s are working like never before. The employment-population ratio for this age group, which comprises the heart of Generation X, hit an all-time high in September and remained pretty close in February even though these statistics aren’t adjusted for the seasonal factors that tend to drive employment down early in the calendar year.(1)

The employment-population ratio for so-called prime-age workers 25 through 54 remains quite high, too, but below the record levels of the late 1990s. A comparison of age-group employment and labor-force participation rates now with those from just before the start of the job dislocations of the COVID-19 pandemic makes clear just how much Americans in their 50s and early 60s stand out.

Why is this happening? The most obvious answer is that there are fewer Americans in their 50s than there were six years ago, so simple supply and demand suggests that their employment rates should be higher. But economists studying such cohort-size effects have found that it’s not always that simple. Before the COVID-19 pandemic, for example, employment rates among those in their late 60s were rising even as aging baby boomers swelled that group’s ranks.

Workers older than 65 did leave the labor force in large numbers during a pandemic that was especially dangerous for them, which might help explain why those just younger than 65 have been more likely to stick with their jobs — employers were suddenly short on experienced workers. The low-hire, low-fire labor market of the past couple of years, which may be due in part to corporate adoption of generative artificial intelligence, also rewards experience. Other possible causes of Gen X labor-market outperformance include early exposure to labor market instability that may have made them better at bouncing back from setbacks than earlier generations were, and rising medical costs and Obamacare cutbacks that have made it ever more important to hold on to jobs that offer health insurance until they turn 65 and can go on Medicare. Finally, the rise of defined-contribution retirement plans brings incentives for working longer (to make sure your money doesn’t run out) that old-style pensions did not, although most baby boomers don’t have pensions either.

Generation X is usually defined as those born from 1965 to 1980, who currently range in age from 45 to 61. In contrast to their Gen X elders, those in their late 40s do not stand out for their increased employment or labor-force participation since the pandemic, but that’s partly just because they’re being compared with other Gen Xers (that is, the people who were in their late 40s six years ago).

Generations are admittedly somewhat dodgy concepts, and while Gen X is less arbitrary than some — there was a clear falloff in U.S. births in the wake of the baby boom after World War II — it is fuzzy around the edges. In the annual births data, 1965 is the obvious starting point because births fell so sharply that year, but in the monthly data there’s also a big inflection in August 1961 (Douglas Coupland, whose 1991 novel Generation X popularized the term, was born that December; I was born in 1964 and have always had mixed generational loyalties). On the other side, there’s no reason for 1980 to be the cutoff other than what has become a post-baby-boom custom of setting the length of generations at 16 years.

Still, if you simply look at the population of Americans in their 50s, which the U.S. Bureau of Labor Statistics estimates on a somewhat herky-jerky monthly basis, it’s clear that there was a pretty significant trend reversal about a decade ago when members of Generation X began turning 50. There are nearly 5 million fewer people in that age group now than in early 2016.

One key concept here is substitutability. Few if any jobs are only held by people in their 50s. The question is whether there’s a shortage of people who can do the jobs that people in their 50s tend to be doing. In a paper published in 2020, economists David Neumark and Maysen Yen of the University of California at Irvine (Yen has since moved on to a job at a bank) found that it was the size of older cohorts (50-59 and 60-69) relative to the youngest cohort (16-24) that seemed to matter, possibly because older workers often transition into "more flexible, lower-paying work" that can also be done by new entrants to the labor force. The estimated U.S. 16-24 population fell during the 2010s but has risen since, so it’s a little hard to know what to make of that. The impact of the departure of 65-and-older workers from the labor force during the pandemic seems clearer.

But if it’s relative scarcity that’s driving up employment for Generation X, you’d think their wages would be rising, too, and BLS statistics on median weekly wages for the 45-to-54 age group (it doesn’t publish them for ages 50-59) show a smaller wage premium since Gen Xers began entering that age group than before.

Another important variable is gender, with the huge increase in women’s labor-force participation from the 1950s through 1990s doing a lot to shape overall employment and labor-force participation rates. The employment-population ratio for women in their 50s is higher than ever. For men, it’s higher than it has been in quite a while but still markedly lower than in the 1970s. Because of some combination of lower working hours, different kinds of jobs and unfair discrimination, older women workers earn 20% to 25% less per week than older men, so part of what we’re seeing with the declining wage premium may just be the shifting gender composition of the older workforce.

Another possibility is that Gen Xers’ low expectations explain both their impressive employment rates and less-impressive pay. "McJob" was another durable term to emerge from Coupland’s novel, and in a paper published in 2008, sociologist Stephen Lippmann of Miami University proposed that those born in 1965 or later were better able to bounce back from job setbacks than their elders in part because they were so accustomed to them. This view is complicated, though, by the fact that today’s Gen-X-led households are much wealthier on average than baby-boomer-led households were at more or less the same age.

I say "more or less" because the baby boom covers 19 years (1946-1964) to Generation X’s 16, so the average age of the boomers portrayed here is slightly younger than that of the Gen Xers. But that’s not enough to explain what as of the third quarter was a nearly $200,000 estimated wealth gap. These are means, while the wage measure is a median, so increased economic inequality may explain some of the disparity. A National Institute on Retirement Security study based on 2020 survey data found that the median Gen X household had just $40,000 in retirement savings and 28% had none at all. Many Gen Xers may be staying in the workforce because they can’t afford not to. Whatever the cause, it’s a generation that is undeniably still hard at work.

(1) The 50-54 and 55-59 age group data from which I assembled this chart are available only back to mid-1976. But the BLS has numbers for the 45-54 age group back to January 1948 that show the current employment-population ratio to be about the same as that of the late 1990s and much higher than at any time before then.

This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Justin Fox is a Bloomberg Opinion columnist covering business, economics and other topics involving charts. A former editorial director of the Harvard Business Review, he is author of "The Myth of the Rational Market."