When the Labor Department releases the monthly jobs report on Friday morning, employment numbers among Americans over the age of 50 will be worth a look– for both the long and short term implications.
In the jobs report for April, more than 2.5 million of the nation’s 12.5 million unemployed were between the ages of 50 and 64. Those born in the mid-1950s would ordinarily be in their lifetime peak earnings and taxpaying years. The decline in the percentage of people in their 50s who are employed creates problems not only for them -- inadequate retirement savings, for one -- but also for the Treasury: a worrisome loss not only of current tax revenues but expected future revenues -- due to workers’ skills becoming rusty and outmoded.
“People who lose their jobs often take jobs that pay less than the job they had,” said Jason Fichtner, the former chief economist for the Social Security Administration who is now a senior research fellow at the Mercatus Center at George Mason University. “The lower wage tends to result in a level downward shift in lifetime wages … the longer it takes them to find a job, the greater their lifetime wage gap is likely to be. This not only has implications for financing Social Security, but also for financing all government spending. If wages are lower, then taxes collected will be lower too (all else being equal).”
You can get some idea of the revenue that’s being lost by looking at the most recent available tax return data from the Internal Revenue Service on income, broken out by age groups.
That data from 2007 shows that taxpayers aged 45 to 55 were the highest earning age group with average salary and wage income reported on their tax returns of $69,559. Tax filers in the 55 to 65 age group reported salary and age income of $63,567 in 2007. A year out of work for a person who was earning $65,000 would mean a loss to the Treasury of $9,425 in federal tax revenue, assuming an effective tax rate of 14.5 percent.
Although there are signs of economic recovery, it is striking that federal individual income tax revenues so far in the current fiscal year -- $664 billion -- are still 11 percent below where they were at the same point in 2008.
Polling data from the most recent NBC News/Wall Street Journal poll reveals a higher level of pessimism among older Americans than among the population at large: among all poll respondents, 58 percent said the nation is “off on the wrong track,” but among people aged 50 to 64, 63 percent said the country was on the wrong track.
When poll respondents were asked whether what they had seen, heard or read in recent weeks had made them more optimistic or less so about the direction of the economy, 53 percent said they were less optimistic. But among people aged 50 to 64, 57 percent were less optimistic.
And older people tend to give Obama a lower rating on his handling of the economy. Among all poll respondents, 52 percent said they disapproved of Obama’s handling of economic policy. But among those aged 50 to 64, 56 percent disapproved of the president’s handling of the economy.
A big unknown for November is whether this segment of the population -- unemployed, over age 50, and generally not happy with Obama’s handling of the economy, will vote or will be so disaffected that they won’t bother to turn out.
Political scientist Matthew Incantalupo at Princeton University points out that it is not enough to simply compare voter turnout among the employed and the unemployed -- since the unemployed usually include large numbers of younger, less educated and lower income Americans -- groups which traditionally have relatively low voter turnout.
Incantalupo’s research delves deeper into the data and finds that in prosperous times, as during the 1996 and 2000 elections, job loss had a negative impact on voter turnout. If you were unemployed you were less apt to vote in those years.
But in 2008 and 2010 job loss had a positive effect on voter turnout. "Job loss has a mobilizing effect on turnout during periods of high unemployment, such as the one brought about by the most recent economic recession," he said.
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