EBRI Notes

'Labor-Force Participation: The Population Age 55 and Older'; and 'Tax Expenditures and Employee Benefits: Estimates From the FY 2008 Budget'

Jun 12, 2007 12  pages


Labor-Force Participation: The Population Age 55 and Older

U.S. labor force aging: As the baby-boom generation ages, a larger percentage of the American work force is nearing the ages that are associated with retirement (55 and older). These workers face more responsibility in paying for their retirement expenses, as they depend primarily on a 401(k)-type plan (financed at least partially with the worker’s own contributions) and are increasingly expected to cover their own costs of health insurance in retirement.

Women are driving the higher rate of labor-force participation by older workers: The labor-force participation rate is increasing for those age 55 and older. For those ages 55–64, this is being driven almost exclusively by the increase of women in the work force; the male participation rate is flat to declining. However, among those age 65 and older, labor-force participation increased for both males and females.

Education a driving factor: Many older workers are in the labor force because they need the money and employment-based health benefits, but education is a strong factor in an individual’s participation in the labor force at older ages: Individuals with higher levels of education are significantly more likely to be in the labor force than those with the lower levels of education.

Tax Expenditures and Employee Benefits: Estimates from the FY 2008 Budget

Annual tally: Congress requires that a list of “tax expenditures” (federal tax revenue forgone due to preferential provisions) be included in the president’s annual budget. The concept has always been controversial, particularly as it relates to “tax deferred” programs (such as retirement plans, where tax revenue ultimately will be collected) rather than “tax exempt” (no revenue collected).

Benefits account for 34 percent: For the next fiscal year (2008), all employee benefits-related tax expenditures ($328.090 billion) will account for 34.1 percent of the $961.011 billion tax expenditures in the budget. Tax-favored employment-based health insurance benefits will account for the largest tax expenditure in the budget ($160.190 billion, or 16.7 percent of the total amount and 48.8 percent of all employee benefits-related tax expenditures), followed by employment-based retirement plans ($92.450 billion, or 9.6 percent of the total amount and 28.2 percent of all employee benefits-related tax expenditures).