Last week I discussed the curious story of employment when examined by age. For those that missed that post, you can read it here.
The question that arose from that analysis was “what is causing the growth in employment for Baby Boomers?” After additional research, and with apologies to Tina Turner, perhaps a second question should be “what’s love got to do with it?” For those readers who are too young to remember Tina Turner’s hit song or for those readers who remember Tina Turner and would like to reminisce, you can watch her perform the song here.
It turns out that part of the answer to the growth in employment for the Baby Boomers may be due to the rising divorce rate of the Baby Boom generation. This phenomena is being referred to as gray divorces. The Washington Post had an article published in August of 2014 discussing this trend. You can read the full article here . It is startling to find out that one out of every four divorces are with couples who are 50 years or older. More surprising was the news that 55% of gray divorces occur between couples married for more than 20 years!
Digging a little deeper, there is another trend that is developing which would appear to be tied to the rising trend of gray divorces. This is the rising trend in the household formation data. A household is formed when an adult leaves the home of another adult and finds his/her own place to live. That may be a child moving out of their parents house and living on their own, a couple finding their own place to live and divorced people. Thinking about the gray divorce trend, it is logical to believe that once you get a divorce, one of the people has to find another place to live. As a result, a new household is formed. Examining the household formation data shows that, on a net basis, all of the household formation is occurring in the Baby Boomer age bracket (55 and over). The Turner Center for Housing Innovation at the University of California at Berkeley analyzed the recent data for household formation and provided a breakdown of household formation by age. The chart illustrates the data when aggregated by age group. The graph shows the change in household formation from 9/30/14 to 9/30/15.
What we see from the chart is a pattern very similar to the employment pattern. Generation X (35-54 years old) has actually seen their household formation decline over the past year, while the Baby Boomers are driving new household formation. For Generation X this may be part of the story of this generation being the hardest hit from the financial crisis. It is sad to consider that, over six years into the recovery and Generation X still suffered a decline in household formation over the past year. On the other hand, the Baby Boomers have accounted for all net new household formation when measuring the change from September 2014 to September 2015.
To close the loop on this discussion, some or all of the rise in employment for the Baby Boomers may be tied to the rise in gray divorces. Grey divorce may force the divorcees to seek additional employment for several reasons:
Today’s blog does not conclusively answer the question about employment growth among the Baby Boomers, but it at least provides further insight into one of the factors contributing to the growth. One thing is clear: demographics is playing a key role in economic growth and needs to be understood as it has influenced and will continue to influence economic growth.
The answer to the question second question asked at the beginning of this blog-“what’s love go to do with it?”-as it relates to employment growth among the Baby Boomers: possibly quite a bit.
Steve Scranton is the Chief Investment Officer and Economist for Washington Trust Bank and is a CFA charter holder with over 30 years of investment experience with equities, tax-exempt and taxable fixed income securities. Steve actively participates on committees within the bank to help design strategies and policies related to client and bank owned investments. Steve also serves as the economist for the Bank and has been a featured speaker for both client and professional organization events throughout the Northwest.