“It’s a recession when your neighbor loses his job; it’s a depression when you lose yours.”
Good old Harry Truman gets credit for this colorful adage, along with many others.* But as the top graph shows, the probability two persons remain employed depends on who they are. During recessions, the pool of older workers seems less likely to dwindle: Even during the Great Recession, employment of older workers (55 to 64 years old) declined moderately, while employment of prime-age workers declined more severely.
What gives? Older workers are closer to retirement and in good times may retire early. But a shock to their retirement savings, as in the recent financial crisis, may induce them to stay employed. Older workers also tend to work in more cognitively and less physically intensive jobs, which may be less cyclically sensitive. The younger segments of prime-age workers, especially those under 35, may be less attached to their firms and tend to switch jobs more frequently; they’re also more likely to have young children and higher home-production demands. If their employers are adversely affected by the business cycle, they’re more likely to lose their jobs and potentially have trouble finding new ones.
The bottom graph adds a wrinkle to this perspective: Older men and older women have different employment patterns. During the severe 1981 recession, the employment rate for men fell about 3 percentage points but the rate for women didn’t change. The same story played out in the Great Recession, when men’s employment rate fell by about the same magnitude and women’s again stayed constant. Given that most assets are owned jointly within a household (e.g., houses) and most older workers are married, an asset shock should affect both sexes similarly. Men and women, however, have a different occupational mix at all age groups. Clearly, these differences in employment are complicated. In fact, the data seem to follow another of Truman’s dicta: “If you cannot convince them, confuse them.”
* Truman also allegedly asked for a one-armed economist to avoid the typical “on the one hand…on the other hand” hedging of that profession, but we won’t dwell on that here.
How these graphs were created: For both graphs, search for “employment rate United States”; choose the series you want and click on “Add to Graph.” If you’re overwhelmed by the search results, narrow them by adding the search term “aged” or by playing with the tags in the side bar.
Suggested by David Wiczer.