Department of Labor and Regulation

Title - Labor Market Information Center

Putting perspective on "South Dakota's Aging Workforce"

From the June 2013 South Dakota e-Labor Bulletin

It's no secret today's labor force looks quite different than it did 40 years ago. Not only has the number of women in the workforce increased, but the age make-up has changed as well. Recently the U.S. Census Bureau released an article focusing on labor force participation and work status of people 65 years and older. According to the Census Bureau, the 65 and older population will increase by over 67 percent between 2015 and 2040. They estimate in 2040 the 65 and older age group will encompass 21.0 percent of the total U.S. population. In South Dakota those numbers are even higher. According to the population projections produced by the South Dakota State Data Center located at South Dakota State University, the 65 and older population will increase by 95 percent by the year 2035. Ages 65 and over as a percent of population will increase from 14 percent in 2010 to 23 percent through 2035. (Note: The U.S. Census Bureau does not calculate population projections for states; therefore, projections through 2040 were not available for South Dakota.) This article will examine the South Dakota's changing labor force and perhaps give some perspective to the phrase "Aging Workforce."

Bar graph of South Dakota population projections

Aging population trends have been on the minds of many for some time because of longer life expectancies and people working far past the traditional retirement age of 65. Over the past 40 years census data has been indicating a gradual aging trend. From the 1970 decennial Census to the 2010 American Community Survey, the percent of population for 65 and older individuals has gradually increased by 2.2 percent. (The Census Bureau replaced the long form of the 2010 census with the American Community Survey for the 2010 Census.)
So why, all of a sudden, do we see the sharp increase of an older population in the coming years? Yes, you guessed it, the baby boomers. Baby boomers are those people born between 1946 and 1964. This generation, one of the largest in history, has changed the entire nation's social and economic culture. Women of this generation began working outside the home in record numbers, changing family dynamics for all other generations to come. What was true for the nation was also true in South Dakota. The labor force participation rate increased dramatically through the 1970s, 1980s and 1990s, with most of the growth coming from women entering the labor force. In South Dakota the labor force participation rate for women 16-64 years of age increased at a staggering pace from 1970 to 2010. Over that time period the rate for women 16-64 increased from 44.5 percent to 77.6 percent. In other words, by 2010, 77.6 percent of women ages 16-64 were included in the labor force. Over this same time period the rate for men 16-64 decreased slightly by 0.7 percent.

Bar graph of labor force participation rates for those 16 to 64

The labor force participation rate for ages 65 and older has also increased over the years. The majority of the increased rate has come from females entering and staying in the labor force longer. Although males have always had a higher labor force participation rate than females, their presence in the 65 and over labor force has been decreasing since the 1970s. The increase of older workers in the labor force can be attributed to many factors, such as changes in Social Security, healthcare, shift of pension types and improved health and longevity.

Bar graph of labor force participation rates for those 65 and older

Social Security: Social security has changed somewhat over the years. Retirement age to receive full benefits has increased from 65 to 67, and there is also the delayed retirement credit. The delayed retirement credit increases monthly benefits for each year the claimant delays retirement between full retirement age (67) and age 70.

Healthcare: The rising cost of healthcare has also kept older workers in the labor force longer. Many older workers are not able to pay for health insurance between early retirement and becoming eligible for Medicare—so they continue working for health insurance benefits.

Pension Types: The shift from defined benefit to 401k plans has caused workers to retire later. A defined benefit plan is a type of pension plan in which an employer promises a specified monthly benefit upon retirement that is predetermined by a formula based on the employee's earnings history, tenure and age, rather than depending directly on individual investment returns. Studies show workers covered by 401k plans rather than defined benefit plans retired one to two years later on average. Many workers today do not have sufficient savings for retirement, so they rely solely on Social Security and Medicare.

Improved Health and Longevity: Life expectancy for the U.S population has increased at a steady pace since 1970. From 1970 to 2010 the average life expectancy of males and females increased from 70.8 to 78.3 years of age.

Although individuals are staying in the workforce longer, the number of beneficiaries drawing Social Security continues to increase each year both in South Dakota and the United States. The U.S. data represents all areas where Social Security benefits are paid, such as all U.S. states and territories as well as beneficiaries living abroad. From year to year South Dakota and the United States have toggled back and forth as far as greater gains, but over the time period 2000-2012, both increased at about the same rate. The number of beneficiaries drawing Social Security in South Dakota increased 28.4 percent, while the United States had a 28.8 percent increase in those drawing.

Line graph of Over the Year Percent Change of Social Security retirement beneficiaries in current year payment status

Looking at the statistics it is obvious people are working longer, but the number of people collecting Social Security has also been steadily increasing over the past 12 years. The baby boomers are just beginning to reach retirement age, so why are both number increasing? Because beneficiaries collecting Social Security can also be employed and earning other income. There are some income limits for individuals who take early retirement, but those who wait until full retirement age to collect benefits are able to make any sum of money without penalty. An individual who earns more than a certain amount in combined income may pay federal income taxes on their Social Security income, but Social Security benefits will not be reduced. With the rising costs of goods and services, many individuals cannot make ends meet by simply living on Social Security; so they are forced to work for years after they begin collecting Social Security benefits.


Marcia Hultman, Secretary
123 W. Missouri Ave.
Pierre, SD 57501-4505
Tel. 605.773.3101
Fax. 605.773.6184