oversight

Unemployed Older Workers: Many Experience Challenges Regaining Employment and Face Reduced Retirement Security

Published by the Government Accountability Office on 2012-04-25.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office

GAO          Report to the Chairman, Special
             Committee on Aging, U.S. Senate



April 2012
             UNEMPLOYED
             OLDER WORKERS
             Many Experience
             Challenges Regaining
             Employment and Face
             Reduced Retirement
             Security




GAO-12-445
                                             April 2012

                                             UNEMPLOYED OLDER WORKERS
                                             Many Experience Challenges Regaining Employment
                                             and Face Reduced Retirement Security
Highlights of GAO-12-445, a report to the
Chairman, Special Committee on Aging, U.S.
Senate




Why GAO Did This Study                       What GAO Found
The number of workers age 55 and             As with many other demographic groups, older workers’ unemployment overall and
over experiencing long-term                  long-term unemployment rates have increased dramatically since the recession
unemployment has grown substantially         began in 2007. In December 2011, the unemployment rate for older workers was 6.0
since the recession began in 2007.           percent, up from 3.1 at the start of the recession, but down from its peak of 7.6
This raises concerns about how long-         percent in February 2010. In particular, long-term unemployment rose substantially,
term unemployment will affect older          and at a greater rate for older than younger workers. By 2011, 55 percent of
workers’ reemployment prospects and          unemployed older workers had been actively seeking a job for more than half a year
future retirement income.                    (27 weeks or more). Meanwhile, the long-term trend of rising labor force participation
                                             rates among older workers has continued, with the recession possibly amplifying this
In light of these developments, GAO          trend.
examined (1) how older workers’
employment status has changed since          Long-term unemployment can put older workers at risk of deferring needed medical
the recession, (2) what risks                care, losing their homes, and accumulating debt. The experts and staff GAO
unemployed older workers face and            interviewed at some one-stop career centers, as well as the unemployed older
what challenges they experience in           workers who participated in GAO’s focus groups, identified employer reluctance to
finding reemployment, (3) how long-          hire older workers as a key challenge that older workers face in finding
term unemployment could affect older         reemployment. They also identified out-of-date skills, discouragement and
workers’ retirement income, and (4)          depression, and inexperience with online applications as reemployment barriers for
what other policies might help them          older workers. Some one-stop staff who serve older workers told GAO that providing
return to work and what steps the            the type of assistance some older workers need to address these unique challenges
Department of Labor (Labor) has taken        can be very time-consuming. (For audio clips from GAO’s focus groups with
to help unemployed older workers.            unemployed older workers, use this link:
                                             http://www.gao.gov/multimedia/video/#video_id=590295)
To conduct this work, GAO analyzed           Long-term unemployment can substantially diminish an older worker’s future
nationally representative datasets, led      retirement income in several ways. First, it can force a worker to stop working and
focus groups of unemployed older             stop saving for retirement earlier than the worker had planned. Second, long-term
workers, modeled how job loss affects        unemployment can lead individuals to draw down their retirement savings to cover
retirement income, and interviewed           living expenses while they are unemployed, which was a common life experience
experts and federal and local officials.     described by GAO’s focus group participants. GAO illustrated how a hypothetical
                                             worker who had $70,000 in retirement savings at age 55 and withdrew 50 percent of
What GAO Recommends                          those savings during a 2 year period of unemployment, would need about another 5
To foster the employment of older            ½ years of work and saving to rebuild the retirement account to the level it had been
workers, we recommend that the               before unemployment began. In addition, long-term unemployment can motivate
Secretary of Labor consider what             older workers to claim early Social Security retirement benefits, which will result in
strategies are needed to address the         lower monthly benefits for workers and their survivors for the rest of their lives.
unique needs of older job seekers, in        Experts GAO interviewed selected various policies that have been proposed to help
light of recent economic and                 address unemployed older workers’ reemployment challenges. Experts selected
technological changes.                       these policies from a broad list GAO compiled from previous academic studies. For
Labor agreed with our                        example, two of the policies that experts selected would provide incentives such as
recommendation. GAO received                 temporary wage or training subsidies for employers to hire long-term unemployed
technical comments on a draft of             older workers. In the current context of high unemployment and slow job creation, the
this report from Labor and the Social        impact of most of these policies is likely to be muted by limited job openings. After an
Security Administration, and                 interagency Taskforce issued its report on the aging of the American workforce in
incorporated them as appropriate.            2008, Labor implemented several strategies the report recommended, but since the
                                             recession started, Labor shifted focus to responding to increased demand for
                                             services. As the economy improves, Labor could refocus on older job seekers and
                                             consider what additional strategies would help address their unique reemployment
View GAO-12-445. For more information,       challenges, in light of recent economic and technological changes.
contact Charlie Jeszeck at (202) 512-7215
jeszeckc@gao.gov.

                                                                                        United States Government Accountability Office
Contents


Letter                                                                                    1
               Background                                                                 3
               Older Workers’ Employment Prospects Have Deteriorated                      9
               Unemployed Older Workers Face Many Challenges Coping with
                 Unemployment and Regaining Employment                                  26
               Job Loss Can Diminish Retirement Income Prospects                        33
               Experts Selected Policies to Consider as the Economy Recovers,
                 and Labor Has Taken Some Steps to Help Older Workers                   47
               Conclusions                                                              56
               Recommendation                                                           57
               Agency Comments and Our Evaluation                                       57

Appendix I     Objectives, Scope, and Methodology                                        59



Appendix II    Workforce Status of Workers Displaced between 2005-2007 and
               2007-2009 in January 2008 and January 2010                               70



Appendix III   Additional Figure Notes for Employment Figures, Including
               Statistical Significance Tests                                           71



Appendix IV    Quotes from Focus Groups with Long-Term Unemployed Older
               Workers                                                                  74



Appendix V     Percentage of the Population 50 and Older, but Less than Full
               Retirement Age, with Initial Dispositions and Awards of Social
               Security Disability Insurance, 2000-2010                                 76



Appendix VI    Proposed Policies Presented to External Experts                           77




               Page i                                    GAO-12-445 Unemployed Older Workers
Appendix VII           Comments from the Department of Labor                                   79



Appendix VIII          GAO Contact and Staff Acknowledgments                                   81



Related GAO Products                                                                           82



Tables
                       Table 1: Experts’ Views on Key Strengths and Limitations of
                                Selected Policy Proposals to Help Address Perceived
                                Employer Reluctance to Hire Older Workers                      49
                       Table 2: Experts’ Views on the Strengths and Limitations of
                                Selected Policy Proposals to Enhance Reemployment
                                Assistance Specifically Targeted to Older Workers              51
                       Table 3: Experts’ Views on the Strengths and Limitations of
                                Selected Policy Proposals to Encourage Older Workers to
                                Obtain Reemployment as Quickly as Possible                     53
                       Table 4: Comparison of Seasonally Adjusted and Unadjusted
                                Unemployment Rates for Workers Age 55 and Older,
                                Selected Months                                                61
                       Table 5: Selected Quotes from Focus Groups with Long-Term
                                Unemployed Older Workers                                       74


Figures
                       Figure 1: Sources of Aggregate Income for Households with
                                Someone Aged 65 or Older, 2008                                  7
                       Figure 2: Estimated Unemployment Rates by Age, 2007-2011                11
                       Figure 3: Estimated Number of Unemployed and Underemployed
                                Older Workers (55 and Over), 2007-2011                         13
                       Figure 4: Growth in Estimated Long-Term Unemployment of Older
                                Workers (55 and Over), 2007-2011                               15
                       Figure 5: Difference between the Estimated Number of
                                Unemployed of All Ages and the Estimated Number of
                                Available Jobs, 2007-2011, and Various Explanations for
                                High Unemployment                                              16




                       Page ii                                  GAO-12-445 Unemployed Older Workers
Figure 6: Estimated Duration of Unemployment for Older Workers
         (55 and Over) by Industry, 2007 and 2011                       17
Figure 7: Estimated Unemployment Rates by Demographic Group
         for Older Workers (55 and Over), 2007 and 2011                 19
Figure 8: Estimated Duration of Unemployment by Age and by
         Gender, 2007 and 2011                                          20
Figure 9: Estimated Labor Force Participation Rates by Age, 1948-
         2011                                                           22
Figure 10: Estimated Percentage of Reemployed Displaced
         Workers Who Earned Less on Their New Full-Time Jobs
         than on Their Previous Jobs, January 2010                      26
Figure 11: Potential Effect That Fewer Years of Work Can Have on
         Retirement Benefits for Workers with Median-Level
         Retirement Benefits from Employer-Sponsored Plans and
         Median-Level Retirement Benefits from Social Security          37
Figure 12: Potential Effect That Fewer Years of Work Can Have on
         Social Security Retirement Benefits of Workers without
         Employer-Sponsored Retirement Plans                            38
Figure 13: Example of the Effect of Early Claiming on Monthly
         Social Security Retirement Benefits                            39
Figure 14: How Drawdowns from Retirement Savings during
         Unemployment Can Affect Amounts Saved at Time of
         Retirement if a Worker Became Reemployed and
         Resumed Saving                                                 43
Figure 15: Estimated Levels of Retirement Savings and Types of
         Plan Participation for Employed Workers 55 and Over and
         Their Households, 2007                                         45




Page iii                                 GAO-12-445 Unemployed Older Workers
Abbreviations

AoA               Administration on Aging
BLS               Bureau of Labor Statistics
CMS               Centers for Medicare and Medicaid Services
CPS               Current Population Survey
DB                defined benefit
DC                defined contribution
DWS               Displaced Worker Supplement
EBRI              Employee Benefit Research Institute
GATE              Growing America Through Entrepreneurship
HRS               Health and Retirement Study
IRA               individual retirement account
JOLTS             Job Openings and Labor Turnover Survey
NBER              National Bureau of Economic Research
OASDI             Old-Age, Survivors, and Disability Insurance
SBA               Small Business Administration
SCF               Survey of Consumer Finances
SCSEP             Senior Community Service Employment Program
SSA               Social Security Administration
SSI               Supplemental Security Income
UI                Unemployment Insurance
WIA               Workforce Investment Act of 1998




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Page iv                                            GAO-12-445 Unemployed Older Workers
United States Government Accountability Office
Washington, DC 20548




                                   April 25, 2012

                                   The Honorable Herb Kohl
                                   Chairman
                                   Special Committee on Aging
                                   United States Senate

                                   Dear Mr. Chairman:

                                   The recent recession in 2007-2009 was the worst since the Great
                                   Depression, and has been characterized by historically high levels of
                                   long-term unemployment. 1 While it is crucial that the nation help people of
                                   all ages return to work, long-term unemployment has particularly serious
                                   implications for older Americans (age 55 and over). Older workers’ job
                                   loss threatens not only their immediate financial security, but their ability
                                   to support themselves during retirement. While unemployed, older
                                   Americans may stop saving for retirement or tap into retirement savings
                                   to pay for critical living expenses. And while working longer may be the
                                   best solution for those approaching retirement with exhausted or
                                   otherwise inadequate savings, this strategy depends upon older workers
                                   being able to find and retain employment. To the extent that unemployed
                                   older workers face unique reemployment challenges, their ability to get
                                   the jobs they need to support themselves and protect or rebuild their
                                   retirement savings could be limited.

                                   Given your interest in the employment and retirement prospects of older
                                   workers—those aged 55 and over—since the onset of the recession, we
                                   examined (1) how the employment status of older workers has changed
                                   since the recession, (2) older workers’ financial risks from long-term
                                   unemployment and challenges in finding new jobs, (3) how periods of
                                   long-term unemployment might affect older workers’ retirement income,
                                   and (4) what other policies might help unemployed older workers regain


                                   1
                                    The recession of 2007-2009 started in December 2007 and ended in June 2009,
                                   according to the Business Cycle Dating Committee of the National Bureau of Economic
                                   Research (NBER). According to NBER, “a recession is a significant decline in economic
                                   activity spread across the economy, lasting more than a few months, normally visible in
                                   production, employment, real income, and other indicators. A recession begins when the
                                   economy reaches a peak of activity and ends when the economy reaches its trough.” In
                                   addition, this recession occurred in the context of a significant decline in major financial
                                   markets, which dramatically reduced the value of major assets.




                                   Page 1                                               GAO-12-445 Unemployed Older Workers
employment and what steps the Department of Labor (Labor) has taken
to help unemployed older workers.

To examine changes in the employment status of older workers since the
start of the recession, we analyzed nationally representative
unemployment and demographic data from the Bureau of Labor Statistics
(BLS), including 2007 through 2011 data from the Current Population
Survey (CPS), the Job Openings and Labor Turnover Survey (JOLTS),
and the 2008 and 2010 Displaced Worker Supplement (DWS). To learn
about older workers’ financial risks from long-term unemployment and
challenges in finding new jobs, we conducted focus groups with
unemployed older workers in four metropolitan areas and also
interviewed staff at one-stop career centers in each of the four areas. 2
(For audio clips from GAO’s focus groups with unemployed older workers,
use this link: http://www.gao.gov/multimedia/video/#video_id=590295.)
Further, we interviewed experts on older workers’ issues and reviewed
studies. To assess how periods of long-term unemployment might affect
older workers’ retirement income, we used microsimulation models to
estimate monthly retirement income for workers who stopped work at
different ages. 3 We also analyzed data on retirement savings from the
nationally representative 2007 Survey of Consumer Finances and
interviewed officials at the Social Security Administration (SSA). 4 To
identify what policies might help unemployed older workers regain
employment and what Labor has done to help older workers, we
interviewed experts on policy proposals previously identified through a
review of the literature and interviewed Labor officials.



2
 The Workforce Investment Act of 1998 provided for the establishment of local one-stop
centers to provide access to employment and training services under a number of
programs, including those administered by the Departments of Labor, Education, Health
and Human Services, and Housing and Urban Development. Pub. L. No. 105-220, § 121,
112 Stat. 936, 963.
3
 Our simulations of retirement income include income from employer-sponsored
retirement plans and Social Security retirement benefits. We used microsimulation models
under license from the Policy Simulation Group, a private contractor. More information
about these microsimulation models is at www.polsim.com.
4
 For our analysis of retirement savings using the 2007 Survey of Consumer Finances, we
counted participation in a defined benefit or defined contribution plan at a current
employer, earned benefits from a defined benefit plan from a past employer, a defined
contribution account from a past employer, a Keogh account, or an individual retirement
account.




Page 2                                            GAO-12-445 Unemployed Older Workers
                            We conducted this performance audit from October 2010 through April
                            2012 in accordance with generally accepted government auditing
                            standards. Those standards require that we plan and perform the audit to
                            obtain sufficient, appropriate evidence to provide a reasonable basis for
                            our findings and conclusions based on our audit objectives. We believe
                            that the evidence we obtained provides a reasonable basis for our
                            findings and conclusions based on our audit objectives. For more
                            information on our scope and methodology, see appendix I.



Background
Unemployment Insurance      Several different programs, including the federal-state Unemployment
and Employment and          Insurance (UI) program and employment and training programs
Training Programs Serving   administered by Labor, help unemployed workers, and one program is
                            specifically for low-income individuals 55 and over. First, the UI program
Unemployed Older            provides eligible unemployed individuals temporary benefits that partially
Workers                     replace their lost wages. The UI program is a federal-state program that is
                            generally funded through taxes on employers and, in some states,
                            employee contributions. Eligibility requirements and benefit levels vary by
                            state within federal guidelines, but a recently enacted federal law will
                            require individuals to be able, available, and actively looking for work as a
                            condition of eligibility for unemployment benefits. 5 UI benefits are
                            generally available to eligible unemployed workers for up to 26 weeks, 6




                            5
                             This requirement, added by the Middle Class Tax Relief and Job Creation Act of 2012,
                            Pub. L. No. 112-96, § 2101, 126 Stat. 156, 159, will take effect after the end of the first
                            session of each state legislature that begins after the date of enactment, February 22,
                            2012.
                            6
                             For evidence that unemployment benefits are generally available for up to 26 weeks, see
                            David Bradley, Benjamin Collins, Katelin Isaacs, Janemarie Mulvey, Federal Programs
                            Available to Unemployed Workers. Congressional Research Service, RL34251
                            (Washington D.C., January 2012). However, the actual duration of UI benefits will vary by
                            state and by individual. See GAO, Unemployment Insurance: Economic Circumstances of
                            Individuals Who Exhausted Benefits, GAO-12-408 (Washington, D.C.: Feb. 17, 2012).




                            Page 3                                               GAO-12-445 Unemployed Older Workers
but extended benefits are sometimes made available to those who
exhaust these benefits, as has occurred during the recent recession. 7

Second, the Workforce Investment Act of 1998 (WIA) established the
adult and dislocated worker programs, which authorize grants to states
for a broad range of employment and training activities, including job
search assistance, assessment, and training for eligible individuals. 8
States that receive funds under WIA must report on the performance of
these programs using performance measures that gauge program results
for participants in the areas of job placement, retention, and earnings,
among others. 9 States are held accountable by Labor for their
performance and may receive incentive funds or financial sanctions
based on whether they meet expected performance levels for each
measure. 10

Last, the Senior Community Service Employment Program (SCSEP)
provides subsidized, community service-based on-the-job training for low-
income individuals age 55 and over who are unemployed, with an



7
 Congress has extended the maximum period for receiving UI benefits through temporary
federal programs during a number of economic downturns, including the recent recession.
Congress also provided for increased weekly UI benefit amounts and increased federal
support to states to finance extended UI benefits under the American Reinvestment and
Recovery Act of 2009 (Recovery Act). Pub. L. No. 111-5, §§ 2002-05, 123 Stat. 115, 437-
44. During the recession of 2007-2009, Congress increased the maximum period for
receipt of UI benefits; as a result, some long-term unemployed workers in certain states
may be eligible to receive UI benefits for up to 99 weeks. The Middle Class Tax Relief and
Job Creation Act of 2012, enacted on February 22, 2012, will reduce this maximum to 93
from 99. The reduction will be phased in between May and September 2012. Pub. L. No.
112-96, § 2122, 126 Stat. 156, 163-66 (2012). For more information on UI and the
Recovery Act, see GAO, Worker and Family Assistance: Unemployment Insurance
Measures Included in the American Recovery and Reinvestment Act of 2009, as of July
2009, GAO-09-942R (Washington, D.C.: July 27, 2009).
8
 Under WIA, dislocated workers include, among others, individuals who (1) have been
terminated or laid off or who have received a notice of termination or layoff, (2) are eligible
for or have exhausted UI benefits or have demonstrated attachment to the workforce but
are ineligible for UI benefits because of insufficient earnings or having worked for a
noncovered employer, and (3) are unlikely to return to a previous industry or occupation.
Dislocated workers also include individuals who were self-employed but are unemployed
as a result of general economic conditions or natural disasters. For the complete
definition, see 29 U.S.C. § 2801(9).
9
 29 U.S.C. § 2871(b),(d).
10
    29 U.S.C. § 2871(g); 20 U.S.C. § 9273.




Page 4                                                GAO-12-445 Unemployed Older Workers
                             emphasis on those who have poor employment prospects. 11 Labor
                             evaluates the performance of state and local areas receiving SCSEP
                             funds using performance measures similar to those used for the WIA
                             adult and dislocated worker programs. 12


Structural versus Cyclical   Economists often classify involuntary unemployment as either structural
Unemployment                 or cyclical. 13 Structural unemployment arises when barriers—such as
                             skills or geographical mismatches—prevent workers from matching their
                             skills to available jobs. In contrast, cyclical unemployment arises when
                             there is a decrease in the overall demand for goods and services in an
                             economy. As a result of such decreases, employers may temporarily lay
                             off workers or cut back their employees’ hours until the economy
                             improves. Research suggests that much of the increase in unemployment
                             since 2007 has been cyclical rather than structural. 14




                             11
                               To be eligible to participate in SCSEP, individuals must have a family income of no more
                             than 125 percent of the federal poverty guidelines prepared by the Department of Health
                             and Human Services and approved by the Office of Management and Budget. 42 U.S.C. §
                             3056p(a)(3), 20 C.F.R. § 641.500. In 2012, an individual living in the 48 contiguous states
                             and D.C. must have an income of not more than $13,963 to be eligible to participate in
                             SCSEP. Household income for an individual in a household of two must not be more than
                             $18,913 in order for the individual to be eligible to participate in the program.
                             12
                              42 U.S.C. § 3056k.
                             13
                               Another type of unemployment—frictional unemployment—is generally due to voluntary
                             job shifts and typically involves shorter unemployment spells.
                             14
                              Linda Levine, The Increase in Unemployment since 2007: Is it Cyclical or Structural?
                             Congressional Research Service, R41785 (Washington, D.C.: November 2011).




                             Page 5                                             GAO-12-445 Unemployed Older Workers
Labor’s Taskforce Report   In 2006, Labor convened an interagency 15 Taskforce on the Aging of the
on the Aging of the        American Workforce (the Taskforce) 16 and issued a report in 2008
American Workforce         highlighting strategies for increasing older Americans’ workforce
                           participation. 17 The Taskforce considered a broad range of issues
                           concerning the aging of the American workforce, including legal and
                           regulatory barriers that could prevent older workers from participating in
                           the workforce, flexible work arrangements, and tools and technical
                           assistance to support older workers’ employment. The Taskforce report
                           recommended that Taskforce agencies continue to work together to
                           implement strategies it had identified, such as to coordinate research and
                           demonstration agendas and inventory legal and regulatory barriers that
                           could limit older workers’ employment. The Taskforce’s recommendations
                           mainly dealt with potential actions Taskforce agencies could undertake to
                           help older Americans remain in or reenter the workforce or pursue self-
                           employment.


Sources of Retirement      While income in retirement comes from a variety of sources, in the
Income                     aggregate, Social Security retirement benefits are the largest source of
                           retirement income for households with someone aged 65 or older. Other
                           financial assets such as income from employer-sponsored retirement
                           plans, private savings, and assets such as home equity are important
                           sources of retirement income for many. (See fig. 1.)




                           15
                             The Taskforce included senior representatives from nine federal agencies whose
                           activities affect the lives of older Americans. These agencies were the Departments of
                           Commerce, Education, Health and Human Services, Labor, Transportation, and the
                           Treasury, along with the Equal Employment Opportunity Commission, the Small Business
                           Administration, and SSA.
                           16
                             Labor officials convened this task force to respond to a request from the U.S. Senate
                           Special Committee on Aging and GAO recommendations in two reports: GAO, Older
                           Workers: Demographic Trends Pose Challenges for Employers and Workers, GAO-02-85
                           (Washington, D.C.: Nov. 16, 2001), and Older Workers: Labor Can Help Employers and
                           Employees Plan Better for the Future, GAO-06-80 (Washington, D.C.: Dec. 5, 2005).
                           17
                             In 2008, this task force published its final report, Report of the Taskforce on the Aging of
                           the American Workforce (Washington, D.C.: February 2008)
                           http://www.doleta.gov/reports/FINAL_Taskforce_Report_2-11-08.pdf.




                           Page 6                                               GAO-12-445 Unemployed Older Workers
Figure 1: Sources of Aggregate Income for Households with Someone Aged 65 or
Older, 2008




Note: “Household” here refers to what SSA identifies as aged units—either a married couple living
together or an unmarried person. The age of a married couple is the age of the husband if he is 55 or
older; if the husband is younger than 55, the age of the married couple is the age of the wife. Thus a
married couple is considered to be 65 or older if the husband is 65 or older or if the husband is
younger than 55 and his wife is 65 or older. Data reported by SSA for pension income includes
regular payments from defined benefit and defined contribution plans and from individual retirement
accounts (IRA) and Keogh accounts, but nonregular (nonannuitized or lump sum) withdrawals from
IRA, Keogh, and defined contribution plans are not included. Social Security income includes
retirement, auxiliary (such as spousal), survivors, and disability benefits. Data reported for income
from assets include interest income; income from dividends, rents, or royalties; and estates or trusts.
Other income includes noncash benefits, veterans’ benefits, UI benefits, workers’ compensation, and
personal contributions. Income from others is excluded. The 95 percent confidence intervals for the
share of aggregate income are 35.9 to 37.1 percent for Social Security, 29.1 to 30.3 for employment
earnings, 17.9 to 18.9 for pension and annuity income, 12.3 to 13.1 for income from assets, 1.9 to 2.3
for other, and 0.5 to 0.7 for cash public assistance.


Social Security retirement benefits are paid to eligible workers under the
Old-Age, Survivors, and Disability Insurance (OASDI) program
administered by SSA. The level of monthly retirement benefits an
individual will receive depends on factors such as work and earnings
history and the age at which the beneficiary chooses to begin receiving




Page 7                                                    GAO-12-445 Unemployed Older Workers
benefits. 18 Generally, individuals may begin receiving Social Security
retirement benefits at age 62; however, the payments will be lower than if
they wait to receive benefits at their full retirement age, which varies from
65 to 67, depending on the individual’s birth year. 19 In contrast, the
monthly benefit is increased for workers who delay receiving benefits
beyond their full retirement age up to age 70. 20 Employees and employers
pay payroll taxes that finance Social Security benefits. Social Security
also provides benefits to eligible workers who become disabled before
reaching retirement age, as well as children, spouses, and widow(er)s of
eligible workers. Benefits are based upon a common formula but are
calculated differently for the different beneficiary types. 21

Employer-sponsored retirement plans fall into two broad categories:
defined benefit (DB) plans and defined contribution (DC) plans. DB plans
promise to provide a benefit that is determined by a formula based on
particular factors specified by the plan, such as salary or years of service.
Typically, DB plans provide annuity payments to retirees on a monthly
basis that continue as long as the recipient lives. 22 Under DC plans,
workers and employers may make contributions into individual
accounts. 23 At retirement, participants’ distribution options vary depending
on the plan, but often include leaving their money in the plan, taking a full
or partial distribution, or purchasing an annuity. In order to preserve the
tax benefits from their DC plan savings, many participants chose to roll
plan savings into an individual retirement account (IRA). IRAs are
personal retirement savings arrangements that allow individuals to make




18
 42 U.S.C. §§ 402, 415.
19
 42 U.S.C. § 402(q)(1); 20 C.F.R. §§ 404.409 to 404.410.
20
 42 U.S.C. § 402(w); 20 C.F.R. § 404.313.
21
  In this report we use the term “Social Security retirement benefits” to refer to an
individual’s retirement (old-age) benefits, and not other Social Security benefits such as
spousal benefits or disability benefits, unless otherwise noted.
22
 A DB plan may also provide benefits to a surviving spouse, if the plan participant is
married and took these benefits.
23
  The most common type of DC plan is the 401(k) plan, which typically allows workers to
choose to contribute a portion of their pretax compensation to the plan. Some 401(k) plans
may also provide for employer contributions, and Roth 401(k) plans may accept after-tax
employee contributions.




Page 8                                              GAO-12-445 Unemployed Older Workers
                          contributions to an individual account and receive favorable tax
                          treatment. 24


                          Like many other demographic groups, older workers have faced dramatic
Older Workers’            increases in unemployment and long-term unemployment since the
Employment                recession began in 2007. For example, only about a third of older workers
                          displaced from 2007 to 2009 had found full-time work by 2010, and those
Prospects Have            who did sustained greater earnings losses than did reemployed younger
Deteriorated              workers. Nonetheless, older workers’ labor force participation has
                          continued to increase despite the worst labor market in decades. For
                          example, the proportion of displaced workers age 65 or over who retired
                          was substantially lower among those displaced during the recession than
                          among those displaced prior to the recession. 25


Multiple Measures Show    Unemployment rates for workers of all ages, including those 55 and over,
Unemployment among        have risen dramatically since the start of the recent recession in
Older Workers Rose        December 2007. As shown in figure 2, the seasonally unadjusted
                          unemployment rate for older workers increased from 3.1 percent in
Dramatically after 2007   December 2007 to a high of 7.6 percent in February 2010, before it




                          24
                            The tax treatment differs depending on the type of IRA. For example, with traditional
                          IRAs, individuals who meet certain conditions can take an income tax deduction on some
                          or all of the contributions they make to their IRAs, but they must pay taxes on amounts
                          they withdraw from the IRA. Individuals below certain income limits may also contribute to
                          Roth IRAs, which do not provide an income tax deduction on contributions, but permit tax-
                          free withdrawals.
                          25
                            In this report, displaced workers are defined as persons 20 years or older who lost or left
                          jobs because their plant or company closed or moved, there was insufficient work for them
                          to do, or their position or shift was abolished. We analyzed displaced workers using the
                          CPS Displaced Worker Supplement (DWS). Displaced workers have lost a job in the past
                          3 years; however, they may be unemployed, employed, or not in the labor market at the
                          time of the survey. See appendix I for more information about displaced workers and the
                          DWS. In our analysis of displaced workers, “retired” is defined to include only people who
                          are no longer in the labor force. Therefore, this definition does not include retired persons
                          who have part-time work. See appendix II for more data on the labor force status of
                          displaced workers in 2008 and 2010.




                          Page 9                                              GAO-12-445 Unemployed Older Workers
decreased to 6.0 percent in December 2011. 26 Further, as shown in figure
3, the seasonally unadjusted number of unemployed older workers
peaked at 2.3 million in February 2010 and decreased to approximately
1.9 million by December 2011, compared with around 839,000 when the
recession began in December 2007. As in prior recessions, smaller
percentages of workers age 55 and over became unemployed. Some
researchers attribute older workers’ lower unemployment rates to the fact
that older workers tend to have longer job tenure and are consequently
less likely to be laid off than younger workers. 27




26
  This figure, along with all others describing characteristics of workers, is based on
sample data and subject to sampling error. For example, we are 95 percent confident that
the unemployment rate for workers age 55 and older was between 5.5 and 6.4 percent in
December 2011. See appendix I for a description of sampling error and the surveys relied
upon. In this report, confidence intervals for estimates and statistical tests for differences
between estimates are presented in graphs, tables, or footnotes in the more detailed
sections presenting the estimates, or in appendix III when indicated. Estimated labor force
statistics in this report are based on analysis of microdata, which beginning in January
2011 may diverge slightly from BLS published estimates; see appendix I for more
information. Because we analyze a variety of labor force outcomes for several subgroups
of the population in this report, we did not attempt to seasonally adjust any of the
estimates. See appendix I for more information about seasonally unadjusted data.
27
  A recent study, however, suggests that older workers with less than 4.6 years of tenure
are actually more likely to be laid off than their otherwise similar younger counterparts.
See Richard Johnson and Corinna Mommaerts, Age Differences in Job Loss, Job Search,
and Reemployment, the Urban Institute (Washington D.C.: January 2011).




Page 10                                              GAO-12-445 Unemployed Older Workers
Figure 2: Estimated Unemployment Rates by Age, 2007-2011




                                      Note: Estimates have 95 percent confidence intervals within plus or minus 0.5 percentage points of
                                      the estimate itself. Recession dates obtained from NBER. Estimates are not seasonally adjusted.

                                      Alternative measures show that the number of discouraged and
                                      underemployed older workers has also increased dramatically since the
                                      start of the 2007-2009 recession. According to the broadest measure,
                                      approximately 4.2 million older workers were unemployed or
                                      underemployed in January 2011, and approximately 3.65 million
                                      remained unemployed or underemployed in December 2011 (see fig. 3).
                                      In addition to the officially unemployed, this measure includes individuals
                                      who wanted to work and were available for work but did not actively seek
                                      employment in the last month for various reasons, 28 such as believing no




                                      28
                                        BLS considers workers who want work and are available for work but who did not
                                      actively seek work in the past month as “marginally attached to the labor force.” BLS
                                      records the reason given for not actively seeking work in the past month: for example,
                                      some marginally attached workers indicate family obligations, such as caring for an aging
                                      parent or a sick child as the reason they did not look for work.




                                      Page 11                                                  GAO-12-445 Unemployed Older Workers
jobs were available. 29 It also includes part-time workers who would prefer
full-time work. 30




29
  BLS defines workers who want work and are available for work, but did not actively seek
work in the past month because they thought no jobs were available, as “discouraged
workers.” Discouraged workers are a subset of those marginally attached to the labor
force.
30
   BLS identifies such workers as part-time for economic reasons, defined as those
employed less than 35 hours per week who want and are available for, but are unable to
find, full-time work, as well as people who prefer full-time hours of work but had their hours
reduced by their employer. In this report GAO includes these workers in the term
“underemployed,” along with marginally attached workers.




Page 12                                              GAO-12-445 Unemployed Older Workers
Figure 3: Estimated Number of Unemployed and Underemployed Older Workers (55
and Over), 2007-2011




Note: (1) Estimates have 95 percent confidence intervals within plus or minus 12 percent of the
estimate itself. (2) See appendix II for BLS’s definitions of unemployed workers, discouraged workers,
workers marginally attached to the labor force, and part-time for economic reasons. Our “broader
measure of people affected by unemployment and underemployment” is the same as measure U-6 in
BLS’s alternative measures of labor underutilization. Estimates are not seasonally adjusted.




Page 13                                                   GAO-12-445 Unemployed Older Workers
Long-Term Unemployment    Although older workers are less likely than younger workers to lose their
for Older Workers Has     jobs, it generally takes older job seekers longer to find new work. 31 Since
Increased Substantially   2007, many job seekers of all ages have experienced long-term
                          unemployment, 32 but individuals age 55 and over have consistently
since the Start of the
                          experienced longer durations of unemployment than younger workers.
Recession                 Moreover, the median length of unemployment has more than tripled for
                          older workers since the recession started, increasing at a greater rate
                          than that of younger workers. Prior to the recession, the median duration
                          of unemployment for job seekers age 55 and over was 10 weeks
                          compared with 9 weeks for job seekers aged 25-54. By 2011, the median
                          duration of unemployment for older job seekers had increased to 35
                          weeks compared with 26 weeks for younger job seekers.

                          Since 2007, the number and percentage of long-term unemployed older
                          workers—those out of work for more than half a year (27 weeks or
                          more)—has increased substantially. In 2007, less than a quarter of
                          unemployed older workers were unemployed for longer than 27 weeks,
                          as shown in figure 4. By 2011, this number had increased to 55 percent.
                          Moreover, by 2011 over one-third of all unemployed older workers had
                          been unemployed for over a year. Data from the Displaced Worker
                          Supplement of the CPS corroborate that many older workers who lose
                          their jobs struggle to regain employment. Specifically, the data show that
                          only 31 percent of those older workers age 55-64 who were displaced
                          between 2007 and 2009 had regained full-time employment by January
                          2010 (see app. II).




                          31
                           In this report, we use the phrase “job seekers” to refer to the unemployed.
                          32
                            BLS defines long-term unemployment as being unemployed for more than half a year
                          (27 weeks or more).




                          Page 14                                            GAO-12-445 Unemployed Older Workers
Figure 4: Growth in Estimated Long-Term Unemployment of Older Workers (55 and Over), 2007-2011




                                       Note: All estimates in this figure have 95 percent confidence intervals within plus or minus 3
                                       percentage points of the estimate itself. See appendix III for statistical comparisons of estimates
                                       across years. Some bars do not sum to 100 percent because of rounding.


                                       The dramatic increase in long-term unemployment bodes poorly for the
                                       reemployment prospects of older workers; several studies suggest that
                                       unemployment erodes workers’ skills and reemployment prospects, 33 and
                                       several experts we interviewed said long-term unemployment diminishes
                                       the likelihood older workers will ever be reemployed. 34 Thus, older
                                       workers who lose their jobs may face both immediate and long-term
                                       financial challenges. Long-term unemployed older workers who exhaust
                                       unemployment benefits before turning 62 are particularly at risk of


                                       33
                                         Rob Valetta and Katherine Kuang. Why is Unemployment Duration So Long? Federal
                                       Reserve Bank of San Francisco Economic Letter 2012-03 (San Francisco, CA, January
                                       2012), 1, and Linda Levine, The Increase in Unemployment since 2007: Is it Cyclical or
                                       Structural? Linda Levine and Gerald Meyer, Long-term Unemployment and Recessions
                                       (Washington, D.C.: May 2010).
                                       34
                                         One expert believed that many older workers “face the real prospect of never working
                                       again, certainly not at their former wage levels.” See What to do about the New
                                       Unemployment, Urban Institute (Washington, D.C.: June 2011).




                                       Page 15                                                    GAO-12-445 Unemployed Older Workers
                                       compromising their future retirement security. (For some potential causes
                                       of long-term unemployment, see fig. 5.)

Figure 5: Difference between the Estimated Number of Unemployed of All Ages and the Estimated Number of Available Jobs,
2007-2011, and Various Explanations for High Unemployment




                                       Note: Estimates for the number of unemployed workers have 95 percent confidence intervals within
                                       plus or minus 5 percent of the estimate itself. Estimates for the number of job openings have
                                       confidence intervals within plus or minus 10 percent of the estimate itself.


Some Subgroups of Older                The length of time older workers remained unemployed varied across
Workers Continue to Face               industries (see fig. 6). Nearly two-thirds of unemployed older workers in
Longer Spells of                       the manufacturing and financial service industries were out of work for 27
                                       or more weeks in 2011. In fact, in 2011, 20 percent of unemployed older
Unemployment than                      workers within manufacturing had been out of work for more than 2 years.
Others                                 In contrast, less than half of unemployed older workers in the education
                                       and health services or leisure and hospitality industries had been out of
                                       work for 27 weeks or more. Even though the education and health


                                       Page 16                                                GAO-12-445 Unemployed Older Workers
                                        services and leisure and hospitality industries had lower levels of long-
                                        term unemployment, the percentage of older workers in these industries
                                        who experienced long-term unemployment also grew significantly from
                                        2007 to 2011.

Figure 6: Estimated Duration of Unemployment for Older Workers (55 and Over) by Industry, 2007 and 2011




                                        Note: The “all other industries” category includes public administration; “other services”; agriculture,
                                        forestry, fishing and mining; and information and a small number of civilians employed in the armed
                                        forces. All estimates in this figure have 95 percent confidence intervals within plus or minus 11
                                        percentage points of the estimate itself. For information about the reliability of estimate and statistical
                                        comparisons of the estimates across different groups and years, see appendix III.




                                        Page 17                                                      GAO-12-445 Unemployed Older Workers
Rates of unemployment differed across demographic groups. For
example, as shown in figure 7, unemployment rates for older men and
women were comparable in 2007 but increased more for men than
women after 2007, and were significantly higher for men than women by
2011. 35 In addition, older workers who were black or Hispanic had
significantly higher unemployment rates than white older workers in both
2007 and 2011. Regarding education level, older workers without a high
school diploma were more likely to be unemployed before and after the
recession than those with a high school diploma. 36 However, the
unemployment rate for workers with at least a bachelor’s degree
approximately doubled by 2011 from its 2007 level, just as it did for those
older workers with less education.




35
  One possible explanation for men’s greater increase in unemployment since 2007 is the
particularly steep increase in unemployment in the manufacturing and construction
industries, which tend to employ higher percentages of men than women.
36
  One possible explanation of the unemployment increase among less educated older
workers is that unemployment rates in manufacturing and construction increased
dramatically in the recent recession, and these industries tend to employ a higher
percentage of less educated workers than do many other industries. Also, a recent study
of the long-term unemployed aged 18-64 also found that the long-term unemployed are
less likely to hold a college degree. Kaiser Family Foundation/NPR Long-Term
Unemployed Survey.




Page 18                                           GAO-12-445 Unemployed Older Workers
Figure 7: Estimated Unemployment Rates by Demographic Group for Older
Workers (55 and Over), 2007 and 2011




Note: All estimates in this figure have 95 percent confidence intervals within plus or minus 1
percentage point of the estimate itself. For statistical comparisons of the estimates across different
groups and years, see appendix III.

Across several different demographic groups, once unemployed, older
workers were similarly likely to remain unemployed for more than half a
year (27 weeks or more) in 2011. For example, in 2011, older
unemployed workers with at least a bachelor’s degree were similarly likely


Page 19                                                    GAO-12-445 Unemployed Older Workers
                                       to face long-term unemployment as those older workers with less
                                       education. In addition, older workers in each racial or ethnic group who
                                       became unemployed were equally likely to face long-term unemployment
                                       in 2011. Even older women—who in 2007 had lower rates of long-term
                                       unemployment than men—were similarly likely to face long-term
                                       unemployment after the recession, as shown in figure 8. Finally, while
                                       long-term unemployment increased for both younger and older workers, a
                                       higher percentage of older workers were long-term unemployed—
                                       approximately 55 percent of unemployed older workers were out of work
                                       for over half a year, compared with approximately 47 percent of workers
                                       age 25-54 in 2011.

Figure 8: Estimated Duration of Unemployment by Age and by Gender, 2007 and 2011




                                       Note: Estimates in this figure have 95 percent confidence intervals within plus or minus 3 percentage
                                       points of the estimate itself. For statistical comparisons of the estimates across different groups and
                                       years, see appendix III.




                                       Page 20                                                    GAO-12-445 Unemployed Older Workers
Older Workers’ Labor       Despite high levels of unemployment and longer spells of unemployment,
Force Participation        older workers’ labor force participation rate—the proportion of the
Nonetheless Continued to   population that is employed or actively seeking employment—increased
                           throughout the 2007-2009 recession, continuing historic trends. In
Rise                       contrast, as shown in figure 9, the labor force participation rate for
                           younger workers aged 16-24 has decreased since the recession began in
                           2007, while the participation of workers aged 25-54 generally decreased,
                           but to a lesser degree. 37 Older workers’ increased labor force participation
                           during the recession continued a long-term trend that began in the 1990s,
                           and thus cannot be attributed solely to the 2007-2009 recession or
                           declines in financial markets. Researchers have identified a number of
                           factors contributing to this historic increase. For example, research
                           indicates that improved health and longer life expectancies could increase
                           older workers’ labor force participation. Researchers also note that rising
                           labor force participation among older women is an important factor in the
                           increase in labor force participation among older workers in recent years.
                           In addition, researchers have noted that some older workers may remain
                           in the labor force to retain health care benefits until they become eligible
                           for Medicare at age 65—particularly since fewer employers now provide
                           retiree health care coverage. 38




                           37
                             Research suggests the long-term decline in young adults’ (aged 20-24) labor force
                           participation is associated with increased school enrollment. Regarding individuals aged
                           25-54, the decline in labor force participation is driven by men, particularly those with less
                           education. The demand for less educated workers has fallen significantly over the past
                           three decades. Similarly, inflation-adjusted wages for men with less than a high school
                           diploma have also fallen. Some studies have suggested that increased access to Social
                           Security disability benefits might also explain some of the historic decline in the labor force
                           participation of men aged 25-54. See Abraham Mosisa and Steven Hipple, “Trends in
                           Labor Force Participation in the United States,” Monthly Labor Review, October 2006, 35-
                           57. Also, Chinhui Juhn and Simon Potter, “Changes in Labor Force Participation in the
                           United States,” Journal of Economic Perspectives, Vol. 20, No. 3, Summer 2006, 27-46.
                           38
                             Mosisa and Hipple, “Trends in Labor Force Participation in the United States,” 35-57;
                           Craig Copeland, Labor-Force Participation Rates of the Population Age 55 and Older:
                           What did the Recession Do to the Trends? EBRI Notes Vol. 32, No. 2, Employee Benefit
                           Research Institute (Washington, D.C.: February 2011), and Murray Gendell, “Older
                           Workers: Increasing Their Labor Force Participation and Hours of Work,” Bureau of Labor
                           Statistics, Monthly Labor Review, January 2008.




                           Page 21                                               GAO-12-445 Unemployed Older Workers
Figure 9: Estimated Labor Force Participation Rates by Age, 1948-2011




                                        Note: All estimates in this figure have 95 percent confidence intervals within plus or minus 0.7
                                        percentage points of the estimate itself.


                                        One recent report found that as a result of the recession, some older
                                        workers decided to remain in the labor force longer than previously
                                        planned, while others reentered the labor force, likely to bolster their
                                        income after the financial crisis. 39 In fact, several one-stop career center
                                        staff we interviewed told us that they were serving increasing numbers of
                                        older individuals who had reentered the workforce from retirement. (For



                                        39
                                          Kristie M. Engemann and Howard J. Wall, “The Effects of Recessions Across
                                        Demographic Groups,” Federal Reserve Bank of St. Louis Review, St. Louis, MO,
                                        January/February 2010, 92(1), 1-26.




                                        Page 22                                                    GAO-12-445 Unemployed Older Workers
more information on the potential implications of older workers’ increased
labor force participation on younger workers, see the following text box.)

Does Labor Force Participation by Older Workers Diminish Employment
Opportunities for Younger Workers?

Results of recent academic studies contradict a popular notion that labor force
participation by older workers diminishes employment opportunities for younger workers.
This notion assumes a zero sum game with regard to employment; that is, that there are a
fixed number of jobs available at any given time and employment of one group results in
unemployment for another group. However, according to a recent study of employment
                                                       a
data from numerous countries over several decades, increased employment of older
workers has not been associated with decreased employment of younger workers. The
study found that when employment of older workers increased, employment of younger
workers also increased, and this relationship remained even when the researchers took
account of overall economic growth. The study also analyzed what happened to younger
workers’ employment rates in some European countries during specific time periods after
increased numbers of older workers retired early, not because of changes in the economy,
but because of changes in national retirement policies. The researchers found the
opposite of what the popular notion of a zero sum game would assume; they found that
when more older workers left their jobs to retire early, more younger workers became
unemployed. The researchers concluded that “the evidence suggests that greater labor
force participation of older persons is associated with greater youth employment and with
                                 b
reduced youth unemployment.” An additional study of multiple countries’ economic data
also found that employment of older workers does not adversely affect the employment of
                   c
younger workers. Two possible explanations for the results of these studies are that (1)
over time, entire economies grow as more workers enter the workforce, increasing the
demand for all goods and services and also for workers, and (2) some jobs held by
younger workers complement jobs held by older workers so that having one position filled
leads to hiring for another position. For example, having a senior researcher may create
the need for research assistants.

a
 Jonathan Gruber, Kevin Milligan, and David A. Wise, Social Security Programs and
Retirement Around the World: The Relationship to Youth Employment, Introduction and
Summary, Working Paper 14647, http://www.nber.org/papers/w14647, NBER (Cambridge,
MA: 2009). The 12 countries covered in this study were Belgium, Canada, Denmark,
France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, the United Kingdom, and
the United States.
b
 For more information on this research, see Jonathan Gruber and David A. Wise, eds.,
Social Security Programs and Retirement Around the World: The Relationship to Youth
Employment, University of Chicago Press, February 2010.

c
 Adriaan Kalwij, Arie Kapteyn, and Klaas De Vos, “Retirement of Older Workers and
Employment of the Young” De Economist (2010) 158:341-359. The 22 countries covered
by this study were Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway,
Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States.




Page 23                                           GAO-12-445 Unemployed Older Workers
Among displaced workers 40 aged 65 and over, a significantly larger
fraction of those who lost their job during the recession years chose to
remain in the workforce, compared with those who lost their jobs during
the prerecession period. Specifically, the percentage of displaced workers
aged 65 and over who retired and left the labor force declined from 61
percent in the prerecession period to 35 percent in the recession years.
At the same time, the percentage of displaced workers age 65 and over
who chose to remain in the workforce but were unemployed increased
from 15 percent prior to the recession to 33 percent during the recession
(see app. II). 41 This could indicate that increasing numbers of older
workers recognize that they are not well positioned for retirement. In
addition, the increased availability of extended UI benefits could have
caused some workers to remain in the labor force, 42 although several
researchers estimate this has had only a modest effect. 43

Those older workers displaced from 2007 to 2009 who successfully
regained employment by January 2010 generally sustained greater


40
  Displaced workers are those who indicated that they lost a job for economic reasons
(such as plant closures or their position being eliminated) during the previous 3 calendar
years. Displaced workers are surveyed by the Census Bureau every 2 years, with the
most recent survey interviewing people who lost their job during the recession period
(January 2007-December 2009), and the previous survey interviewing people who
predominantly lost their jobs prior to the recent recession (January 2005-December 2007).
Older displaced workers may choose to stay in the workforce—becoming either employed
or unemployed—or to exit the workforce, possibly into retirement.
41
  One study indicates this increase suggests that growing concerns about the adequacy
of retirement savings and the 2008 stock market collapse may have discouraged early
retirement and prompted more older workers to remain in the labor force after losing their
jobs. Richard Johnson, Rising Senior Unemployment and the Need to Work at Older
Ages, Urban Institute (Washington, D.C.: September 2009).
42
  Research indicates extended UI benefits could increase the unemployment rate in two
ways: (1) by keeping older workers who would otherwise have dropped out of the labor
force attached to the labor market or (2) by allowing the unemployed to turn down job
offers they would have accepted had UI benefits not been available. See Jesse Rothstein,
Unemployment and Job Search in the Great Recession, NBER (Cambridge, MA: October
2011).
43
  See Gary Burtless and Adam Looney, Growth through Innovation: The Immediate Jobs
Crisis and Our Long-Run Labor Market Problem. Brookings Institution (Washington, D.C.:
January 2012); Jesse Rothstein, Unemployment and Job Search in the Great Recession
NBER (Cambridge, MA: October 2111); and Rob Valetta and Katherine Kuang, Why is
Unemployment Duration So Long? Federal Reserve Bank of San Francisco, (San
Francisco, CA: January 2012); The Increase in Unemployment since 2007: Is it Cyclical or
Structural? Levine and Meyer, Long-term Unemployment and Recessions.




Page 24                                            GAO-12-445 Unemployed Older Workers
earnings losses than did younger workers. When comparing earnings
before and after displacement, the median earnings replacement rate for
workers aged 55-64 who were displaced from 2007 to 2009 was only 85
percent, compared with approximately 95 percent for workers aged 25-54
and over 100 percent for workers aged 20-24. 44 Indeed, as shown in
figure 10, an estimated 70 percent of reemployed displaced older workers
sustained earnings losses (an earnings replacement rate of less than 100
percent) compared with 53 percent of reemployed individuals aged 25-54.
Other researchers have also found that displaced older workers suffer
greater wage losses than younger workers, 45 and that the effects of job
loss are likely to be long-lasting—including being more likely to lose
subsequent jobs and experience additional unemployment spells. 46




44
  This analysis is restricted to long-tenured displaced workers (workers with 3 or more
years of tenure on the job they lost or left) who lost full-time, salaried jobs and were
reemployed in full-time, salaried jobs at the time of the survey.
45
  A recent study using data from the Survey of Income and Program Participation found
that between 1996 and 2007, the median hourly wage earned by displaced men aged 50
to 61 who become reemployed at ages 50 to 61 was 20 percent lower than the median
wage on the prior job. For those reemployed at age 62 or older, the median wage for the
new job was 36 percent below the median wage for the prior job. In contrast, the study
found that younger men’s median wages fell by only 4 percent for men aged 35 to 49 and
2 percent for those aged 25 to 34. The study found that reemployed older displaced
women also suffered wage losses, but these differences were not as significant as those
for men. See Johnson and Mommaerts, “Age Differences in Job Loss, Job Search, and
Reemployment.”
46
  A recent study using data from the Health and Retirement Study (HRS) found that
individuals who lost a job between ages 50 and 56 had “messy post-displacement
employment histories.” Specifically, such workers were “more likely to job-hop, to suffer
further involuntary job losses, and to experience subsequent unemployment than those
who were still working for their age-50 employer at age 56.” See Steven A. Sass and
Anthony Webb, Is the Reduction in Older Workers’ Job Tenure a Cause for Concern?
Center for Retirement Research at Boston College (December 2010).




Page 25                                             GAO-12-445 Unemployed Older Workers
                    Figure 10: Estimated Percentage of Reemployed Displaced Workers Who Earned
                    Less on Their New Full-Time Jobs than on Their Previous Jobs, January 2010




                    Note: Estimates in this figure have 95 percent confidence intervals within plus or minus 7 percentage
                    points of the estimate itself. Analysis is restricted to long-tenured displaced workers (workers with 3 or
                    more years of tenure on the job they lost or left) who lost full-time, salaried jobs and were reemployed
                    in full-time, salaried jobs at the time of the survey. For statistical comparisons of the estimates across
                    different groups and years, see appendix III.




                    Since the start of the recession, workers of all ages have struggled to
Unemployed Older    cope with unemployment. However, older workers generally face longer
Workers Face Many   periods of unemployment than do younger workers and may face unique
                    reemployment challenges. According to experts and one-stop career
Challenges Coping   center staff we interviewed, such challenges include employer reluctance
with Unemployment   to hire older workers, out-of-date skills, and unfamiliarity with online
and Regaining       applications, which can be particularly common for older workers with
                    limited technological skills.
Employment




                    Page 26                                                     GAO-12-445 Unemployed Older Workers
Unemployed Older          Unemployed older workers in our focus groups wanted to return to work
Workers Have Difficulty   so they could pay for critical living expenses and contribute to their
Meeting Financial         families and communities. 47 They told us that losing their jobs had taken
                          a toll on their sense of self-worth, reduced their standard of living, and put
Obligations
                          them at risk of long-term financial hardship.

                          Older workers cited difficulty paying for health care and health insurance
                          as a key financial challenge since they lost their jobs. 48 Specifically, many
                          focus group participants described struggling to pay health insurance
                          premiums and some said they had found it difficult to secure private
                          insurance because of high costs or preexisting conditions. Many focus
                          group participants said they had forgone seeking medical care or taking
                          prescribed medications because they could not afford them. See
                          appendix IV for examples of specific quotes from focus group participants
                          regarding risks associated with long-term unemployment.

                          Many focus group participants said that being unemployed had made it
                          difficult to afford mortgage or rent payments. 49 In addition, some focus
                          group participants told us they had lost or were at risk of losing their
                          homes. Others had taken in roommates, moved in with friends or family,


                          47
                            GAO conducted focus groups in Baltimore, Maryland; Falls Church, Virginia; San Jose,
                          California; and St. Louis, Missouri. GAO selected these locations based on metropolitan
                          areas’ unemployment rates, geographic diversity, and the estimated costs for travel and
                          securing focus group facilities. In total GAO conducted 10 focus group sessions.
                          Methodologically, focus groups are not designed to (1) demonstrate the extent of a
                          problem or to generalize results to a larger population, (2) develop a consensus to arrive
                          at an agreed-upon plan or make decisions about what actions to take, or (3) provide
                          statistically representative samples or reliable quantitative estimates. Instead, they are
                          intended to generate in-depth information about the reasons for the focus group
                          participants’ attitudes on specific topics and to offer insights into their concerns about and
                          support for an issue. Please see appendix I for further details on our focus group
                          methodology.
                          48
                            A survey of workers unemployed during the recession also found that some unemployed
                          individuals age 55 and over had no health insurance or had gone without medical care.
                          See M. Heidkamp, N. Corre, and C. Van Horn, The “New Unemployables” Older
                          Jobseekers Struggle to Find Work During the Great Recession, Sloan Center on Aging
                          and Work, Boston College (Chestnut Hill, MA: 2010). A recent survey of long-term
                          unemployed and underemployed individuals age 18-64 also found that many of the long-
                          term unemployed individuals reported difficulty paying for health insurance or health care.
                          See Kaiser Family Foundation/ NPR Long-Term Unemployed Survey.
                          49
                            A recent survey of long-term unemployed and underemployed individuals aged 18-64
                          also found that many long-term unemployed individuals reported difficulty paying for
                          housing. See Kaiser Family Foundation/ NPR Long-Term Unemployed Survey.




                          Page 27                                               GAO-12-445 Unemployed Older Workers
or moved to a more affordable apartment to reduce their housing
expenses. For example, one focus group participant told us his son had
moved back home so that he could give his parents money for rent.

Most of our focus group participants had relied on UI benefits to help pay
for critical living expenses while they were unemployed, and many said
that without UI benefits they would have been in much greater financial
jeopardy. Specifically, many focus group participants said that without UI
benefits they would have lost their homes or even become homeless.
However, some participants said they had already exhausted their UI
benefits or would soon exhaust their benefits. Some focus group
participants indicated that, since losing their jobs, they had received
public assistance, such as through the Supplemental Nutrition Assistance
Program (formerly known as food stamps). 50

Even with UI, many focus group participants said they had drawn down
retirement savings, increased their credit card debt, or tapped into their
home equity to cover living expenses while unemployed. Others reported
borrowing money from family or friends or selling possessions to meet
their financial needs. 51 A majority of those who were old enough to claim
early Social Security retirement benefits had already done so.

In addition, focus group participants said they had struggled to fulfill family
financial obligations they had been able to meet in the past. Several
mentioned that they were attempting to pay their children’s college tuition



50
  A recent GAO report examines how many workers who lost their jobs during the recent
recession received and exhausted UI benefits, the economic circumstances of those UI
recipients who exhausted their benefits and whether they received support from other
government programs, and the extent to which UI agencies refer those exhausting UI to
other support programs. According to the report, 15 percent of these UI exhaustees had
received benefits through the Supplemental Nutrition Assistance Program. See GAO,
Unemployment Insurance: Economic Circumstances of Individuals Who Exhausted
Benefits, GAO-12-408 (Washington, D.C.: Feb. 17, 2012).
51
  A survey of unemployed older workers age 55 and over also found that unemployed
older workers have increased credit card debt; sold possessions; borrowed money from
family, friends, or adult children; or moved to a different house or apartment. See
Heidkamp, M., Corre, and Van Horn, The “New Unemployables:” Older Jobseekers
Struggle to Find Work During the Great Recession. Another survey of long-term
unemployed and underemployed individuals ages 18-64 also found that many had taken
money out of savings or retirement funds to pay bills, sold personal belongings, or
borrowed money from relatives and friends. See Kaiser Family Foundation/ NPR Long-
Term Unemployed Survey.




Page 28                                          GAO-12-445 Unemployed Older Workers
                           or were helping to pay unemployed adult children’s living expenses. They
                           also frequently expressed general concern about high unemployment
                           among younger generations. Some said they were supporting their
                           children’s employment by taking care of their grandchildren during the
                           workday. Others mentioned that they were caring for their aging parents.


Unemployed Older
Workers Face Many
Challenges in Becoming
Reemployed
Perceived Employer         Many experts, one-stop career center staff, and other workforce
Reluctance to Hire Older   professionals we interviewed said that some employers are reluctant to
Workers                    hire older workers. 52 Because of legal prohibitions against age
                           discrimination, employers are unlikely to explicitly express a lack of
                           interest in hiring older workers; 53 however, one workforce professional
                           told us that local employers had asked her to screen out all applicants
                           over the age of 40. 54 Focus group participants perceived employer
                           reluctance to hire older workers as their primary reemployment challenge,
                           and several cited job interview experiences that had convinced them that
                           age discrimination was limiting their ability to find a new job.

                           According to experts we interviewed, a key reason employers are
                           reluctant to hire older workers is that they expect providing health benefits
                           to older workers would be costly. Several employer surveys corroborate




                           52
                             In some cases, our interviews with one-stop career center staff also included individuals
                           who worked for other organizations, such as nonprofits, to help older workers overcome
                           their employment challenges. In this report, we refer to these individuals and the one-stop
                           career center staff as “workforce professionals.”
                           53
                             The Age Discrimination in Employment Act of 1967, as amended, prohibits employment
                           practices that discriminate against people who are age 40 or older. Pub. L. No. 90-202, 81
                           Stat. 602, codified at 29 U.S.C. §§ 621-634.
                           54
                             For information about evidence that employers discriminate against older job applicants,
                           see Joanna N. Lahey, “Do Older Workers Face Discrimination?” Center for Retirement
                           Research at Boston College, Issue Brief Number 33, July 2005.




                           Page 29                                             GAO-12-445 Unemployed Older Workers
                                this concern. 55 In addition, a few focus group participants who had
                                handled their previous employer’s health insurance or had been involved
                                in hiring decisions said they had seen that older workers substantially
                                increased insurance costs, which provided a disincentive to hire older
                                workers. For example, one focus group participant told us that his prior
                                employer had told him not to hire anyone older than him.

                                The higher wages that older workers previously earned also make some
                                employers hesitant to hire them, according to experts, workforce
                                professionals, and our focus group participants. 56 For example,
                                employers may expect that an older worker who accepts a job paying
                                significantly less than the worker had previously earned might continue to
                                search for a higher-paying job and might leave the job if a better offer
                                became available. Also, according to experts we interviewed, employers
                                may believe that an older worker who previously held a high-level position
                                will be overqualified and therefore unhappy in a lower-level position.
                                Further, some experts we interviewed said employers may believe that an
                                older worker may not be happy working for a younger, less experienced
                                supervisor, which could cause interpersonal conflicts. Some focus group
                                participants said potential employers had specifically mentioned these
                                concerns during job interviews. Many of our focus group participants said
                                they had great financial need for a new job and expected to take a
                                significant pay cut to get one. See appendix IV for examples of specific
                                quotes from focus group participants regarding challenges they
                                experienced in becoming reemployed.

Lack of Up-to-Date Skills and   Workforce professionals we interviewed said that many older workers
Diminished Skills               lack up-to-date skills with computers and other technology, and this puts
                                them at a disadvantage in becoming reemployed. Some noted that after a
                                long spell of unemployment, even those older workers who had
                                previously been proficient with computer technology might find their


                                55
                                  See Marcie Pitt-Catsouphes, Michael A. Smyer, Christina Matz-Costa, and Katherine
                                Kane, “The National Study Report: Phase II of the National Study of Business Strategy
                                and Workforce Development,” Center on Aging and Work/Workplace Flexibility at Boston
                                College Research Highlight 04, March, 2007, 21. Also, see The Real Talent Debate: Will
                                Aging Boomers Deplete the Workforce? A WorldatWork Research Report, April 2007, 4.
                                56
                                  A recent study using data from the Survey of Income and Program Participation found
                                that between 1996 and 2007, the median hourly wage for reemployed displaced workers
                                was lower at ages 50 to 61 than at ages 35 to 49. The authors of the study suggest that
                                “concern over the expense of hiring older workers may be overblown.” See Johnson and
                                Mommaerts, Age Differences in Job Loss, Job Search, and Reemployment.




                                Page 30                                           GAO-12-445 Unemployed Older Workers
                               technology skills outdated. Some experts we interviewed said that
                               employers might hesitate to hire and retrain older workers because they
                               assume that older workers will not want to work much longer, so the
                               employer would not get a good return on the training investment. Some
                               workforce professionals also said that, according to their observations,
                               employers have increased the number of skills they require applicants to
                               possess, even for low-level positions. For example, a workforce
                               professional told us one job posting for a receptionist stated that the
                               applicant needed to be able to manage the employer’s website in addition
                               to completing more typical administrative duties. Some focus group
                               participants said that they were at a disadvantage in finding new jobs
                               because injuries or other health problems prevented them from
                               performing the type of work they had done in the past or meeting
                               requirements of available jobs in other fields.

Challenges in the Online Job   According to workforce professionals, an ongoing trend among
Application Process            employers—to require job seekers to submit all applications and résumés
                               online—creates difficulties for many older workers, particularly those with
                               few or no computer skills. Further, workforce professionals told us that
                               many online job applications require applicants to disclose information
                               that readily reveals the applicant’s age, such as the year the job seeker
                               graduated from high school, and that applications cannot be submitted
                               until such fields are completed. Such information would make it possible
                               for employers to screen out older workers, if the employer wanted to do
                               so. Workforce professionals also said that even workers seeking jobs that
                               require little or no computer use could get those jobs only by completing a
                               long online application. For example, workforce professionals in two
                               locations told us that individuals seeking positions as maids and janitors
                               in national chain hotels could apply for these positions only online and
                               that the older workers seeking these positions often were unfamiliar with
                               such applications.

                               Moreover, workforce professionals and focus group participants noted
                               that online applications can vary widely among employers, cutting and
                               pasting is sometimes not an option, and each application can take hours
                               to complete. They also told us that many online applications cut off if an
                               applicant has not completed or saved the work within a certain amount of
                               time. This makes applying for jobs more difficult for workers with limited
                               computer skills.

Emotional Challenges That      Workforce professionals at the four one-stop career centers we visited
Result from Long-Term          and some other experts said that some older workers experience
Unemployment                   depression and discouragement because of their long-term


                               Page 31                                   GAO-12-445 Unemployed Older Workers
                            unemployment. While this challenge is not limited to older workers,
                            depressed and discouraged older workers may not search for jobs as
                            intensely as they might have otherwise and their performance in
                            interviews may also be compromised. 57 For example, workforce
                            professionals said that depressed or discouraged job seekers may show
                            up at interviews looking disheveled or may become short-tempered
                            during interviews. A workforce professional in Falls Church, Virginia, said
                            that employers have told him they had decided against hiring an older job
                            applicant because the applicant had appeared too desperate for a job.
                            Many of our focus group participants said they had been discouraged or
                            depressed because of their continued unemployment.


Older Workers Need          Workforce professionals identified different types of services that older
Reemployment Services       workers need from the workforce system to help address their
That Address Their Unique   reemployment challenges, such as employers’ reluctance to hire them.
                            For example, workforce professionals said older workers need services
Challenges                  that help them

                            •    learn how to present their skills and experiences to potential
                                 employers in a way that does not draw attention to their age,
                                 extensive years of experience, and past high-level positions;

                            •    develop interview responses that can diffuse employer concerns
                                 about hiring older workers, such as whether the job seeker would be a
                                 good fit, be willing to work for less pay, or be okay with reporting to a
                                 younger manager;

                            •    understand how to adjust their physical appearance to make a better
                                 impression on prospective employers;

                            •    develop skills, including technological skills, that employers currently
                                 expect their employees to possess; and

                            •    complete and submit online job applications.




                            57
                              A recent survey of long-term unemployed and underemployed individuals ages 18-64
                            also found that many of these long-term unemployed individuals reported negative
                            impacts on their mental and physical health. See Kaiser Family Foundation/ NPR Long-
                            Term Unemployed Survey.




                            Page 32                                          GAO-12-445 Unemployed Older Workers
                           One-stop career center staff told us they offer classes and other support
                           for workers to help with résumé writing, job interviewing, and computer
                           skills. Some one-stop career center staff members told us that they
                           perform mock interviews to help older job seekers learn how to gracefully
                           respond to blunt questions that employers may ask older job applicants.
                           Staff at two of the one-stop career centers we visited told us they had
                           studied the details of some large employers’ online applications to help
                           job seekers avoid having their applications automatically rejected
                           because of blank fields or inappropriate responses.

                           One-stop career center staff also told us that providing the type of
                           assistance that some older workers need can be very time-consuming.
                           For example, one-stop career center staff said that helping some older
                           workers understand that their physical appearance or discouraged
                           demeanor hurts their reemployment prospects usually requires sensitive
                           one-on-one discussions. Also, one-stop career center staff told us they
                           sometimes have to work individually with older workers for long periods of
                           time to help them complete online applications.


                           Older workers who saved for retirement but lost their jobs following the
Job Loss Can               recession could face reduced retirement security because of long-term
Diminish Retirement        unemployment, in part because they have fewer years to accrue
                           additional benefits or make additional contributions, and they might rely
Income Prospects           upon their retirement savings to cover expenses incurred while they are
                           unemployed. Furthermore, a long period of unemployment could lead
                           older workers to claim early Social Security retirement benefits, which
                           would reduce their monthly benefits for the rest of their lives.


Job Loss Can Lead to       Long-term unemployment can reduce an older worker’s future monthly
Lower Private Retirement   retirement income in numerous ways, such as by reducing the number of
Income, Early Social       years the worker can accumulate DB plan retirement benefits or DC plan
                           savings, by motivating Social Security claims at an earlier age than the
Security Claims, and       worker otherwise would have chosen, and by leading workers to draw
Exhaustion of Retirement   down retirement savings to pay for expenses during unemployment.
Savings
Fewer Years of Work Can    Job loss can result in fewer years of work over a worker’s lifetime, which
Lower Retirement Income    can lower the worker’s retirement income in several ways. For example,
                           fewer years of work can prevent a worker covered by a traditional DB
                           plan from having enough years of work with an employer to vest in (that
                           is, earn a nonforfeitable right to receive) employer-funded retirement
                           benefits, thus preventing the worker from having any retirement benefits


                           Page 33                                    GAO-12-445 Unemployed Older Workers
from the employer. 58 Fewer years of work can also reduce a worker’s final
retirement benefit from a traditional DB plan if the number of years
worked is used in the formula for calculating retirement benefits. For
workers with DC plans, having fewer years of work can limit the amount
of yearly employee and employer contributions that accumulate in a
worker’s account and reduce the earnings from those contributions.
Further, having fewer years of work gives a worker less time to move up
the salary ladder and achieve higher levels of pay. For a worker with a
traditional DB plan, this will result in lower benefits if salary levels are
included in the formula for calculating benefits, and, for a worker with a
DC plan, this can reduce the worker’s ability to increase contributions to
the plan over time. Social Security retirement benefits may be reduced as
a result of fewer years of work because the benefits are based, in part, on
a calculation of the worker’s average monthly earnings over 35 years.
The 35 years used for the calculation are the worker’s highest earnings
years, adjusted for changes in wage levels. If a worker has less than 35
years of earnings, then zeros would be used for earnings in the missing
years, and this will result in a lower calculated benefit. Even if the worker
had already worked for 35 years, losing work could reduce the worker’s
Social Security retirement benefits because the worker did not have the
opportunity to achieve higher earnings to replace low-earnings years in
the benefit calculation. 59

Our simulations of how job loss and a forced early retirement would affect
an older worker’s retirement income show that workers who had been
participating in an employer-sponsored retirement plan would lose more
retirement income because of job loss than workers who relied


58
  The terms of an employer-sponsored retirement plan may specify when the employee
has earned a nonforfeitable right to employer-funded benefits (called vesting), typically
after the employee reaches a certain age or has completed a certain period of service.
Federal vesting requirements may apply to some plans. For example, to qualify for
favorable tax treatment, private sector DB plans are generally required to vest within a
maximum of 7 years if they use graded vesting, in which the employee is vested in an
increasing percentage of the benefits over time. If the plan does not use graded vesting,
employees must be 100 percent vested within 5 years. In addition, employees must be
vested upon reaching retirement age (typically age 65 or earlier, if defined by the plan),
and federal law limits the ability of plans to disregard an employee’s prior years of service
after breaks in service of less than 5 years. 29 U.S.C. § 1053(a)-(b). However, plans
sponsored by public sector employers are not generally subject to these requirements,
although state laws may apply.
59
  For more information on how Social Security retirement benefits are calculated, see
online illustration at http://www.ssa.gov/oact/ProgData/retirebenefit1.html.




Page 34                                              GAO-12-445 Unemployed Older Workers
exclusively on Social Security retirement benefits. 60 Workers with
employer-sponsored retirement plans are in the best position to save for
retirement because their retirement saving is facilitated and may be
supplemented by their employers. Also, workers with access to employer-
sponsored plans typically have higher average earnings than workers
without access to such plans, and higher earnings will generally result in
higher Social Security retirement benefits and generally in a greater ability
to save for retirement. These workers also have the most retirement
income to lose by becoming unemployed.

We simulated how losing years of work as well as losing coverage by an
employer-sponsored retirement plan between ages 55 and 62 could affect
retirement income. Specifically our simulation estimated pretax monthly
retirement income beginning at age 62 for groups forced to leave work at
ages 55 and 58, and we compared future retirement income of these
groups with our simulation results for a group who stopped work at age
62. The simulations show that retirement benefits from employer-
sponsored plans are reduced much more than Social Security retirement
benefits as a result of having fewer years of work. For example, median-
level retirement benefits from employer-sponsored plans are 39 percent
lower—$500 compared with $817—for workers with a DC plan (and no
DB plan) who leave work at age 55 compared with similar workers who
work until age 62. For these same groups of workers, median Social
Security retirement benefits are only 13 percent lower—$1,273 compared
with $1,467—for those who stopped working at age 55. Also, according to
our simulations, the median Social Security retirement benefit for workers
who leave work at age 55 or 58 with only a DC or a DB plan (but not both)
is higher than the median benefits for such workers from an employer-
sponsored retirement plan. 61




60
  Our simulations of how job loss and a forced early retirement would affect an older
worker’s retirement income cover retirement income from employer-sponsored retirement
plans and Social Security retirement benefits but not retirement income from other
sources.
61
  Over time, the percentage of a worker’s retirement income coming from Social Security
compared with private sources may increase because Social Security retirement benefits
are subject to cost-of-living adjustments based on the Consumer Price Index for Urban
Wage Earners and Clerical Workers published by the Bureau of Labor Statistics; however,
retirement benefits from private sources may not be inflation-adjusted.




Page 35                                          GAO-12-445 Unemployed Older Workers
The simulations also show that some workers with employer-sponsored
retirement plans who lose their jobs in their 50s are likely to end up either
not vesting in the plans or cashing out their savings when they lose their
jobs. On the other hand, the simulations demonstrate that workers who
have benefits from both a DB and a DC plan are in the best financial
position for retirement. At the median level of benefits, even those who
were forced to retire at age 55 would have higher monthly retirement
income than workers with only a DB or DC plan who worked until age 62.
Figure 11 shows the simulations’ results at the median level (middle value
in distribution) of benefits for workers who had been participating in
employer-sponsored plans.

The older workers from our simulations in figure 11 are better positioned
for retirement than many other older workers because (1) they were
fortunate enough to be working for an employer that offered a retirement
plan before they lost their job, and (2) their retirement benefits are at the
median level, which means their benefits are higher than those of almost
half of the other workers in their group with similar retirement plans.
Workers with benefits in the lower range (25th percentile) have
substantially lower benefits. For example, a worker with benefits from a
DC plan at the 25th percentile level will receive only about $136 per
month from the DC plan at age 62 if the worker stops working at age 58,
and such a worker will receive only $239 if he or she stops working at age
62. The results of our simulation show a best-case scenario for workers
with DC plans because the simulation assumes the workers do not draw
down any DC plan savings before age 62.

Finally, the simulations demonstrate that workers with both a DB and DC
plan are in the best financial position for retirement. At the median level of
benefits, even those who were forced to retire at age 55 would have
higher monthly retirement income than workers with only a DB or DC plan
who worked until age 62.




Page 36                                     GAO-12-445 Unemployed Older Workers
Figure 11: Potential Effect That Fewer Years of Work Can Have on Retirement Benefits for Workers with Median-Level
Retirement Benefits from Employer-Sponsored Plans and Median-Level Retirement Benefits from Social Security




                                        Note: The cohort used from the simulation models comprises individuals who were age 55 in 2010
                                        and were participating in a retirement plan at their current employer. The models simulated retirement
                                        benefits at age 62 after all individuals in the cohort stopped working at ages 55, 58, and 62. The
                                        graphic shows the median level of benefits from employer-sponsored plans (including benefits from
                                        prior employers) based on the type of plan the individuals were participating in at the time of job loss.
                                        The medians for private retirement benefits and for Social Security retirement benefits were
                                        calculated separately and cannot be combined to get a median for total retirement income. The
                                        models assumed that all participants who vested in benefits and did not cash out their benefits when
                                        they left the job before age 62 used DC plan savings to purchase an annuity at age 62.


                                        Our simulations showed that workers with only Social Security retirement
                                        benefits have a comparatively small reduction in retirement income
                                        because of job loss, but, given their low monthly retirement income levels,
                                        the approximately $30 to $60 reduction could become problematic as
                                        retirees age and if health care costs and premiums continue to increase.
                                        Also, these workers may have great difficulty paying for living expenses
                                        while they are unemployed before they are old enough to claim Social
                                        Security retirement benefits because, if they do not have retirement
                                        savings, they may not have other savings to help them through a period
                                        of long-term unemployment. Figure 12 shows the simulations’ results at
                                        the median level of benefits for workers who stopped working at different
                                        ages and had only Social Security retirement benefits.




                                        Page 37                                                    GAO-12-445 Unemployed Older Workers
                                Figure 12: Potential Effect That Fewer Years of Work Can Have on Social Security
                                Retirement Benefits of Workers without Employer-Sponsored Retirement Plans




                                Note: Benefit amounts shown are for claims filed at age 62. The cohort used from the simulation
                                models comprises individuals who were age 55 in 2010 and did not have retirement benefits from an
                                employer-sponsored plan or IRA at age 62.


Unemployment Can Motivate       The responses of our focus group participants, academic research, and a
Older Workers to Claim Social   recent spike in Social Security claims indicate that long-term
Security Retirement Benefits    unemployment can motivate older workers to file for early Social Security
Early                           retirement benefits, which will result in those workers and their survivors
                                receiving lower monthly retirement benefits for the rest of their lives than if
                                the workers had waited to claim benefits at full retirement age. 62 Many
                                unemployed older workers in our focus groups said that they were
                                planning to claim Social Security retirement benefits as soon as they were
                                eligible or had already done so. They said that they could not find a job
                                and needed a source of income to help pay for living expenses, and
                                therefore decided to claim Social Security retirement benefits early. Some
                                focus group participants also expressed the notion that they needed to
                                claim Social Security retirement benefits as soon as possible because
                                they were afraid of changes Congress might make in Social Security
                                benefits and wanted to ensure they were grandfathered into the program
                                before the changes were made. A few older workers in our focus groups
                                who were too young to claim Social Security retirement benefits but had
                                health problems that affected their ability to work said they applied for
                                Social Security disability benefits to help pay for living expenses after they
                                became unemployed.




                                62
                                  The full retirement age is the age at which an individual is eligible to receive unreduced
                                retirement benefits. This age ranges from 65 to 67 depending on the year the recipient
                                was born. 42 U.S.C. § 416(l); 20 C.F.R. § 404.409(a).




                                Page 38                                                GAO-12-445 Unemployed Older Workers
Claiming Social Security retirement benefits at age 62 will cause an older
worker to receive lower monthly benefits than if the worker had waited
until full retirement age to claim benefits. Because Social Security
retirement benefits are adjusted to provide approximately the same
estimated value of lifetime benefits regardless of when the benefits are
claimed, claiming benefits early results in a reduction to the monthly
benefit amount because the benefits are paid out over a longer period of
time. Therefore, older workers who claim Social Security retirement
benefits early will have less income from Social Security each month to
pay for living expenses for the rest of their lives. Figure 13 shows how an
older worker’s monthly Social Security retirement benefit would differ
depending on the age at which the worker claimed the benefits.

Figure 13: Example of the Effect of Early Claiming on Monthly Social Security
Retirement Benefits




Note: For this analysis, GAO applied Social Security retirement benefit formulas for delayed and early
claiming to the age 62 benefit amount derived from the analysis used in the preceding figure (fig. 12).
The illustration is based on an individual who worked until age 62. The individual used in the
illustration (1) is from a subset of the cohort used in the simulation models comprising individuals who
were age 55 in 2010 and did not have retirement benefits from an employer-sponsored plan at age
62, and (2) had Social Security retirement benefits at the median level for the subset.

Academic studies have found that unemployment can lead workers to
retire. A study published in 2009 covering 30 years of data on
employment and retirement decisions found that during times when
obtaining a new job is difficult, older workers were likely to retire in




Page 39                                                    GAO-12-445 Unemployed Older Workers
response to becoming unemployed. 63 Regarding the then-ongoing
recession of 2007-2009, the study estimated that more older workers
would retire early because of unemployment than would delay retirement
in an attempt to rebuild savings after the downturn in the financial market.
Also, a 2012 study found that high unemployment increases Social
Security retirement claims among men with limited education. 64 The spike
in claims for Social Security retirement benefits that occurred in 2009
after large increases in unemployment rates offers support for the study’s
findings. According to estimates from SSA’s Office of the Chief Actuary, in
fiscal year 2009 about 139,500 (about 6 percent) more older workers
applied for Social Security retirement benefits than would have been
expected in the absence of a recession. 65

The recession also led to an increase in applications for disability benefits
from the Social Security Disability Insurance program. In 2009, SSA
received approximately 205,000 (12 percent) more applications for
disability benefits because of the recession, and applications also rose in
2010 because of the recession, according to estimates by the Office of
the Chief Actuary. 66 While we do not know the percentage of these


63
  Courtney Coile and Phillip B. Levine, The Market Crash and Mass Layoffs: How the
Current Economic Crisis May Affect Retirement, Working Paper 15395,
http://www.nber.org/papers/w15395, NBER (Cambridge, MA: 2009) .
64
  The researchers estimate that the recession of 2007-2009 increased Social Security
retirement claiming for men with limited education by about 40 percent. See Owen Haaga
and Richard W. Johnson, Social Security Claiming: Trends and Business Cycle Effects,
Center for Retirement Research at Boston College (Chestnut Hill, MA: February 2012).
65
  When the Office of the Chief Actuary made estimates in December 2008 for the number
of retirement benefit claims SSA would receive in fiscal year 2009, it did not factor
recessionary effects into the estimates because, at that time, it did not know if the
recession would increase or reduce the number of applications SSA would receive for
retirement benefits. Therefore, according to the Office of the Chief Actuary, comparing the
estimates for retirement benefits applications for fiscal year 2009 that were made in
December 2008 with the actual number of applications received in fiscal year 2009
provides a reasonable estimate of the effect of the recession on Social Security
applications in fiscal year 2009.
66
  When the Office of the Chief Actuary made estimates in April 2008 for the number of
OASDI disability applications SSA would receive in fiscal year 2009, it was not recognized
within the United States that the economy was in recession, and a recession was not
expected. Therefore, the Office of the Chief Actuary did not factor recessionary effects into
the April 2008 estimates. According to the Office of the Chief Actuary, comparing the
estimates for OASDI disability benefits applications for fiscal year 2009 that were made in
April 2008 with the actual number of applications received provides a reasonable estimate
of the increase in applications due to the recession.




Page 40                                             GAO-12-445 Unemployed Older Workers
additional applications that were filed by older workers, the majority of
disability awards (approved applications) are for individuals age 50 and
over. Also, for individuals age 50 and over, awards for disability benefits,
as well as the percentage of individuals in the population who have been
awarded disability benefits have increased since the recession started. 67
(See app. V for information on the increase in disability benefit awards.)

Older workers who lost their jobs in the recession had significant injuries
or health problems, and were not old enough to claim Social Security
retirement benefits have strong incentive to apply for Social Security
disability benefits. If they are awarded benefits, they will receive monthly
payments and, after a 24-month waiting period, they will be eligible for
health insurance from the Medicare program. 68 Also, receiving Social
Security disability benefits gives unemployed older workers an alternative
to claiming Social Security retirement benefits early. This is because
individuals who are awarded Social Security disability benefits and remain
eligible for those benefits can continue receiving them up until full
retirement age, when they can begin receiving full retirement benefits.

An increase in the number of individuals receiving disability benefits is
costly for the OASDI trust funds. 69 According to the Office of the Chief
Actuary, some workers who applied for disability benefits as a result of
the recession probably would have applied eventually, but job loss or
other effects of the recession motivated them to apply earlier. However,
other workers may never have applied for disability benefits if they had
not lost their jobs, and the trust fund would not have made disability
payments to those workers.




67
  According to the Office of the Chief Actuary, applications did not increase as a result of
the recession for Aged benefits under the Social Security Supplemental Security Income
(SSI) program. To be eligible for SSI Aged benefits, individuals must be 65 or over and
have very low income and few assets. Such individuals may have already been
unemployed before the recession, which could help explain why the recession did not
increase applications for SSI Aged benefits.
68
   Receipt of disability benefits is generally subject to a 5-month waiting period beginning
with the month the applicant was both insured for disability and disabled, as defined by
statute. 42 U.S.C. § 423, 20 C.F.R. § 404.315.
69
  Unlike Social Security disability benefits, early Social Security retirement benefits do not
increase expenditures from the OASDI trust funds. This is because retirement benefits are
actuarially adjusted based on the age the benefits are claimed.




Page 41                                              GAO-12-445 Unemployed Older Workers
Unemployment Can Lead Older    Unemployment can also lead an older worker who has a retirement
Workers to Use Their Private   account to use some or all of those savings to cover living expenses while
Retirement Savings Early       unemployed. Slightly over half of the older workers in our focus groups
                               who reported having retirement savings in an IRA or DC plan also
                               reported that they had used some or all of these savings to pay for
                               expenses while they were unemployed. For example, focus group
                               participants described using retirement savings to cover expenses such
                               as mortgage and car payments, medical bills, a child’s college tuition, and
                               moving to more affordable housing. A survey of unemployed workers
                               conducted in March 2010 also found that a high percentage reported
                               using savings set aside for retirement or other purposes to help make
                               ends meet. 70 In addition, an October 2010 survey of workers age 50 and
                               over found that nearly a quarter reported that they had used all their
                               savings during the past 3 years. 71

                               The earlier a worker stops working and cashes out DC plan savings, the
                               lower the savings will be and the shorter the period that the savings are
                               likely to last. Depending on the level of savings, the length of time the
                               worker spends unemployed, and the worker’s other financial resources, a
                               worker may be at risk of using a large percentage of DC savings during
                               unemployment. If the worker is fortunate enough to find another job that
                               includes an employer-sponsored retirement plan or pays enough to
                               enable the worker to save some earnings in an IRA, the worker will be
                               able to resume saving for retirement. Figure 14 illustrates how a worker’s
                               retirement savings of $70,000 in a 401(k) plan could change after 2 years
                               of unemployment, depending on how much the worker withdrew from the
                               account while unemployed. 72 The figure also shows how the account
                               value could increase if the worker became reemployed and resumed



                               70
                                 Heidkamp, Corre, and Van Horn, The “New Unemployables”, Older Job Seekers
                               Struggle to Find Work During the Great Recession.
                               71
                                 Sara E. Rix, AARP Public Policy Institute, “Recovering from the Great Recession: Long
                               Struggle Ahead for Older Americans” (Washington, D.C.: May 2011). This study surveyed
                               adults aged 50 and over who had been in the labor force at some point during the
                               previous 3 years.
                               72
                                 We used $70,000 as the starting point for this illustration because it is about the median
                               level of DC plan savings for employed workers age 55 and over who have a DC plan
                               account from a current or past employer. For purposes of this illustration, we decided to
                               round this median to the nearest $10,000. Based on 2007 Survey of Consumer Finances
                               data, the estimated median is $70,800 and its 95 percent confidence interval is within plus
                               or minus $13,204, or between $57,596 and $84,004.




                               Page 42                                             GAO-12-445 Unemployed Older Workers
                                      saving for retirement. As shown in figure 14, if the worker did not make
                                      any withdrawals during the period of unemployment, savings could have
                                      reached nearly $110,000 by age 62, after becoming reemployed. On the
                                      other hand, if the worker withdrew 50 percent of the retirement account
                                      balance while unemployed but then found a job and saved for another 5
                                      years, the worker would still have less savings than before unemployment
                                      began.

Figure 14: How Drawdowns from Retirement Savings during Unemployment Can Affect Amounts Saved at Time of Retirement
if a Worker Became Reemployed and Resumed Saving




                                      Note: This illustration is based on an individual who was born at the beginning of 1953, turns 55 in
                                      2008, and retires at age 62 in 2015. To calculate changes in the account balance over time, we used
                                      the interest and rate-of-return assumptions as reported in past and projected under the intermediate
                                      cost assumptions in the 2011 Annual Report of the Board of Trustees of the Federal Old-Age and
                                      Survivors Insurance and Federal Disability Insurance Trust Funds (also known as the OASDI
                                      Trustees’ Report). We used scaled earnings for medium annual earners as reported in past and
                                      projected in the 2011 OASDI Trustees’ Report. We assumed the employee contributions to the
                                      retirement account are 6 percent of the individual’s wages and received a 3 percent employer
                                      matching contribution.




                                      Page 43                                                  GAO-12-445 Unemployed Older Workers
                          If the individual shown in figure 14 worked beyond the age of 62, the
                          worker could continue to increase the savings and postpone the time
                          when the savings would need to be used. If the worker worked until age
                          65, savings could reach about $139,500, if no withdrawals were made
                          while unemployed. But, if substantial withdrawals were made while
                          unemployed, the worker would need to work past age 62 just to get back
                          to the level of savings in the account before the unemployment began. On
                          the basis of our estimates, if the worker withdrew 50 percent of the
                          retirement account balance while unemployed and became reemployed
                          at age 57, it would take about 5 ½ more years of saving (age 62 ½) until
                          the account balance got back to the level it was when the worker was 55.


Before the Recession,     In the period shortly before the recession started, we estimate that 40
Many Older Workers Had    percent of employed individuals age 55 and over had no DB plan and no
Little or No Retirement   retirement savings or savings below $50,000. 73 Specifically, we estimate
                          that 22 percent of older workers had no private retirement savings and did
Savings
                          not participate in a retirement plan, and an additional 18 percent only had
                          retirement savings of less than $50,000 in a DC plan or IRA. Another 23
                          percent had total retirement savings of $50,000 or more in a DC plan or
                          IRA and did not participate in a DB plan. We estimate that 37 percent of
                          older workers were participating in a DB plan at their current employer or
                          had earned the right to receive benefits from a past employer’s DB plan,
                          and about half of these (19 percent of all older workers) had both a DB
                          and a DC plan. 74 See figure 15 for the results of our analysis, based on
                          data from the 2007 Survey of Consumer Finances.

                          When older workers’ retirement plans and retirement savings are
                          combined with those of their spouses, the resulting estimates indicate that
                          more households than individuals have private retirement savings or plan
                          participation. For households with at least one spouse over age 55, an
                          estimated 16 percent had no retirement savings or plan participation, and
                          an additional 13 percent had savings of less than $50,000. Figure 15
                          shows the estimated percentage of part- or full-time employed individuals



                          73
                             Percentage estimates based on the 2007 Survey of Consumer Finances have 95
                          percent confidence intervals of within plus or minus 3.4 percentage points of the estimate
                          itself. See appendix I for additional information about this survey and estimates.
                          74
                            Our analysis does not cover the dollar value of benefits that individuals expect to receive
                          from DB plans because these data are not collected in the Survey of Consumer Finances.




                          Page 44                                             GAO-12-445 Unemployed Older Workers
                                        age 55 and older and their households according to the type of retirement
                                        plans or savings they had at the time of the 2007 survey. The percentage
                                        of those shown as participating in a DC or DB plan includes those who
                                        were participating at their current employers or who had accumulated
                                        benefits from a prior employer.

Figure 15: Estimated Levels of Retirement Savings and Types of Plan Participation for Employed Workers 55 and Over and
Their Households, 2007




                                        Page 45                                       GAO-12-445 Unemployed Older Workers
Note: For the purpose of this figure, retirement savings are considered to be participation in a DB or
DC plan at a current employer, earned DB benefits from a past employer, a DC account from a past
employer, a Keogh account, or an IRA. In this figure, rollover IRAs—IRAs that were started with funds
rolled over from a DC plan account—are counted as DC savings, not IRAs. Also, Keogh accounts are
counted as IRAs. Our analysis of households only includes the retirement savings and plan
participation of the head of household and the spouse and does not include the retirement savings or
retirement plan participation of additional family members. Percentage estimates in this figure have
95 percent confidence intervals that are within plus or minus 3.2 percent of the estimate itself.
Because of rounding, percentages for “total value of retirement savings” for households does not sum
to the corresponding combined value for categories “IRA only” and “DC.”

Changes that have occurred since 2007, including job losses and
financial market declines, have likely reduced retirement savings for some
older workers. 75 Also, after the start of the recession in 2007, to cut costs,
some employers suspended contributions to their employees’ DC
accounts, which will ultimately reduce employees’ retirement income.
According to the Employee Benefit Research Institute’s (EBRI) annual
Retirement Confidence Survey, workers’ confidence in being able to
afford a comfortable retirement has eroded since 2007. 76 For example, in
2007, according to EBRI estimates, 11 percent of workers age 55 and
over said they were not at all confident about having enough money to
live comfortably in retirement. By 2011, that percentage had increased to
22 percent. In addition to the impact of the 2007-2009 recession and
ensuing financial downturn, these changes may indicate that more older
workers are becoming aware that they do not have enough savings to
retire and need to keep working to increase their income or save more for
retirement. This may help explain why the proportion of older workers
participating in the workforce has continued to increase. Also, since the
onset of the recession, more workers have reported that they expect to
retire at older ages than in the past. EBRI conducted an analysis of
expected retirement ages of workers age 50 and over using 2006, 2008,
and 2010 data from the University of Michigan’s Health and Retirement
Study. EBRI found increases from 2006 to 2010 in the percentage of



75
  According to a recent study using data from the Health and Retirement Study, “The
retirement wealth held by those ages 53 to 58 before the onset of the recession in 2006
declined by a relatively modest 2.8 percentage points by 2010. In more normal times, their
wealth would have increased over these 4 years.” See Alan L. Gustman, Thomas L.
Steinmeier, and Nahid Tabatabai, “How Did the Recession of 2007-2009 Affect the Wealth
and Retirement of the Near Retirement Age Population in the Health and Retirement
Study?” NBER Working Paper 17547, http://www.nber.org/papers/w17547 (Cambridge,
MA: October 2011).
76
 Ruth Helman, Craig Copeland, and Jack VanDerhei, Issue Brief No. 355: The 2011
Retirement Confidence Survey: Confidence Drops to Record Lows, Reflecting “the New
Normal,” Employee Benefit Research Institute (Washington, D.C.: 2011).




Page 46                                                   GAO-12-445 Unemployed Older Workers
                       workers age 50 and over who expected to retire after age 65. 77 However,
                       workers’ reports about plans to delay retirement should be considered
                       with some skepticism because EBRI has found that a large percentage of
                       workers retire earlier than they expected for various reasons, including
                       health problems, downsizing or closure of their company, and having to
                       care for a spouse or other family member.

                       Experts we interviewed most frequently selected a range of policy
Experts Selected       proposals that could potentially help unemployed older workers regain
Policies to Consider   employment as the economy improves. 78 In the current context of high
as the Economy         unemployment and slow job creation, the impact of such policies is likely
                       to be muted by limited job openings. Nonetheless, experts we spoke to
Recovers, and Labor    said these policies could potentially help some older workers obtain
Has Taken Some         reemployment. Labor has taken some steps to help older workers by
                       implementing several strategies proposed in its 2008 Taskforce report.
Steps to Help Older
Workers




                       77
                         Sudipto Banerjee, “Retirement Age Expectations of Older Americans Between 2006 and
                       2010,” Employee Benefit Research Institute, Notes Vol. 32, No. 12, Dec. 2011, 2-12.
                       78
                         The 12 experts we interviewed primarily work in academia and think tanks, and were
                       selected based on their expertise on older workers, workforce development, or retirement
                       policy. We selected a group of experts to help ensure a range of viewpoints. We asked
                       these experts if they would be willing to assess the strengths and weaknesses of policy
                       proposals to help long-term unemployed older workers regain employment. Prior to
                       interviewing the experts, we sent them a list of the 21 policy proposals we had compiled
                       from previously published studies and reports. We asked the experts to select those 5
                       policies they believed merited serious consideration. The 8 policies addressed in this
                       section are those that received votes from 4 or more of the 12 experts we interviewed.
                       The expert discussion cited in this report should be interpreted in the context of two key
                       limitations and qualifications. First, although we were able to secure the participation of a
                       balanced, highly qualified group of experts, other experts in this field could not be included
                       because we needed to limit the size of the panel. Second, although many points of view
                       were represented, the panel was not representative of all potential views.




                       Page 47                                              GAO-12-445 Unemployed Older Workers
Proposed Policies to Help   Experts we interviewed most frequently selected a variety of policy
Older Workers as the        options that could help address unemployed older workers’ reemployment
Economy Recovers            challenges. Experts selected these policies from a broader list of
                            proposals we compiled from previous studies, 79 many of which were
                            conducted before the recession. (For a complete list of the proposals we
                            presented to experts, see app. VI.) While there was no consensus among
                            experts and each proposal had advantages and disadvantages, several
                            experts we spoke to said implementing several policies in combination
                            would likely improve older workers’ employment levels more than
                            implementing any of the policies in isolation. Experts differed on whether
                            they believed the policies should be narrowly targeted at older workers or
                            more broadly applied to all long-term unemployed workers. Some experts
                            suggested all long-term unemployed workers—not just those who are
                            older—should qualify to receive assistance under some proposed
                            policies. Others said that policies specifically targeted to older workers
                            could help “level the playing field” and contain federal costs. Finally,
                            experts said that implementing many of the policies would increase
                            federal spending and involve legislative changes, and would therefore
                            need to be considered carefully in the context of our nation’s current long-
                            term fiscal challenges.

                            The eight policy proposals experts most frequently selected fall into three
                            categories, organized by the underlying issue they are meant to address:
                            (1) employer reluctance to hire older workers, (2) the need to enhance
                            reemployment assistance targeted specifically to older workers, and (3)
                            the need to encourage older workers to obtain reemployment as quickly
                            as possible. However, some of the policy proposals experts selected will
                            be of limited effectiveness as long as the number of job seekers greatly
                            outnumbers the number of available jobs. Further, the effectiveness of
                            some proposed policies could be limited if older workers’ unemployment
                            is caused by structural rather than cyclical changes. However, experts we
                            spoke to said these policies could potentially help older workers obtain
                            reemployment.




                            79
                              Before interviewing experts, we reviewed the literature, including past GAO reports,
                            academic studies, and federal agency reports, to identify policies that have been proposed
                            to help unemployed older workers regain employment. The eight policies that received
                            votes from at least 4 of the 12 experts are listed in tables 1 to 3 along with experts’
                            comments on the policies’ strengths and limitations.




                            Page 48                                            GAO-12-445 Unemployed Older Workers
                                           Of the eight proposed policies most frequently selected, three aim to
                                           address employer reluctance to hire older workers (see table 1). As
                                           discussed previously, almost all of the experts and workforce
                                           professionals we interviewed said that some employers are reluctant to
                                           hire older workers. When explaining why this might be the case, many
                                           experts cited older workers’ higher health care costs and salary
                                           expectations. Many experts we interviewed said that eliminating the
                                           requirement that Medicare generally be the secondary payer for benefits
                                           for workers age 65 and over covered by an employer group health plan
                                           could improve employers’ willingness to hire older workers. 80 However,
                                           the experts also acknowledged that implementing such a policy would
                                           shift health insurance costs from employers to the public system and
                                           exacerbate Medicare’s current financial challenges. Two of the other
                                           proposed policies experts most frequently selected would provide
                                           incentives to employers to encourage them to hire long-term unemployed
                                           older workers, such as by offering temporary wage or training subsidies.

Table 1: Experts’ Views on Key Strengths and Limitations of Selected Policy Proposals to Help Address Perceived Employer
Reluctance to Hire Older Workers

Experts’ favored policy proposals to help address perceived employer reluctance to hire older workers
Eliminate the requirement that Medicare generally be   Key strengths as identified by experts
the secondary payer for workers covered by an          Could minimize younger workers’ cost advantage to employers because of
                            a
employer group health plan.                            their lower health care costs, and by doing so would make hiring older
                                                       workers more attractive to employers.
                                                       Could be justified on the grounds of fairness, since working individuals 65
                                                       and over have paid their Medicare taxes and are entitled to the benefit.
                                                       Key weaknesses as identified by experts
                                                       Might not help that many older workers, or the neediest among them,
                                                       because it would apply only to those 65 and over, who can typically collect
                                                       Social Security retirement benefits, and not those 55-64.
                                                       This would represent a cost to the government and exacerbate Medicare’s
                                                       financial challenges, although it is unclear by how much. The cost might be
                                                       limited because workers 65 and over tend to be in better health—and
                                                       therefore less expensive to cover—than nonworkers 65 and over.




                                           80
                                             For workers aged 65 or over and covered by their own or their spouse’s employer’s
                                           group health plan, federal law generally requires that the employer’s group health plan be
                                           the primary payer and Medicare be the secondary payer for benefits. 42 U.S.C. §
                                           1395y(b)(2)(A); 42 C.F.R. §§ 411.170, .172, .175.




                                           Page 49                                             GAO-12-445 Unemployed Older Workers
                                                              May not increase the employment rate of those 65 and over very much, since
                                                              many work part-time and are not covered by their employers’ health
                                                              insurance plans.
Congress could offer temporary wage subsidies to              Key strengths as identified by experts
employers that hire older workers who have                    Could influence employers’ behavior to make them more likely to hire older
experienced long-term unemployment (27 or more                workers.
weeks).
                                                              Limiting eligibility to older workers makes the policy more efficient by
                                                              reducing the likelihood that the government would be subsidizing individuals
                                                              that employers would have hired anyway.
                                                              Could be cost-effective when the costs of long-term unemployment and
                                                              entitlement programs are taken into account.
                                                              Key weaknesses as identified by experts
                                                              May lead some employers to postpone hiring to get the benefit, because it
                                                              would make older workers unemployed for 27 or more weeks cheaper than
                                                              those unemployed for a shorter period.
                                                              May influence the type of workers employers hire, rather than increasing
                                                              overall employment levels.
                                                              May want to expand eligibility to all unemployed older workers, not just those
                                                              unemployed for 27 or more weeks, because evidence indicates that
                                                              unemployed older workers tend to remain unemployed for long periods of
                                                              time.
                                                              Potential for employer windfalls if employers would have hired the older
                                                              worker even without the subsidies.
Congress could offer training subsidies to employers          Key strengths as identified by experts
that hire older workers who experienced long-term             May increase older workers’ employment levels because the training
unemployment (27 weeks or more). To be eligible for           subsidies would be led by employer demand and tied to an actual job.
the training subsidy, employers would have to commit
to retaining these workers for a certain amount of time       Could help prevent older workers’ skills from atrophying because of
(e.g., 6 months to a year).                                   prolonged unemployment and help return them to their pre-unemployment
                                                              productivity levels.
                                                              Limiting eligibility to older workers makes the policy more efficient by
                                                              reducing the likelihood that the government would be subsidizing individuals
                                                              that employers would have hired anyway.
                                                              Key weaknesses as identified by experts
                                                              Would need to ensure that current employees of organizations receiving
                                                              subsidies are given comparable levels of training so they are not at risk of
                                                              subsequent displacement.
                                                              Could pose equity issues, since workers of all ages have been affected by
                                                              increased long-term unemployment.
                                                              Potential for employer windfalls if employers would have provided this
                                                              training even without the subsidies.
                                             Source: GAO summary of experts’ views on policy proposals selected by four or more experts.

                                             a
                                              For workers aged 65 or over and covered by their own or their spouse’s employer’s group health
                                             plan, federal law generally requires that the employer’s group health plan be the primary payer and
                                             Medicare be the secondary payer for benefits. 42 U.S.C. § 1395y(b)(2)(A); 42 C.F.R.
                                             §§ 411.170, .172, .175.




                                             Page 50                                                                   GAO-12-445 Unemployed Older Workers
                                              Experts most frequently selected three proposed policies to enhance the
                                              reemployment assistance the federal workforce development system
                                              currently provides to older workers (see table 2). One of these policies
                                              proposes that Labor develop a job search assistance program specifically
                                              targeted to older workers to provide training in basic computer skills,
                                              résumé writing, and online application filing. The second proposed policy
                                              would involve changing the WIA and SCSEP performance measures to
                                              remove a potential disincentive for serving older workers. 81 The third
                                              policy proposes increasing funding for the SCSEP program to reflect
                                              increases in the older worker population.

Table 2: Experts’ Views on the Strengths and Limitations of Selected Policy Proposals to Enhance Reemployment Assistance
Specifically Targeted to Older Workers

Experts’ favored policy proposals to help enhance reemployment assistance specifically targeted to older workers
Labor could develop a job search assistance program         Key strengths as identified by experts
specifically targeted to older workers that provides        Could help older workers navigate the new, more advanced job search
training in basic computer skills, résumé writing, online   technologies that may be unfamiliar to them because they have not searched
application filing, and other areas where older workers
                                                            for a job in many years.
may require specialized assistance.
                                                            Job search assistance has proven beneficial to older workers and is generally
                                                            more valuable to them than training, given their time left in the labor force.
                                                            Could be efficient because of a potentially large take-up rate, ease of program
                                                            development and implementation, and low costs.




                                              81
                                                Each state receiving funds under WIA is required to report annually the state’s and local
                                              areas’ progress on several performance measures based on indicators such as
                                              participants’ earnings, and Labor uses these measures to determine fiscal incentives and
                                              sanctions. 29 U.S.C. § 2871, 20 U.S.C. § 9273. The SCSEP program is subject to similar
                                              performance measures, 42 U.S.C. § 3056k, but does take the unique characteristics of the
                                              SCSEP population into account when setting performance goals for SCSEP grantees,
                                              according to Labor officials. For example, Labor officials said the average earnings
                                              performance goals set for SCSEP grantees reflects average earnings that result from
                                              more likely part-time work. In a previous GAO report, we found that Labor’s calculation of
                                              the earnings measure, which compares pre- and post enrollment earnings for participants
                                              in WIA adult and dislocated worker programs, could be a barrier to enrolling older workers
                                              because older workers’ high prior wages and their tendency to work part-time could
                                              negatively affect a local area’s performance on the earnings measure. Although Labor has
                                              changed the earnings measure so it no longer compares pre- and post enrollment
                                              earnings, the measure could still provide a disincentive for serving older workers because
                                              older workers may be more likely to work part-time and could still have lower earnings
                                              after exiting the program than other adults, since older dislocated workers generally suffer
                                              greater earnings losses than do younger workers. See GAO, Older Workers: Employment
                                              Assistance Focuses on Subsidized Jobs and Job Search, but Revised Performance
                                              Measures Could Improve Access to Other Services, GAO-03-350 (Washington, D.C.: Jan.
                                              24, 2003).




                                              Page 51                                              GAO-12-445 Unemployed Older Workers
                                                           Key weaknesses as identified by experts
                                                           May overlap somewhat with services already offered to the general
                                                           unemployed population.
                                                           Does not address what is perceived as employers’ reluctance to hire older
                                                           workers, which likely affects their reemployment prospects more than whether
                                                           their job search skills are up to date.
Congress could change WIA and SCSEP performance Key strengths as identified by experts
measures to eliminate any disincentives to placing Could level the playing field for older workers, who may be penalized by the
older workers in part-time employment.             current measures, and make it easier to serve older workers through the one-
                                                   stop career center system, especially those seeking part-time work.
                                                           Could be implemented at a low cost because it primarily involves an
                                                           administrative or technical change.
                                                           Key weaknesses as identified by experts
                                                           Unlikely to reduce unemployment by very much, since WIA and SCSEP serve
                                                           only a fraction of eligible individuals in need of job search assistance.
                                                           Could mean fewer younger workers will get services at one-stop career centers
                                                           if funding levels do not increase; however, this is not a serious limitation if
                                                           current measures unfairly penalize older workers.
Congress could expand funding for SCSEP to take into Key strengths as identified by experts
account increases in the older worker population.    Increased funding could help meet the employment needs of a very
                                                     disadvantaged and underserved population that many employers are unlikely
                                                     to employ in the absence of severe labor shortages.
                                                           Only a small percentage of eligible individuals are currently served by SCSEP;
                                                           expanding funding to keep up with the aging population could help keep this
                                                           percentage from declining.
                                                           Research has shown that SCSEP has done a reasonably good job at
                                                           accomplishing its goals.
                                                           Key weaknesses as identified by experts
                                                           Expanding the SCSEP program would cost money and could be difficult given
                                                           the current budget environment.
                                                           SCSEP is designed to serve the neediest older workers, and as a result, other
                                                           subgroups of older workers that have been negatively affected by the recession
                                                           would not benefit from this policy option.
                                          Source: GAO summary of experts’ views on policy proposals selected by four or more experts.


                                          Finally, as previously discussed, the longer older workers remain
                                          unemployed, the greater their risk of losing relevant skills or of dropping
                                          out of the labor force. Consequently, several proposed policies aim to
                                          encourage older workers to obtain reemployment as quickly as possible
                                          or build their job skills to better position them for reemployment. Experts
                                          we interviewed most frequently selected two such policy proposals (see
                                          table 3). Specifically, a number of experts we interviewed believed that
                                          implementing a wage insurance program could help unemployed older
                                          workers accept new full-time jobs that pay less than they had previously
                                          earned. In addition, a number of experts favored a policy that would


                                          Page 52                                                                   GAO-12-445 Unemployed Older Workers
                                             require the long-term unemployed to enroll in training to remain eligible
                                             for UI benefits.

Table 3: Experts’ Views on the Strengths and Limitations of Selected Policy Proposals to Encourage Older Workers to Obtain
Reemployment as Quickly as Possible

Experts’ favored policy proposals to encourage older workers to regain employment as quickly as possible
Congress could enact a wage insurance program that                  Key strengths as identified by experts
temporarily compensates older workers—up to a specified             Could help older workers transition to the lower wages they will
maximum benefit—for accepting new full-time jobs that pay less      likely receive upon becoming reemployed and reduce the likelihood
than their previous jobs within a given time frame.
                                                                    of premature withdrawal from the labor force.
                                                                    Could help protect older workers’ retirement security and lessen
                                                                    their reliance on government assistance by reducing the likelihood
                                                                    that they will use retirement savings to replace lost income because
                                                                    of lower wages.
                                                                    Could result in less spending on UI for older workers, and those
                                                                    savings could help fund the wage insurance program.
                                                                    Key weaknesses as identified by experts
                                                                    Could be expensive for the government, since unemployed older
                                                                    workers almost always take a pay cut when they become
                                                                    reemployed.
                                                                    Might not affect older workers’ reemployment significantly, since the
                                                                    problem may be that they are unable to find work at any wage.
                                                                    May encourage older workers to settle for low-wage, less promising
                                                                    employment that increases the probability of a subsequent period of
                                                                    unemployment.
                                                                    May stigmatize unemployed older workers by putting them in a
                                                                    separate class of workers than everyone else.
Congress could require long-term unemployed individuals (27 or      Key strengths as identified by experts
more weeks) to enroll in publicly funded retraining programs or     Could help prevent older workers’ skills from eroding because of
publicly subsidized on-the-job training programs as a condition
                                                                    long-term unemployment and alleviate concerns that UI benefits are
of receiving UI benefits. Some of the training funds could be       simply a government handout.
obtained by redirecting a portion of individuals’ UI benefits for
these purposes.
                                                                    Could potentially be less expensive for the government in the long
                                                                    run than providing UI benefits without conditions for retraining.
                                                                    Could help older workers adjust to the fact that today many job
                                                                    losses are permanent rather than temporary and that they may
                                                                    need to obtain new skills to become reemployed.




                                             Page 53                                              GAO-12-445 Unemployed Older Workers
                                                              Key weaknesses as identified by experts
                                                              The United States may lack the necessary training infrastructure
                                                              and funding to launch a major training program that sufficiently
                                                              prepares workers for jobs that pay decent wages and benefits.
                                                              Would require an enhanced understanding of reemployment
                                                              barriers and employers’ training needs before the policy could be
                                                              implemented.
                                                              Would need to ensure that the training provided is linked to actual
                                                              employment opportunities to justify the financial investment in
                                                              training.
                                                              Requiring all long-term unemployed older workers to enroll in
                                                              training may not make sense financially, particularly for those with a
                                                              short remaining work life.
                               Source: GAO summary of experts’ views on policy proposals selected by four or more experts.




Labor Implemented Some         Labor officials told us that Labor has taken several steps to implement
Proposed Strategies to         selected strategies recommended in 2008 by the Taskforce on the Aging
Help Older Workers, but        of the American Workforce. These steps included awarding approximately
                               $10 million in grants to 10 organizations in 2009 through the Aging
Has Shifted Priorities since   Worker Initiative demonstration project to test new ways of providing
the Recession                  training and other services to connect older Americans with employment
                               opportunities in high-growth, high-demand industries. Labor is currently
                               in the process of evaluating these grants. 82 Also, in 2008, Labor
                               expanded a demonstration project designed to assist individuals in
                               creating or expanding their own businesses, which addresses the
                               Taskforce’s recommendation to facilitate self-employment for older
                               workers. Specifically, Labor awarded a second round of grants to four
                               demonstration sites through this project—Project GATE (Growing
                               America Through Entrepreneurship). In addition, Labor officials told us
                               that they had taken steps to connect one-stop career centers to Aging
                               and Disability Resource Centers (which serve adults with disabilities,




                               82
                                 According to Labor officials, the evaluation examines the implementation of the grants,
                               documents the various types of interventions, assesses attributes of the treatments,
                               estimates how successful they were in assisting aging workers in becoming employed or
                               reemployed, and determines the potential for implementation of various methods in the
                               broader workforce system. The final report is expected in December 2012, according to
                               Labor officials.




                               Page 54                                                                   GAO-12-445 Unemployed Older Workers
including the elderly) to enhance communication. 83 In addition, Labor
officials told us that since the recession began, the department has taken
various steps to help the long-term unemployed, many of whom are older
job seekers. Labor also continues to sponsor National Employ Older
Workers Week, an event held annually in September in localities
throughout the country. 84

As Labor officials we interviewed noted, the Taskforce conducted its work
under different economic circumstances, when the workforce community
was primarily focused on avoiding potential labor shortages. Since then,
the number of unemployed individuals per job opening has greatly
increased and technology has continued to change the job search and
application process. Consequently, some issues may have assumed
greater importance since the Taskforce issued its report, especially
employer reluctance to hire older workers and the prevalence of online
applications.

According to Labor officials, the onset of the 2007-2009 recession shifted
Labor’s focus away from implementing strategies recommended in the
Taskforce report to responding to greatly increased demand for services.
As more Americans lost jobs and struggled to find reemployment,
increasing numbers sought reemployment services through the one-stop
career center system, according to Labor officials. Administrative data
Labor provided show that from 2007 to 2010 the overall number of all
WIA adult and dislocated worker program participants the one-stop career
centers served nearly tripled—from over a million participants in 2007 to




83
  Aging and Disability Resource Centers are designed to serve as “one-stop shops” for
individuals and their families who need information about or access to long-term support
services. The centers are part of a collaborative effort led by the Administration on Aging
(AoA) and Centers for Medicare and Medicaid Services (CMS). Other Aging and Disability
Resource Center partners include the Department of Health and Human Services Office
on Disability, the Administration for Developmental Disabilities, the Department of
Education, and the Veterans Administration.
84
  According to Labor officials, National Employ Older Workers Week “provides Senior
Community Service Employment Program grantees with an opportunity to reach out to
employers and the whole community as they recognize the vital role of older workers and
their employers in the workforce.”




Page 55                                             GAO-12-445 Unemployed Older Workers
              over 3 million in 2010. 85 The number of older workers served by these
              programs from 2007 to 2010 increased at an even greater rate—over 3.5
              times—from approximately 124,000 in 2007 to around 441,000 in 2010.


              Although long-term unemployment hurts job seekers of all ages, it poses
Conclusions   some greater challenges for older workers. Specifically, once
              unemployed, older workers tend to stay unemployed longer, and those
              who regain employment generally sustain greater wage losses than do
              younger workers. The challenges older workers face once they lose their
              jobs also highlight the increased fragility of retirement security in this
              country. Long-term unemployment can reduce retirement income, and
              older Americans have fewer years to recover from such losses. A long
              spell of unemployment may even force some older Americans to leave
              the labor market and retire earlier than they had hoped. The high costs of
              long-term unemployment—overlaid upon the retirement insecurity facing
              so many workers—explain the different paths older workers are taking.
              Thus, some are using their retirement savings and taking Social Security
              retirement benefits early in response to this extended joblessness. Yet it
              is striking that other older workers are choosing to remain in the labor
              force longer as older workers’ labor force participation continues to rise
              despite the worst labor market in generations. At least part of this trend
              may be due to inadequate retirement savings or accounts that suffered
              losses from the financial crisis.

              According to experts we interviewed, some proposed policy options could
              help older workers regain employment as the economy continues to
              improve. In addition, a renewed focus by Labor on older workers’ needs
              could help workforce professionals better address the unique needs of
              older job seekers. While Labor took steps to implement some of the 2008
              Taskforce recommendations, Labor officials understandably shifted their
              focus away from the report’s findings when the recent recession caused a
              dramatic increase in demand for workforce services. Now, a renewed


              85
                The administrative data from Labor for WIA adult and dislocated worker program
              participation is for program year 2007, starting April 1, 2007, through program year 2010,
              ending on March 31, 2011. In addition to increased demand for services, additional
              funding provided under the Recovery Act contributed to this increase in the number of
              individuals the programs served. Specifically, the Recovery Act provided an additional
              $500 million in funding for grants to the states for adult employment and training activities,
              and $1.25 billion for grants to the states for dislocated worker employment and training
              activities. Pub. L.No. 111-5, tit. VIII, 123 Stat. 115, 172-73 (2009).




              Page 56                                              GAO-12-445 Unemployed Older Workers
                     focus on the needs of unemployed older workers is needed to identify
                     strategies to help address older workers’ significant reemployment
                     challenges because older workers remain a critical and growing segment
                     of the workforce. This effort could include examining what has been
                     learned since 2008 about addressing older workers’ employment needs in
                     light of a changed economy, the shift to online employment applications,
                     and employers’ altered expectations. Without a renewed focus on the
                     unique needs of older job seekers, many unemployed older Americans
                     may face difficulty regaining the employment they need to support
                     themselves and their families in the short term, while also facing long-
                     term financial hardship in retirement.


                     To foster the employment of older workers, we recommend that the
Recommendation       Secretary of Labor consider what strategies are needed to address the
                     unique needs of older job seekers, in light of recent economic and
                     technological changes.


                     We provided a draft of this report to the Department of Labor and the
Agency Comments      Social Security Administration. Labor provided a written response (see
and Our Evaluation   app. VII). Both agencies provided technical comments, which we
                     incorporated as appropriate. Labor agreed with our recommendation and
                     noted a couple of its initiatives focused on the employment of older
                     workers. Specifically, Labor cited its current evaluation of the Aging
                     Worker Initiative demonstration project, which will assess the success of
                     new interventions used by 10 local grantees to help connect aging
                     workers with employment opportunities. In addition, Labor cited its
                     sponsorship of the annual National Employ Older Workers Week that
                     provides outreach opportunities for SCSEP grantees.




                     Page 57                                   GAO-12-445 Unemployed Older Workers
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution until 30 days after the date of this
letter. At that time, we will send copies of this report to the Secretary of
Labor and the Commissioner of Social Security, and other interested
parties. In addition, this report will be available at no charge on GAO’s
website at http://www.gao.gov. If you or your staff have any questions
concerning this report, please contact me at (202) 512-7215 or
jeszeckc@gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this report.
GAO staff who made key contributions to this report are listed in appendix
VIII.

Sincerely yours,




Charles Jeszeck
Director, Education, Workforce, and Income Security




Page 58                                    GAO-12-445 Unemployed Older Workers
Appendix I: Objectives, Scope, and
                         Appendix I: Objectives, Scope, and
                         Methodology



Methodology

                         The objectives of this study were to examine (1) how the employment
                         status of older workers has changed since the recession, (2) older
                         workers’ financial risks from long-term unemployment and challenges in
                         finding new jobs, (3) how periods of long-term unemployment might affect
                         older workers’ retirement income, and (4) what other policies might help
                         unemployed older workers regain employment and what steps the
                         Department of Labor (Labor) has taken to help unemployed older
                         workers. We conducted this performance audit from October 2010
                         through April 2012 in accordance with generally accepted government
                         auditing standards. Those standards require that we plan and perform the
                         audit to obtain sufficient, appropriate evidence to provide a reasonable
                         basis for our findings and conclusions based on our audit objectives. We
                         believe that the evidence we obtained provides a reasonable basis for our
                         findings and conclusions based on our audit objectives. We determined
                         that the data that we analyzed were sufficiently reliable for the purposes
                         of this report.

                         To obtain background information on older workers’ employment and
                         retirement prospects, we reviewed numerous studies, reports, and
                         surveys of older workers. We interviewed officials from Labor and the
                         Social Security Administration (SSA) and reviewed relevant data from
                         those agencies.


Analysis of Employment   To examine changes in the employment prospects of older workers since
Data on Older Workers    the start of the recession, we analyzed monthly data for 2007 through
                         2011 from the Current Population Survey (CPS) produced by the Bureau
                         of Labor Statistics (BLS). We also analyzed data from the 2008 and 2010
                         Displaced Worker Supplement to the CPS.

                         We selected the CPS mainly because it is nationally representative and
                         contains large sample sizes, demographic and industry information, and
                         data directly relevant to unemployment and underemployment.

                         Similarly, we analyzed the 2008 and 2010 Displaced Worker Supplement
                         to the CPS because this supplement contains data on the employment
                         and earnings status of displaced workers before and after their job loss.
                         Displaced workers are defined as persons 20 years or older who lost or
                         left jobs within the past 3 years for the following reasons: because their
                         plant or company closed or moved, there was insufficient work for them to
                         do, their position or shift was abolished, or similar economic reasons. The
                         Displaced Worker Survey (DWS) is administered every 2 years as a
                         supplement to the CPS. In the 2008 DWS, people are identified as


                         Page 59                                   GAO-12-445 Unemployed Older Workers
Appendix I: Objectives, Scope, and
Methodology




displaced if they lost or left their jobs for one of the specified reasons
between January 2005 and December 2007. In the 2010 DWS, people
are identified as displaced if they lost or left their jobs for one of the
specified reasons between January 2007 and December 2009. Displaced
workers have lost a job in the past 3 years; however, they may be
unemployed, employed, or not in the labor market at the time of the
survey.

We use the following labor force definitions in this report:

•   Unemployed workers are all jobless persons who are available to take
    a job and have actively sought work in the past 4 weeks.

•   Marginally attached workers are persons who are not in the labor
    force, who want and are available for work, and have looked for work
    in the past 12 months. They are not counted as unemployed because
    they had not searched for work in the prior 4 weeks.

•   Discouraged workers are a subset of the marginally attached who
    indicate that they have not searched for work in the prior 4 weeks for
    the specific reason that they believed no jobs were available for them.

•   Workers employed part-time for economic reasons are those
    employed less than 35 hours per week who want and are available
    for, but are unable to find, full-time work, and those who prefer full-
    time work but had their hours reduced by their employer because of
    business conditions.

We assessed the reliability of the CPS generally and of data elements
that were critical to our analyses and determined that they were
sufficiently reliable for our analyses. Specifically, we

•   reviewed documentation on the general design and methods of the
    CPS and on the specific elements of the CPS data that were used in
    our analyses,

•   interviewed BLS officials knowledgeable about the CPS data and
    consulted these officials periodically throughout the course of our
    study, and

•   completed our own electronic data testing to assess the accuracy and
    completeness of the data used in our analyses. To the extent




Page 60                                     GAO-12-445 Unemployed Older Workers
Appendix I: Objectives, Scope, and
Methodology




      possible, we compared our estimates against published reports using
      the CPS data, such as BLS reports.
As a result of our assessment, we identified a limitation with the CPS
basic monthly data. Specifically, beginning in January 2011, labor force
estimates based on microdata diverge slightly from BLS published labor
force estimates. According to Census Bureau officials, these
discrepancies result from new steps that CPS implemented in 2011 to
help prevent the inadvertent disclosure of individuals in the public use
files. While some primary topside labor force estimates will agree, all
others will be slightly off. This is solely the result of these disclosure
protection procedures. Census Bureau officials told us that the masking
procedures implemented in 2011 are random and are applied to all
records on the file identically; they do not create any systematic biases
that would affect our analysis of older workers.

Throughout this report, when monthly data are presented, the estimates
are not seasonally adjusted. We were advised by Census Bureau
officials not to attempt to seasonally adjust our analyses of CPS
microdata, because the sample sizes in the age groups we present are
relatively small. Most of the data in this report are annual averages, for
which seasonal adjustments are irrelevant. Where monthly data are
presented, unadjusted estimates and seasonally adjusted estimates do
not necessarily diverge by a large amount. For example, this table shows
seasonally adjusted data for figure 2, compared with the unadjusted data
shown in table 4.

Table 4: Comparison of Seasonally Adjusted and Unadjusted Unemployment Rates
for Workers Age 55 and Older, Selected Months

                            Unemployment rate, age 55 and Unemployment rate, age 55 and
                                       older, unadjusted      older, seasonally adjusted
 December 2007                                                      3.1%                                  3.2%
 June 2009                                                          6.8%                                  7.0%
 February 2010                                                      7.6%                                  7.2%
 December 2011                                                      6.0%                                  6.2%
Source: GAO analysis of CPS public use microdata and published data series downloaded from BLS website.


Note: Estimates of unadjusted unemployment rates calculated by GAO using CPS public use
microdata. These estimates are identical to BLS’s published unadjusted unemployment rates for
workers age 55 and older. Estimates of seasonally adjusted unemployment rates for workers age 55
and older are downloaded from BLS’s website.




Page 61                                                                 GAO-12-445 Unemployed Older Workers
                          Appendix I: Objectives, Scope, and
                          Methodology




                          We also use nationally representative data from the Job Openings and
                          Labor Turnover Survey (JOLTS), a monthly survey developed by BLS to
                          address the need for data on job openings, hires, and separations. We
                          use the JOLTS data to present a comparison of the number of
                          unemployed persons with the number of job openings over the period
                          January 2007 to December 2011. This is the only national data source
                          available to measure job openings in the United States.


Focus Groups with Older   To learn about older workers’ financial risks from long-term
Workers and Interviews    unemployment and challenges in finding new jobs, we conducted 10
with One-Stop Staff and   focus group sessions with a total of 77 long-term unemployed older
                          workers aged 55 or over at four locations. These sessions involved
Other Experts             structured small-group discussions designed to gain more in-depth
                          information about specific issues that cannot easily be obtained from
                          another method, such as a survey or individual interviews. Consistent
                          with typical focus group methodologies, our design included multiple
                          groups with varying characteristics but some similarity on one or two
                          homogeneous characteristics. All but one of the groups involved 8 to 10
                          participants; the remaining group had only 5 participants because of poor
                          attendance.

                          Our overall objective in using a focus group approach was to obtain
                          views, insights, and feelings of older workers who had been looking for a
                          job for more than half a year. Specifically, we wanted to learn what
                          challenges they had faced since becoming unemployed, what barriers
                          they perceived as hindering their ability to become reemployed, and their
                          views on how their spell of unemployment had affected or would likely
                          affect their retirement income and decisions. By including long-term
                          unemployed older workers with and without employer-sponsored
                          retirement plans, we intended to gather a range of perspectives regarding
                          how unemployment might affect retirement prospects.

                          We conducted 10 separate focus group sessions with long-term
                          unemployed older workers. Specifically, focus group participation was
                          limited to individuals 55 or older who had been unemployed for 27 weeks
                          or more and who had worked for their previous employer for at least 3
                          years before losing their job. We held three sessions with individuals
                          aged 55-61 who did not have an employer-sponsored retirement plan at
                          the job they lost, three sessions with individuals aged 55-61 who did have
                          an employer-sponsored retirement plan at the job they lost, and three
                          sessions with individuals aged 62-67 regardless of their retirement plan
                          coverage. We also conducted one focus group session in Falls Church,


                          Page 62                                   GAO-12-445 Unemployed Older Workers
Appendix I: Objectives, Scope, and
Methodology




Virginia. We conducted this session as a pretest, but because we did not
need to significantly change our focus group guide after the session, we
decided to include the results of the pretest in our focus group analysis.

We selected three cities—in addition to our pretest location in Falls
Church, Virginia—in which to conduct focus groups. We selected these
locations based on metropolitan areas’ unemployment rates, geographic
diversity, and the estimated costs for travel and securing focus group
facilities. We conducted three sessions in each of the following three
cities—Baltimore, Maryland; San Jose, California; and St. Louis, Missouri.
Additionally, we used criteria in selecting participants that ensured a mix
of gender and that accounted for the race and ethnicity of the area in
which the focus groups were located.

Discussions were structured, guided by a moderator who used a
standardized list of questions to encourage participants to share their
thoughts and experiences. During the sessions, we informed participants
that their names would not be used in the published report. We conducted
one pretest focus group session prior to beginning our travel for the
sessions.

Each of the 10 focus groups was recorded and transcriptions were
created, which served as the record for each group. Those transcripts
were then evaluated using content analysis to develop our findings. The
analysis was conducted in two steps. In the first step, three analysts
jointly developed a set of codes to track the incidence of various
responses and themes during focus group sessions. In the second step,
each transcript was coded by an analyst and then those codes were
verified by a second analyst. Any coding discrepancies were resolved by
both analysts agreeing on what the codes should be. In addition to focus
group sessions, we conducted one-on-one interviews with selected long-
term unemployed individuals in three of our four focus group locations.

Methodologically, focus groups are not designed to (1) demonstrate the
extent of a problem or to generalize results to a larger population, (2)
develop a consensus to arrive at an agreed-upon plan or make decisions
about what actions to take, or (3) provide statistically representative
samples or reliable quantitative estimates. Instead, they are intended to
generate in-depth information about the reasons for the focus group
participants’ attitudes on specific topics and to offer insights into their
concerns about and support for an issue. The projectability of the
information produced by our focus groups is limited for several reasons.
First, the information includes only the responses from long-term


Page 63                                    GAO-12-445 Unemployed Older Workers
                           Appendix I: Objectives, Scope, and
                           Methodology




                           unemployed older workers from the 10 selected groups. Second, while
                           the composition of the groups was designed to ensure a range of age,
                           retirement plan coverage, and racial background, the groups were not
                           randomly sampled. Third, participants were asked questions about their
                           experiences or expectations, and other long-term unemployed older
                           workers not in the focus groups may have had other experiences or
                           expectations. Because of these limitations, we did not rely entirely on
                           focus groups, but rather used several different methods to corroborate
                           and support our conclusions.

                           We also interviewed staff at one-stop career centers in each of the
                           locations where we conducted focus groups to learn more about
                           challenges unemployed older workers face in finding employment.
                           Further, we interviewed experts about older workers’ reemployment
                           challenges. We selected these experts based on their knowledge of older
                           workers’ issues, labor economics, and the workforce development
                           system. Specifically, we used several criteria to select experts to
                           interview, such as (1) having conducted research and published studies
                           on relevant topics (including older workers, the workforce development
                           system, labor economics, or retirement issues) or (2) representing
                           associations with highly established awareness or knowledge of issues
                           relevant to the employment and retirement prospects of older workers.


How Unemployment Might     To assess how periods of long-term unemployment might affect older
Affect Retirement Income   workers’ retirement income, we used the Policy Simulation Group’s (PSG)
                           microsimulation models to simulate Social Security benefits and
                           retirement plan income. For our simulations, we used PSG’s Social
                           Security and Accounts Simulator (SSASIM), Genuine Microsimulation of
                           Social Security Acounts (GEMINI), and Pension Simulator (PENSIM)
                           simulation models. GEMINI simulates Social Security benefits and taxes
                           for large, representative samples of people born in the same year.
                           GEMINI simulates all types of Social Security benefits, including retired
                           workers’, spouses’, survivors’, and disability benefits. It can be used to
                           model a variety of changes to Social Security. GEMINI uses inputs from
                           SSASIM, which has been used in numerous GAO reports, and PENSIM,
                           which was developed for the Department of Labor. GEMINI relies on
                           SSASIM for economic and demographic projections and relies on
                           PENSIM for simulated life histories of large, representative samples of




                           Page 64                                   GAO-12-445 Unemployed Older Workers
Appendix I: Objectives, Scope, and
Methodology




people born in the same year and their spouses. 1 Life histories include
educational attainment, labor force participation, earnings, job mobility,
marriage, disability, childbirth, retirement, and death. Life histories are
validated against data from the Survey of Income and Program
Participation, the Current Population Survey, Modeling Income in the
Near Term (MINT3), 2 and the Panel Study of Income Dynamics.
Additionally, any projected statistics (such as life expectancy,
employment patterns, and marital status at age 60) are, where possible,
consistent with intermediate cost projections from the Social Security
Administration’s Office of the Chief Actuary. At their best, such models
can provide only very rough estimates of future incomes. However, these
estimates may be useful for comparing future incomes across alternative
policy scenarios and over time.

In order to compare pretax retirement benefits accumulated at different
ages, we simulated and analyzed retirement benefits for three cohorts of
individuals born in 1955. For the first cohort, we conducted the simulation
to have all individuals stop work at age 55 and estimated the retirement
benefits earned by that age for each individual in the cohort. Similarly, for
the second and third cohorts, we simulated that all individuals in the
cohort stopped working at ages 58 and 62, respectively, and estimated
pretax retirement benefits earned by those ages. In the simulations, for
each cohort, we had all individuals claim their benefits at age 62,
regardless of when they stopped working. We determined the median
level of benefits from employer-sponsored retirement plans and Social
Security using all individuals in each cohort, including those who would
have had no retirement benefits from an employer-sponsored plan
because they did not vest in benefits or they cashed out of their
retirement plan when they stopped working. To compare how job loss at
different ages may affect retirement benefits, we compared the retirement
benefits for the individual at the median level of retirement benefits in
each cohort. For our analysis of how job loss might affect retirement
benefits for those participating in employer-sponsored plans, we only


1
 While these models use sample data, our report, like others using these models, does
not address the issue of sampling errors. The results of the analysis reflect outcomes for
individuals in the simulated populations and do not attempt to estimate outcomes for an
actual population.
2
 MINT3 is a detailed microsimulation model developed jointly by SSA, the Brookings
Institution, RAND, and the Urban Institute to project the distribution of income in retirement
for the 1931 to 1960 birth cohorts.




Page 65                                              GAO-12-445 Unemployed Older Workers
Appendix I: Objectives, Scope, and
Methodology




included individuals who were participating in an employer-sponsored
retirement plan at the job they had when they stopped working. Our
analysis took into consideration retirement benefits earned by individuals
in the cohort and retirement benefits for the surviving spouse of someone
who vested in a DB plan. Our analysis includes retirement income from
employer-sponsored retirement plans and Social Security retirement
benefits and does not include retirement income from other sources.

PENSIM uses several different asset allocations for defined contribution
(DC) accounts and assigns each type of allocation to a portion of
individuals in the cohort, based on existing research on actual use of
different asset allocations. For our analysis, the PENSIM model used the
assumption that all individuals who vested in employer-sponsored
retirement benefits and did not cash out their benefits when they left the
job before age 62 used DC plan savings to purchase an annuity at age
62. In the model the annuity prices are based on projected mortality and
interest rates using annuity price loading factors that ensure that the cost
of providing these annuities equals the revenue generated by selling them
at those prices.

We used nationally representative 2007 Survey of Consumer Finances
(SCF) data from the Board of Governors of the Federal Reserve to
estimate the percentage of employed individuals age 55 and older
(working full- or part-time) who were participating in employer-sponsored
retirement plans or had private retirement savings before the recession
caused substantial job losses. 3 In addition to providing household-level
data, the SCF also provides detailed individual-level economic
information about an economically dominant single individual or couple in
the household. To estimate the percentage of older workers with defined
benefit (DB) plans, we included in our analysis any employed older
worker who (1) was participating in an employer-sponsored DB plan at a
current job, (2) had participated in an employer-sponsored DB plan at a
past job and was expecting to receive retirement benefits from the plan,
or (3) was already receiving payments from an employer-sponsored DB
plan. Similarly, to estimate the percentage of older workers with a DC
plan, we included any older workers with an account from a DC plan from


3
 The Survey of Consumer Finances data that we used were collected from May 2007 to
March 2008. The collection period includes a few months of the recession that started in
December 2007; however, the significant increases in unemployment that followed the
onset of the recession had not yet occurred.




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Methodology




a current or past employer, and we counted rollover individual retirement
accounts (IRA) as DC accounts. We produced analogous estimates for
households with an employed head of household or spouse age 55 or
over. Our estimates for households only include retirement benefits and
savings of the head of household and a spouse or partner and do not
include retirement benefits or savings held by additional family members.

We assessed the reliability of the SCF generally and of data elements
that were critical to our analyses and determined that they were
sufficiently reliable for our analyses. Specifically, we reviewed
documentation on the general design and methods of the SCF and on the
specific elements of the SCF data that were used in our analyses and
completed our own electronic data testing to assess the accuracy and
completeness of the data used in our analyses.

To illustrate how drawdowns from retirement savings before retirement
can affect amounts saved by the time of retirement, we developed a
model to tabulate retirement account balances for a hypothetical
individual. For this, we used an individual who was born at the beginning
of 1953, turns 55 in 2008, and retires at age 62 in 2015. We used
$70,000 as the starting point for this illustration because it is about the
median level of DC plan savings for employed workers age 55 and over
who have a DC plan account from a current or past employer, based on
2007 SCF data. To calculate changes in the account balance over time,
we used the intermediate interest and rate-of-return assumptions as
reported in past and projected under the intermediate cost assumptions in
Social Security’s 2011 Annual Report of the Board of Trustees of the
Federal Old-Age and Survivors Insurance and Federal Disability
Insurance Trust Funds (also known as the OASDI [Old-Age, Survivors,
and Disability] Trustees’ Report). We used scaled earnings for medium
annual earners as reported in past and projected in the 2011 OASDI
Trustees’ Report. 4 We assumed the employee’s contributions to the
retirement account to be 6 percent of the individual’s wages and the
employee received a 3 percent employer matching contribution.




4
 Scaled earnings are earnings levels that have been scaled up or down to reflect the
average patterns of work and earnings of actual insured workers over their careers.




Page 67                                            GAO-12-445 Unemployed Older Workers
                             Appendix I: Objectives, Scope, and
                             Methodology




Experts’ Views on Policies   The 12 experts we interviewed primarily work in academia and think
to Help Unemployed Older     tanks, and were selected based on their expertise on older workers,
Workers and Steps Taken      workforce development, or retirement policy. We selected a group of
                             experts to help ensure a range of viewpoints. To identify policies that
by Labor to Help             could help unemployed older workers become reemployed, we compiled
Unemployed Older             a list of 21 proposed policy options from the relevant literature. (See app.
Workers                      VI for the list of 21 policy options.) In many cases, the policy options on
                             the list we compiled were proposed before the recession started in 2007.
                             Prior to interviewing the experts, we sent them a list of the 21 policy
                             proposals we had compiled and asked them to select the five policies that
                             merited the most serious consideration because they were either relevant
                             in the current economy or could be relevant as the economy recovers.
                             We also asked these experts to assess the strengths and weaknesses of
                             policy proposals to help long-term unemployed older workers regain
                             employment.

                             After interviewing all 12 experts, we tallied the number of votes each
                             policy proposal had received. The 8 proposed policies addressed in the
                             body of the report are those that received votes from 4 or more of the 12
                             experts we interviewed. The expert discussion cited in this report should
                             be interpreted in the context of two key limitations and qualifications. First,
                             although we were able to secure the participation of a balanced, highly
                             qualified group of experts, other experts in this field could not be included
                             because we needed to limit the size of the group. Although many points
                             of view were represented, the group of experts we interviewed was not
                             representative of all potential views. While we conducted preliminary
                             research and heard from national experts in their fields by conducting
                             these expert interviews, these discussions cannot represent the full
                             variety of opinions on the policy proposals. More thought, discussion, and
                             research must be done to develop greater agreement on what we really
                             know, what needs to be done, and how to do it. These two key limitations
                             and qualifications provide contextual boundaries. Nevertheless, the
                             experts we interviewed provided insightful comments in responding to the
                             questions they were asked.

                             To identify what steps Labor has taken to help unemployed older workers,
                             we interviewed Labor officials.


Sampling Variability         As noted above, we relied on estimates from several surveys, including
                             the CPS, the Displaced Worker Supplement to the CPS, SCF, and
                             JOLTS. Because these surveys are probability samples based on random
                             selections, the specific sample selected is only one of a large number of


                             Page 68                                     GAO-12-445 Unemployed Older Workers
Appendix I: Objectives, Scope, and
Methodology




samples that might have been drawn. Since each sample could have
provided different estimates, we express our confidence in the precision
of our particular sample’s results as a 95 percent confidence interval (for
example, plus or minus 7 percentage points). This is the interval that
would contain the actual population value for 95 percent of the samples
that could have been selected. In this report, 95 percent confidence
intervals are provided along with sample-based estimates where used.
We calculated standard errors for estimates from the CPS using the
Census generalized variance functions, as published in the BLS technical
notes to the household survey data published in the Employment and
Earnings monthly publication.




Page 69                                   GAO-12-445 Unemployed Older Workers
Appendix II: Workforce Status of Workers
              Appendix II: Workforce Status of Workers
              Displaced between 2005-2007 and 2007-2009 in
              January 2008 and January 2010


Displaced between 2005-2007 and 2007-2009
in January 2008 and January 2010




              Note: (1) Estimates for 25- to 54-year-olds and 55- to 64-year-olds have 95 percent confidence
              intervals within 5 percentage points of the estimate itself; estimates for people 65 and older have
              confidence intervals within 10 percentage points of the estimate itself. The following estimates have
              margins of error greater than or equal to 30 percent of the estimates: for people 55-64, the
              “percentage retired” in 2008, for people 65 and older, the percentage employed full-time, percentage
              employed part-time, and percentage not in the labor force (other) in both 2008 and 2010. For
              statistical comparisons of the estimates across different groups and years, see appendix III.




              Page 70                                                   GAO-12-445 Unemployed Older Workers
Appendix III: Additional Figure Notes for
              Appendix III: Additional Figure Notes for
              Employment Figures, Including Statistical
              Significance Tests


Employment Figures, Including Statistical
Significance Tests
              Figure 3: Estimated Number of Unemployed and Underemployed Older
              Workers (55 and Over), 2007-2011


              •   Appendix I includes the definitions used in the report of unemployed
                  workers, marginally attached workers, discouraged workers, and
                  workers employed part-time for economic reasons.
              Figure 4: Growth in Estimated Long-Term Unemployment of Older
              Workers (55 and Over), 2007-2011

              •   There was a statistically significant change in the proportion of
                  unemployed older workers in each of the categories shown in the
                  figure between 2007 and 2011. Specifically:

              •   The proportion of unemployed older workers who were unemployed
                  for under 5 weeks, for 5-14 weeks, and for 15-26 weeks each
                  declined significantly from 2007 to 2011.

              •   The proportion of unemployed older workers who were unemployed
                  for 27 weeks to a year, and for more than 1 year, each increased
                  significantly from 2007 to 2011.

              Figure 6: Estimated Duration of Unemployment for Older Workers (55 and
              Over) by Industry, 2007 and 2011


              •   Because of the smaller number of persons with long durations of
                  unemployment in 2007, some of the estimates for duration of
                  unemployment by industry are unreliable in 2007 (the margins of error
                  for the estimates are high relative to the value of the estimates.) For
                  2007, the following estimates have margins of error that exceed 30
                  percent of the estimate itself: the percentage unemployed for 27
                  weeks or more for all industries except wholesale and retail trade,
                  manufacturing, and “all other industries”; and for the percentage
                  employed for 27-52 weeks, 53-104 weeks, and 105 or more weeks for
                  all industries. In 2011 the following estimates in the figure have
                  margins of error that exceed 30 percent of the estimate itself: the
                  percentage unemployed for 53-104 weeks in leisure and hospitality,
                  and the percentage unemployed for 105 or more weeks in:
                  transportation and utilities, financial activities, and leisure and
                  hospitality.




              Page 71                                     GAO-12-445 Unemployed Older Workers
Appendix III: Additional Figure Notes for
Employment Figures, Including Statistical
Significance Tests




•   For each industry in the figure, the percentage of unemployed workers
    who have been unemployed for 27 weeks or more is significantly
    higher in 2011 than in 2007.

Figure 7: Estimated Unemployment Rates by Demographic Group for
Older Workers (55 and Over), 2007 and 2011

•   Differences in unemployment rates between 2007 and 2011 are
    statistically significant for all groups in this figure.

•   Differences in unemployment rates between men and women are
    statistically significant in 2011, but not in 2007.

•   Differences in unemployment rates between whites and blacks, and
    between whites and Hispanics, are statistically significant in both 2007
    and 2011; however, differences between whites and the “all other
    races” group are significant only in 2011.

•   Differences in unemployment rates between those with no high school
    diploma and each of the other education groups are statistically
    significant in both 2007 and 2011.

Figure 8: Estimated Duration of Unemployment by Age and by Gender,
2007 and 2011

•   Differences between younger and older workers in the percentage
    unemployed for 27 weeks or longer were significant in both 2007 and
    2011.

•   Differences between men and women in the percentage unemployed
    for 27 weeks or longer were statistically significant in 2007, but not in
    2011.

Figure 10: Estimated Percentage of Reemployed Displaced Workers Who
Earned Less on Their New Full-Time Jobs than on Their Previous Jobs,
January 2010

•   Differences between younger workers and older workers are
    statistically significant in the 2010 survey, but not in the 2008 survey.




Page 72                                     GAO-12-445 Unemployed Older Workers
Appendix III: Additional Figure Notes for
Employment Figures, Including Statistical
Significance Tests




•   For both younger workers and older workers, there was a statistically
    significant increase in the percentage of workers with earnings
    replacement rates less than 100 percent between the 2008 survey
    and the 2010 survey.

Appendix II: Workforce Status of Workers Displaced between 2005-2007
and 2007-2009 in January 2008 and January 2010

•   For 25- to 54-year-olds and 55- to 64-year-olds, the following
    estimates are significantly different between 2008 and 2010:

    •     the percentage unemployed,

    •     the percentage working full-time, and

    •     the overall percentage working/not working.

•   For people 65 and older, the following estimates are significantly
    different between 2008 and 2010:

    •     the percentage unemployed,

    •     the percentage retired, and

    •     the percentage not in the labor force (other).




Page 73                                      GAO-12-445 Unemployed Older Workers
Appendix IV: Quotes from Focus Groups with
                                                Appendix IV: Quotes from Focus Groups with
                                                Long-Term Unemployed Older Workers



Long-Term Unemployed Older Workers

                                                The following table provides examples of specific focus group quotes
                                                organized by topic. These selected quotes further exemplify our findings
                                                on the risks long-term unemployed older workers face, the challenges
                                                they experience becoming reemployed, and how long-term
                                                unemployment has affected their plans for retirement. (For audio clips
                                                from GAO’s focus groups with unemployed older workers, use this
                                                http://www.gao.gov/multimedia/video/#video_id=590295: )

Table 5: Selected Quotes from Focus Groups with Long-Term Unemployed Older Workers

                                                                                                               Focus group participant
Topic/quotes                                                                                                   characteristics
Some unemployed older workers want to work and have difficulty meeting financial obligations
That’s our culture. We want to work. We need to work.                                                          56-year-old man
You’ve got to support a family, so you’re still out there on the pavement or the Internet looking for a        55-year-old man
job.
I was used to a 70-hour week, and then to go from that to nothing, your sense of self-worth isn’t there.       58-year-old woman
Medical can cost you $1,000 a month. When you think about Social Security at my age group—my                   64-year-old woman
Social Security is $1,300 a month. Medical is $1,000, where is my mortgage and food?
I don’t have medical insurance right now. Any medical insurance. Because it is too expensive.                  63-year-old woman
I’ll never retire. I still have a kid in college. My son lost his job about 6 months after I did, so my wife   55-year-old man
and I are paying his mortgage, his car insurance, and everything he has, electric, all that stuff.
Perceived employer reluctance to hire older workers
The interview was going really, really well and … she went, “Oh no!” and I said, “What is it?” [And she        59-year-old man
said], “Oh nothing, nothing, I just noticed what year you graduated high school.”
They asked me one question that always knocked me out of the game—they’re not allowed to ask                   62-year-old man
how old you are, but they wanted to know when I graduated from college.
I would sacrifice pay to start somewhere else. I say, “I’ll start at rock bottom . . . whatever it takes.”     59-year-old man
I need a job. I have to pay insurance for me and my wife. I have seven kids. I’m trying to get them            64-year-old man
through college. I’ll take that $10 job. I need a job that bad.
Emotional challenges that result from long-term unemployment
When you’re not working, you don’t feel very good, you are depressed. You feel discouraged. Your               62-year-old woman
self-esteem is about an inch high.
One of the most devastating things with becoming unemployed was with losing my identity. I was one             58-year-old woman
thing and then I was nothing.
Claiming Social Security retirement benefits as soon as possible
I’m turning 62 in a few days, and I’m like “What am I going to do?” You can’t find a job out there so I        61-year-old man
might as well retire.
I just turned 62 in January, and I just filed for my Social Security so that I would have some kind of         62-year-old woman
income to fall back on, because unemployment was exhausted.
If I don’t find a job, I’ll claim at 62 because of, you know, unemployment will be long gone by then. And 59-year-old woman
if I do sell that house, anything I have left after the sale will be gone by then, too. So, if I find a job, I
won’t claim unless or until I have to for health reasons or whatever.




                                                Page 74                                                 GAO-12-445 Unemployed Older Workers
                                               Appendix IV: Quotes from Focus Groups with
                                               Long-Term Unemployed Older Workers




                                                                                                                                   Focus group participant
Topic/quotes                                                                                                                       characteristics
I want to secure my place because if the eligibility requirement on that changed, then you’re out of                               58-year-old woman
luck, too. It’s scary.
They’re talking about cutting it off, so I think anybody that’s eligible for it, they need to try and go and                       66-year-old woman
apply for it.
Using retirement savings to cover expenses during long-term unemployment
Coping financially has been really rough, because even though I had a retirement plan, it’s not enough 59-year-old woman
to pay my mortgage and my car payment. . . . So then you tap into what you have saved . . . you see
that dwindle down to nothing and then you still got to make it to 62, and you don’t have enough to
make it to 62.
When I got laid off . . . my daughter was in college at the time . . . I wanted her to finish school so, of                        55-year-old woman
course, I depleted all of my savings, my 401(k).
                                               Source: Transcripts of focus groups GAO conducted with long-term unemployed older workers.




                                               Page 75                                                                 GAO-12-445 Unemployed Older Workers
Appendix V: Percentage of the Population 50 and Older,
                  Appendix V: Percentage of the Population 50
                  and Older, but Less than Full Retirement Age,
                  with Initial Dispositions and Awards of Social
but Less than Full Retirement Age, with Initial
                  Security Disability Insurance, 2000-2010


Dispositions and Awards of Social Security Disability
Insurance, 2000-2010




                  Page 76                                          GAO-12-445 Unemployed Older Workers
Appendix VI: Proposed Policies Presented to
                                             Appendix VI: Proposed Policies Presented to
                                             External Experts



External Experts


                                                                                                                 Selected by at least
Policy option                                                                                                    four experts
Policies to help address perceived employer reluctance to hire older workers
1.   Labor could develop a comprehensive and highly visible campaign to educate employers on the strengths NO
     of older workers as potential employees and their important role in the 21st century economy.
2.   Congress could offer temporary wage subsidies to employers that hire older workers who have                 YES
     experienced long-term unemployment (27 or more weeks).
3.   Congress could offer training subsidies to employers that hire older workers who experienced long-term      YES
     unemployment (27 weeks or more). To be eligible for the training subsidy, employers would have to
     commit to retaining these workers for a certain amount of time, for example, 6 months to a year.
4.   Congress could offer a tax credit—that applies to the first year of employment—to employers that hire       NO
     older workers who experienced long-term unemployment (27 weeks or more).
5.   To reduce the potentially high cost to employers of providing health insurance benefits to older workers, YES
     Congress could eliminate the requirement that Medicare generally be the secondary payer for workers 65
     and over who are covered by an employer group health plan.
6.   Congress could allow older workers and their employers to opt out of paying the Social Security payroll     NO
     tax once the worker has accumulated 35 years of covered earnings.
7.   Congress could provide tax credits to new small businesses that are owned by older workers and employ       NO
     a high percentage of older workers (such as 50 percent or more).
8.   Congress could pass legislation (such as the proposed Fair Employment Opportunity Act of 2011) that         NO
     prohibits employers and employment agencies from screening workers out of the candidate pool solely
     because they are unemployed.
9.   To alleviate employer concerns about declining productivity and increased health care costs at older ages NO
     (at or near Social Security’s full retirement age), Congress could allow employers to set a mandatory
     retirement age (of 66 or greater) for new hires who were within 10 years of reaching this age (e.g., 56 or
     older).
10. In partnership with other federal agencies, Labor could identify the legal and regulatory barriers to the NO
    employment of older workers and determine (1) whether legal and regulatory changes are needed and (2)
    the impact of potential changes.
Policies to help enhance reemployment assistance specifically targeted to older workers
11. Labor could collect and disseminate information on the most effective strategies for serving older workers   NO
    through the workforce investment system.
12. Labor could develop job search assistance programs that address skill deficiencies common among              YES
    seniors, such as deficiencies in basic computer skills, résumé writing, and online application filing.
13. Labor could encourage partnerships between one-stop career centers and the Small Business                  NO
    Administration (SBA) to provide entrepreneurial development services to older job seekers. As part of this
    effort to link older workers with SBA’s programs and services, SBA could provide targeted information to
    older workers regarding entrepreneurial resources, counseling, and training on its website.
14. To directly assist older workers who wish to start their own businesses, Labor could replicate Project       NO
    GATE (Growing America Through Entrepreneurship) at one-stop career centers, targeted specifically to
    older workers.
15. Labor could direct the Bureau of Labor Statistics to work with the Census Bureau to (1) add specific         NO
    questions to the CPS about older workers and their labor force participation, and (2) request a special
    tabulation of census data on older workers designed to match workforce investment areas. These data
    would allow one-stop staff to better target services to the different types of older workers within their
    jurisdiction.



                                             Page 77                                             GAO-12-445 Unemployed Older Workers
                                            Appendix VI: Proposed Policies Presented to
                                            External Experts




                                                                                                                          Selected by at least
Policy option                                                                                                             four experts
16. Congress could change Workforce Investment Act of 1998 (WIA) and Senior Community Service                             YES
    Employment Program (SCSEP) performance measures to eliminate any disincentives to placing older
    workers in part-time employment.
17. Congress could expand funding for SCSEP to take into account increases in the older worker population.                YES
Policies to help encourage older workers to obtain reemployment as quickly as possible
18. Congress could enact a reemployment bonus program that provides a low-value bonus (for example,                       NO
    approximately $1,000) to Unemployment Insurance (UI) claimants who accept new jobs within a given
    time period (for example, 3-6 months). The program could target UI claimants with an above average
    likelihood of exhausting their UI benefits.
19. Congress could enact a wage insurance program that temporarily compensates older workers for                          YES
    accepting new full-time jobs that pay less than their previous jobs within a specified time frame. For
    example, the program could pay older workers 50 percent of the difference between their old and new
    wages over a period of 2 years (up to a specified maximum benefit). The subsidy could be limited to
    individuals making less than $50,000 at their new jobs and who accepted their new jobs within 27 weeks
    of filing for UI.
20. Labor could encourage one-stop career centers to prioritize job-matching services (i.e., matching older               NO
    workers’ existing skills with available jobs) rather than training or retraining services.
21. Congress could require long-term unemployed individuals (those unemployed for 27 or more weeks) to                    YES
    enroll in publicly funded retraining programs or publicly subsidized on-the-job-training programs as a
    condition of receiving Unemployment Insurance. Some of the training funds could be obtained by
    redirecting a portion of individuals’ unemployment benefits for these purposes.
                                            Source: GAO.


                                            Note: To compile this list of policy options, we reviewed the literature, including academic studies,
                                            past GAO reports, and federal agency reports, to identify policies that have been proposed to help
                                            unemployed older workers regain employment. We presented these options to 12 experts in areas
                                            such as older workers’ issues, labor economics, and the workforce development system, and asked
                                            the experts to select the five policies that they believed merited serious consideration. Policies that
                                            were selected by 4 or more experts are described in more detail in the body of the report.




                                            Page 78                                                    GAO-12-445 Unemployed Older Workers
Appendix VII: Comments from the
             Appendix VII: Comments from the Department
             of Labor



Department of Labor




             Page 79                                      GAO-12-445 Unemployed Older Workers
Appendix VII: Comments from the Department
of Labor




Page 80                                      GAO-12-445 Unemployed Older Workers
Appendix VIII: GAO Contact and Staff
                  Appendix VIII: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Charles Jeszeck, (202) 512-7215 or jeszeckc@gao.gov
GAO contact
                  In addition to the contact named above, Laura J. Heald, Assistant
Staff             Director; Lucas Alvarez; Laurel E. Beedon; James E. Bennett; Amy Buck;
Acknowledgments   David M. Chrisinger; William Colvin; Sarah C. Cornetto; Cynthia L. Grant;
                  Gene G. Kuehneman Jr.; Kathy D. Leslie; Douglas A. Manor; Jaclyn
                  Nidoh; Rhiannon Patterson; Kathy Peyman; Mark F. Ramage; David M.
                  Reed; Nyree M. Ryder Tee; Aron E. Szapiro, Frank Todisco; and Walter
                  Vance made key contributions to this report.




                  Page 81                                  GAO-12-445 Unemployed Older Workers
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             Income Security: Older Adults and the 2007-2009 Recession.
             GAO-12-76. Washington, D.C.: October 17, 2011.

             Retirement Income: Ensuring Income throughout Retirement Requires
             Difficult Choices. GAO-11-400. Washington, D.C.: June 7, 2011.

             Private Pensions: Some Key Features Lead to an Uneven Distribution of
             Benefits. GAO-11-333. Washington, D.C.: March 30, 2011.

             Social Security Reform: Raising the Retirement Ages Would Have
             Implications for Older Workers and SSA Disability Rolls. GAO-11-125.
             Washington, D.C.: November 18, 2010.

             Private Pensions: Alternative Approaches Could Address Retirement
             Risks Faced by Workers but Pose Trade-Offs. GAO-09-642. Washington,
             D.C.: July 24, 2009.

             Employment and Training: Most One-Stop Career Centers Are Taking
             Multiple Actions to Link Employers and Older Workers. GAO-08-548.
             Washington, D.C.: April 21, 2008.

             401(k) Plans: Policy Changes Could Reduce the Long-term Effects of
             Leakage on Workers’ Retirement Savings. GAO-09-715. Washington,
             D.C.: August 28, 2009.

             Private Pensions: Low Defined Contribution Plan Savings May Pose
             Challenges to Retirement Security, Especially for Many Low-Income
             Workers. GAO-08-8. Washington, D.C.: November 29, 2007.

             Retirement Security: Women Face Challenges in Ensuring Financial
             Security in Retirement. GAO-08-105. Washington, D.C.: October 11,
             2007.

             Highlights of a GAO Forum: Engaging and Retaining Older Workers.
             GAO-07-438SP. Washington, D.C.: February 28, 2007.

             Senior Community Service Employment Program: Labor Has Made
             Progress Implementing Older Americans Act Amendments of 2000, but
             Challenges Remain. GAO-06-549T. Washington, D.C.: April 6, 2006.




             Page 82                                 GAO-12-445 Unemployed Older Workers
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           Older Workers: Employment Assistance Focuses on Subsidized Jobs and
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(131032)
           Page 83                               GAO-12-445 Unemployed Older Workers
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