Montanans Getting Older

Montanans Getting Older

By Barbara Wagner, Economist

Montana Department of Labor and Industry

Even as Montana exits the current recession, another issue looms. Montana’s aging population poses a large challenge to our economic growth, particularly to certain industries, and this challenge can no longer be avoided as something that will occur in the far distant future. The aging workforce will start to affect Montana’s labor markets in the next few years, much sooner than other places in the country.

Although natural market mechanisms will encourage greater labor force participation through higher wages and greater opportunities, both workers and businesses will be forced to adapt to a more diverse and flexible workplace. Now is the time to plan for these changes by developing flexible worker training and adopting new workplace practices.

With a median age of 39.3 compared to the national average of 36.8, Montana has the 8th oldest population in the country. If these 2.3 years seem insignificant, consider that the traditional working age population aged 16 to 65 is expected to start declining in Montana starting in 2012, just over two years from now (the U.S. population aged 16 to 65 is not expected to decline before 2030). Over 19.3% of Montana’s workers are over the age of 55 and approaching retirement.

According to the employment projections produced by the Research and Analysis Bureau, job growth will be slow throughout 2010, but will resume growth of slightly over 1% in future years.

According to this forecast, there would be more jobs than workers by 2015 – six years from now.

Tight labor markets come with positive aspects for Montana’s workers, such as low unemployment, ample job opportunities, and higher wages. But Montana businesses will be facing higher labor costs and have difficulty finding workers. These costs will partially be passed on to consumers through higher prices for Montana-made products, possibly even putting our goods at a competitive disadvantage with those from other areas.

The changing age demographic will affect certain industries more than others. The larger number of older Montanans will place greater demands on our health care industry and long-term care facilities, along with the government institutions that regulate or provide health services. The increased demand for health services presents good opportunities for economic growth, but the health industry already struggles to find sufficient workers. According to projections completed by the Research and Analysis Bureau, there will be 330 openings for healthcare support positions in Montana during 2010, despite slow economic growth in the overall economy. As the workforce ages, the need for these workers will increase to about 400 open positions per year.

Other industries will be affected as well. The number of children aged 0-4 is expected to reach a peak of about 60,300 in 2013, but will begin to decrease in 2014. The smaller number of children of pre-school age will result in lower demands in the child care industry, likely reducing the number of workers needed. Given their care-giving aptitudes, child care workers may fi nd similar job satisfaction in the healthcare industry, but training programs are needed to make the transition successful.

The education sector, which currently employs about 5,500 Montanans, will experience conflicting changes in the demand for their services. On one hand, the need for greater worker productivity may increase demand for professional or short-term training. On the other, the number of college-aged Montanans, or those 18 to 24 years of age, is also expected to decrease steadily throughout the timeframe, moving from about 85,100 to 70,518 in 2023, potentially reducing the demand for education services.

The Montana education system is facing both challenges and opportunities due to the aging workforce, but has plenty of options to address these changes, such as increasing the percentage of students going to college, increasing the number of out-of-state students, or recruiting students in older age groups.

Setting aside demand changes, the industries of Real Estate, Other Services, Agriculture, and Transportation and Warehousing have above-average concentrations of older workers. All of these industries had more than 6.6% of their workers aged 65 and above in 2008 (compared to 3.9% for all industries). These industries will likely face the largest challenge in replacing the retiring workforce.

Government also has an above-average concentration of workers approaching retirement age; the State of Montana anticipates that 89% of current executive branch employees will be eligible for full or partial retirement within the next ten years.

One solution to the aging workforce is to reduce the need for more workers while still growing our economy by increasing worker productivity. More productive workers can produce more goods and services, thus maintaining Montana’s level of state GDP despite a declining number of Montanans employed. In effect, this would reduce job growth from the expected levels, but make each job more valuable to the economy. As more productive workers are generally paid more, the average wage in Montana should increase.

Productivity can be increased by either technology or infrastructure improvements that make each worker more efficient, or by increasing the skills and knowledge of each worker through formal education or on-the job training. Therefore,  the aging workforce will likely result in greater demand for infrastructure improvements and worker training programs.

The other solution to the problems posed by an aging workforce is to increase the number of workers either from in-migration of workers from other states, or by increasing labor force participation from its current level. Some increases will naturally occur as higher wages and more opportunities provide greater incentives to join the labor force. But there are certain populations that have lower-than average participation that may need other changes before joining the labor force. Women, minorities, older workers, and workers with lower education levels all have lower-than-average labor force participation rates. These workers may require changes to the workplace, such as flexible schedules, child or family care services, paid worker training, or even transportation.

How are Montanans Aging?

Overall, the Montana population is expected to grow steadily at a rate of approximately 0.5% annually. But there is a significant shift in the age of the Montana population. The share of Montanans who are under the age of 18 remains roughly equal over the time frame, moving from 22.2% to 22.7%. However, other age groups change substantially.

The percentage of Montanans who are of traditional college age (18-24 years) is expected to decrease throughout the timeframe, with 14,600 fewer Montanans of college age in 2023 compared to 2009.

The number of Montanans aged 25 to 64 is expected to peak in 2015, then decrease, moving from a share of 54.8% in 2009 to 53.5% in 2023, losing approximately 12,100 people.

The most dramatic shift occurs in the population over the age of 65. In 2009, Montanans over 65 represented approximately 14.8% of the population; in 2023, this age group will represent over 24.5% of the population.

This dramatic shift will cause many changes in our way of life, with potential impacts ranging from a greater attention to elder care to a greater tax burden per worker.