Why an Aging Workforce Could Shift Wage Negotiations in Employees' Favor

Diccon Hyatt is a seasoned financial and economics journalist who has extensively covered pandemic-era economic developments. With hundreds of articles simplifying complex financial matters, he focuses on how economic trends affect individual finances and market dynamics. His experience includes roles at U.S. 1, Community News Service, and the Middletown Transcript.

Key Insights

• The U.S. workforce is shrinking as the population ages and more employees retire.
• Ongoing demographic shifts will intensify competition among employers for talent, driving wage increases.
• Immigration has helped alleviate labor shortages recently, but restrictive policies could exacerbate worker scarcity.

As the U.S. population grows older due to declining birth rates, workers seeking higher pay find themselves in a stronger position. This demographic evolution carries significant consequences for the future of employment.

With a growing share of retirees, employers will face increasing challenges in recruiting qualified candidates. This dynamic is expected to empower employees during wage and benefit negotiations in the years ahead.

“By 2025, the U.S. labor market is projected to remain robust as an aging population limits labor supply growth, prompting firms to compete more fiercely for workers and potentially reversing recent slowdowns in wage growth,” explains Adam Schickling, senior economist at Vanguard.

How Rapidly Is the Population Aging?

According to the Congressional Budget Office’s 2023 analysis, in 2024 there are approximately 2.9 working-age adults (ages 25-64) for every person aged 65 and older. If current trends persist, this ratio could decline to 2.2 to 1 by 2054, meaning each working individual may support nearly one additional retiree compared to today.

For perspective, in 1954, there were six working-age adults for every senior citizen.

A recent World Economic Forum survey found that 47% of U.S. employers view the aging and shrinking workforce as a pivotal factor shaping their organizations’ futures.

The aging workforce has already dramatically affected employers and the economy, with the pandemic accelerating early retirements, intensifying demand for remaining workers, and contributing to inflation spikes in 2021 and 2022.

Additional Influences on Labor Market Dynamics

Immigration has recently played a key role in offsetting workforce aging, helping sustain labor force growth alongside economic expansion, according to a November analysis by job platform Indeed.

However, future immigration trends remain uncertain, especially with political shifts promising stricter immigration enforcement.

“Slower labor force growth, stable participation rates, and expected immigration declines suggest labor supply constraints will significantly impact the job market in coming years,” note economists Allison Shrivastava, Cory Stahle, and Daniel Culbertson from Indeed’s hiring lab. “With fewer workers available, competition for talent is likely to intensify over time.”

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