December 6, 2024

Introduction

Across the United States, population growth in younger demographic groups has slowed over the last two decades. This has resulted in older age groups growing in share of workforce, population, and economic impact. Iowa has been experiencing these trends at accelerating rates. Yet not all employers are prepared for this shift in labor force composition.[i] Preparing them is crucial for ensuring a smooth transition into a new normal of older Iowans contributing to the workforce for longer. This report quantifies the extent of this demographic shift in Iowa and outlines possible solutions moving forward.

Key Findings

• Iowans aged 55 to 64 have disproportionately exited the labor force. This age group reported a current labor force participation rate 7.5% lower than in December 2019. The next highest decline was 0.52% lower for 65 and older.
• In 2023, Iowa ranked 2nd in highest percentage of its population over the age of 65 (24.4%). This is two spots higher than in 2000 (14.9%).
• According to AARP, Iowans over 50 are expected to contribute 43% or $258 billion to GDP and 41% or $21.5 billion to state and local taxes by 2050. This is up from 42% and 38%, respectively.
• Iowa’s workforce can benefit from an expansion of existing programs and tax incentives that reduce barriers to entry for workers and ease training costs for businesses.

Iowa’s Post-Pandemic Labor Market Demography

Iowa has an aging population that will play an increasing role in Iowa’s workforce and economy in the coming years. The Census Bureau estimates that in 2030, Iowans over 54 will compose 41.1% of the working age population, nearly 12 percentage points higher than in 2000. Younger working-age Iowans are also leaving the state. The Census Bureau projects that 13% of the working population under 54 from 2000 is expected to leave Iowa by 2030.[ii] This indicates a clear demographic shift towards older Iowans slowly replacing younger Iowans in population, labor force participation, and as a major contributor to the economy. Although Iowa is not unique in experiencing this dynamic demographic change, the pandemic and other economic trends have accelerated this shift in the labor market.

Iowa’s labor market is poised for an unprecedented shift in labor force demography. In 2000, Iowa ranked 4^th highest in percentage of its population over the age of 65 (14.9%). The Census Bureau’s projections for 2030, which were published in 2005, changed Iowa’s rank to 12^th highest with this older demographic increasing to 22.5% of the state’s total population. Iowa’s current demography is already ahead of these 2030 projections. As of 2023, Iowa ranked 2^nd highest with 24.4% belonging to this group.

This major shift is largely attributable to Iowa’s shrinking 55 to 64 workforce following the pandemic. Table 1 displays the percentage change in number and share of the workforce before and after the pandemic. It focuses on two age categories, 55 to 64 and those over 65, to visualize the stark shift in worker composition.

Table 1. Change in Level of Employment and Share of Labor Force for Ages 55 to 64 and 65+, 2010 to 2023

Source: Bureau of Labor Statistics

In the decade leading up to the pandemic, both level of employment and share of labor force grew significantly for both age categories. After the pandemic, workers 55 to 64 disproportionally exited the labor force while those over 65 continued to grow nominally and as a share of the total labor force. The workforce has substantially shifted towards a larger, older workforce in the last few years.

Labor force participation rates (LFPR) also provide a crucial insight into how active certain demographics are in the labor market. Figure 1 visualizes the latest Census Bureau microdata on post-pandemic LFPR, available through IPUMS-CPS. The figure separates the data by four age demographics and shows the change in LFPR from December 2019 to the latest 2024 data.

Figure 1. Change in Iowa Workforce Participation Rate for Ages 55-64 since December 2019

Lingering effects of the pandemic on Iowa’s older workforce have been especially pronounced for workers aged 55 to 64. In 2024, this age demographic’s labor force participation rate (LFPR) was still 7.54% lower than its December 2019 rate. The other three age categories listed in figure 1 were less than 1% lower than their 2019 rates, indicating a stark reminder of the pandemic’s long-lasting impact on Iowa’s mature population.

While Iowa continues to adapt to major shifts in its labor force and population composition, the rest of the United States faces similar challenges. Recent projections from the Bureau of Labor Statistics (BLS) published in August 2024 shed light into this trend at the national level. Figure 2 visualizes the share of population and labor force of all working age demographics across four decades, starting in 2003 and ending in projected 2033.

Figure 2. Share of Population and Labor Force by Age Demographic Category in the United States, 2003 to projected 2033 

The BLS report estimates the share of Americans over 54 in the labor force is expected to grow to 23.9% in 2033—0.9 points higher than in 2023.[iii] Simultaneously, this demographic’s LFPR is expected to decline by 1.2%. This is despite a 3.3% increase for Americans between 55 to 64, 3.5% increase for 65 to 74, and 1.9% increase for 75 and older. LFPR among Americans over 55 is expected to fall even though more people will participate due to the population growth of aged 75+ outpacing the other categories. Essentially, those 55 to 64 are expected to drop out of the labor force at a greater rate than those 65 and older, pushing the burden of labor participation onto the nation’s more mature population. Figures 5 and 6 in the appendix provide a more detailed breakdown of the labor force size and the labor force participation rate for each of these age groups.

Economic Contributions of Iowa’s Aging Workforce

As Iowa’s population continues to age, older Iowans are set to have an even greater impact on the state’s economy. Gross domestic product, tax contributions, and overall economic growth will become heavily influenced by this demographic’s economic productivity. The American Association of Retired Persons (AARP) has done extensive analysis on this looming demographic shift and the subsequent economic impacts of older Americans on state economies. Their analyses show evidence for why Iowa needs to address this inevitable demographic shift.  

According to a 2018 AARP study, “The Longevity Economy Outlook: Iowa,” the 50 years and older population will continue to drive economic growth for the next 30 years.[iv] Using Regional Economics Models, Inc. (REMI), AARP found that elderly Iowans will continue to fuel extensive economic growth over the next three decades. Figure 3 visualizes the economic contributions of elderly Iowans on GDP and tax contribution in 2018 and estimated 2050 projections.

Figure 3. Iowa’s 50+ Age Demographic’s Economic Contributions 

The AARP study found in 2018 Iowa’s 50 years and older population contributed $86 billion towards the state’s total Gross Domestic Product (GDP), equivalent to 42%. In the same year, this population’s market activities supported $6.3 billion in state and local taxes, 38% of total taxes. The economic impact of the aging workforce is expected to increase to $258 billion or 43% of GDP and $21.5 billion or 41% of state and local taxes by 2050.

Even though labor participation of Iowa’s aging workforce is expected to decline by 2033, this subgroup will continue to impact the state’s economy as it continues to delay retirement. An analysis conducted by Changing the Narrative, an organization with a nationwide initiative to end ageism, estimated the cost of delayed retirement in Colorado. This can provide an estimate of the magnitude of economic impact by older workers in Iowa. The report found that if 5% of Coloradans over 65 delay retirement until 75, they could contribute an additional $298 million in spending each year to the state’s economy—or $2.98 billion over the decade.[v] While it’s not clear the exact extent to which delaying retirement impacts Iowa’s economy, the older workforce nonetheless contributes substantially and with great magnitude.  According to the AARP study, in 2018 households with Iowans 50 years and older were responsible for 58 cents of every dollar spent but were only 36% of total population. By 2050, when the 50 years and older population accounts for a projected 40% of the population, they will also account for 61 cents of every dollar spent, a 5% increase.[vi] The economic contributions the 50 and older population provides are significant and will only grow in the future.

The Path Forward: Policy Considerations to Catalyze Change[1]

Many businesses remain unaware of the accelerating shift in age composition among available workers.[2] This is a sentiment echoed by 64% of American adults over 50 who believe older workers faced some sort of discrimination in the workforce.[vii] Whether these implicit biases exist in the hiring process or employers and society are slow to recognize the cultural change of older adults who want or need to work longer, older adults are facing unnecessary roadblocks. If this continues, these issues could directly harm the outlook of Iowa’s labor market by disincentivizing participation and productivity among older Iowans. More importantly, without added support from employers, older workers will struggle to receive proper training on relevant skills and knowledge needed to succeed. As labor composition continues to trend towards a larger, older workforce, employers will benefit by recruiting, retaining, and accommodating this older demographic.

This section outlines options for Iowa. It highlights the steps Iowa could take to improve the workplace environment for older Iowans and their employers. Suggestions and analyses are separated into three major topics. The first three subsections explore existing public policies and programs in Iowa that could be expanded. This includes existing programs, recent legislation, and tax incentives. The following subsection discusses federal programs that could be adapted at the state level. The final subsection considers programs from other states and countries that could be adapted for implementation in Iowa. While CSI does not advocate or take positions on specific legislation, Iowa business leaders and policymakers may reference this section as they consider options to prepare for the evolving labor market.

Expanding existing public policies in Iowa

Businesses are not always equipped with the information necessary to keep up with labor market shifts. Many lack convincing resources with incentive to grow their older workforce.  However, the state has developed programs to help. In 2023, the Iowa Department on Aging aimed to promote business-friendly resources through a grant for the Age Inclusive Management Strategies (AIMS) initiative—which involved a partnership between the University of Iowa and the Transamerica Institute.[viii] The AIMS initiative focuses on assisting employers in recognizing the ongoing demographic shift, understand existing myths and stereotypes about older workers, and exploring or redesigning benefits, policies, and practices to hire and retain an older workforce. Thousands of Iowa businesses were invited to participate in the free program. Of these, over 100 went through the onboarding process with approximately three dozen engaging to expand opportunities for their older workforce. Continuing to expand this program throughout the state can prove beneficial.

Lingering issues for post-employment assistance persist despite these efforts. Specifically, retirement planning can be difficult for many older workers; not everyone can predict how much wealth is needed to comfortably retire. To help address this, Iowa created the Iowa Solutions for Aging with Independence and Longevity (IA SAIL) project. This program collaborates with government agencies, community partners, and nonprofits to develop a Multisector Plan for Aging (MPA), which addresses aging-related issues. While the focus of most multisector plans on aging is on health and long-term care, Iowa’s MPA aims to reframe longer lifespans as a positive economic opportunity for extended engagement in the workforce, which ultimately leads to healthier lives and a more secure retirement. Moving forward, having a robust work strategy within the MPA is critical. The MPA should include demographic analysis of all ages in the workforce with a keen eye toward the material increase in the aging population coinciding with a forty-year decline in birthrates. Alongside this information would be a general analysis of what the average individual needs to have a secure financial retirement, the current progress generations are making in meeting that target, and what supporting resources are required to reach that target. Ensuring Iowa is prepared to encourage and support lifelong training, education, work, and retirement-security is critical for sustaining a growing economy.

Figure 4. Birth rates in Iowa, 2007 to 2022

Source: Axios Des Moines