The declining birth rates in the US over the past several decades is leading to an aging population, leading to significant implications for labor trends and wages. With more people retiring, there could be a scarcity of qualified hires, providing employees with the upper hand when it comes to wage and benefit negotiations in the coming years.
As per a recent analysis, the outlook for the U.S. labor market for 2025 is robust due to the aging population restricting labor supply growth and firms having to compete for workers more than before, challenging the recent downward trend in wage growth.
A report by the Congressional Budget Office revealed that in 2024, there were 2.9 individuals aged between 25 and 64 for every person aged 65 or more. If the trend continues, by 2054 the ratio is slated to drop to 2.2 to 1, implying that every working person may have to support an additional retiree compared to now.
In a World Economic Forum survey conducted in the US last November, 47% of the employers identified the aging-and thus reducing-workforce as a trend likely to greatly influence the future of their organizations. The graying workforce is also responsible for causing notable upheavals for employers and the economy due to the wave of early retirements triggered by the pandemic, subsequently increasing the demand for remaining workers and contributing to the inflation spikes in 2021 and 2022.
The recent influx of immigrants has, to an extent, compensated for the aging population and ensured that the labor force is growing in tandem with the economy. Yet, it is uncertain whether such a trend will continue, particularly with incoming policies promising to tighten immigration control and potentially deporting people already residing in the U.S.
As per an analysis by Indeed's hiring lab, a combination of slower labor force growth, plateauing participation rates, and an expected drop in immigration implies that labor supply will significantly influence the job market in the coming years. Consequently, with fewer workers available to fill job vacancies, competition will likely intensify in the long run.