While employment rates have fallen sharply among the general population, they have not done so among the elderly. This result is difficult to reconcile with Keynesian characterizations of the labor market.
The red line in the chart below displays an index of the per capita employment for the general population. For example, a value of 93 for 2010 means that the fraction of people employed in 2010 was 7 percent less than it was in 2007, before the recession began. The red line shows what we all know by now: many fewer people have jobs now than did a few years ago.
The other two series in the chart are for specific age groups: ages 65-69 and ages 70-74. Both groups have a somewhat greater fraction working now than in 2007 (the increase is even more for ages 75+, but that group is small, so it is omitted from the chart).
Recent studies have looked at the labor-market experiences of the elderly during the first half of the recession. The authors emphasize that, while the recession by itself might reduce elderly employment, the elderly have become increasingly willing to work. I agree.
Many elderly people, for example, saw the market values of their homes and retirement assets plummet in 2008 and feel they can no longer afford to be retired. Naturally, many of them react by looking for work.
The blue and green lines in the chart show that the elderly have been much more successful than the general population at obtaining and retaining jobs.
These findings contradict the Keynesian narrative of the labor market, in which the marketplace fails to recognize the degree to which people would like to have a job. (The Keynesian narrative helps rationalize, among other things, the assertion that unemployment insurance did not reduce employment during the recession, because “what’s limiting employment now is lack of demand for the things workers produce. Their incentives to seek work are, for now, irrelevant.”)
Employment, even during a recession, is not solely the result of lucky few finding available positions. All else being the same, the market tends to create and allocate jobs for those people who are most interested in working.