Gary Burtless observes that while the labor force participation rate for younger workers has declined since 2007, it has actually increased for over-65s:

[E]mployment rates of adults between 60 and 74 have increased. The share of all labor income earned by older workers has soared in recent years because these workers have enjoyed faster wage gains than workers who are younger.

It is crucial to understand why this is the case. A major reason is that older workers are now better educated compared with prime-age workers than was the case in the past. Twenty-five years ago the gap in education between prime-age workers and older Americans was large. Americans past 60 had much less schooling than workers who were younger. The gap is now far narrower.

Trends in education are also important in accounting for the increase in Americans’ employment rates at older ages. There are major differences between the participation rates of older people with different levels of schooling. In the early 1990s nearly 60 percent of 62-74 year-old men with doctoral and professional degrees were still in labor force. In contrast, only 20 percent of male high school dropouts the same age were in the workforce. The participation-rate gap was smaller for older women, but it was still sizeable. For both sexes the employment gap between the highly educated and less educated has held steady or widened in the past two decades.

One virtue of rising labor force participation among older workers is that it has the potential to ease the burden on Social Security, which is part of why Andrew Biggs has proposed eliminating or reducing the Social Security payroll tax for workers at age 62:

Using the standard Social Security models developed by the Policy Stimulation Group, I estimate that eliminating the 12.4% payroll tax for workers at age 62 would reduce annual Social Security revenues by roughly 2.2%, or about $16.2 billion in 2012 tax collections.

Using Eric French’s parameters, it would increase the overall labor supply by around 1.4%. The average 62-year-old working full time in 2010 earned around $58,800, implying a federal income-tax rate of about 15%. Adding the 2.9% Medicare tax and a 4.4% average state income-tax rate, total non-Social Security revenues would rise by around $18.3 billion, of which the federal government would collect about $14.7 billion. Thus higher non-Social Security revenues compensate for much of the payroll tax cut. (Higher benefits earned by later retirements have no significant impact on these estimations.)

Meanwhile, the gains to individuals and the economy could be substantial. Working one additional year would boost average private pension income by almost 5%. And all Americans would benefit from the extra goods and services that older workers could provide.

GOP candidates in 2014 and 2016 would do well to embrace something like Biggs’ proposal, which would complement an expanded child credit that would benefit younger parents. 

P.S. I should add that Andrew has argued that the rising labor force participation rate among older workers reflects a desire to rebuild retirement savings damaged during the 2008 financial crisis:

Americans of all ages lost jobs during the recession, but common sense suggests that older workers would have the toughest time finding new employment. They’re paid more, they cost more in terms of benefits, and their technical skills may not be exactly cutting-edge. So the recovery, such as it has been, should have been stronger among the young. But older workers are also highly motivated: A younger person might decide to ride out the recession on his parents’ couch, but older workers need to rebuild their shrunken 401(k) balances and find health coverage.

The relative success of older Americans in the labor market suggests that motivation plays a more significant role in labor market outcomes than is commonly acknowledged.