We've been writing a lot lately about whom and what to blame for sky-high unemployment. I've mentioned labor mobility and skills mismatch as factors. My colleague Ilan Moscovitz says it's mostly a lack of demand that's preventing employers from creating new jobs. Others have argued -- falsely, I think -- that high unemployment benefits are to blame. There's little clarity and even less consensus on this topic, which makes for good debates.

Here's another variable to add to the mix:


Source: Bureau of Labor Statistics, author's calculations.

This chart shows the percentage of those who are age 65 and over who participate in the labor force, meaning they're either employed or actively seeking employment. What it shows is clear: In a trend that's really picked up over the past 5-10 years, more of the older end of the population is remaining in the workforce rather than exiting into retirement.  

How does impact unemployment? A paper by the Federal Reserve Bank of San Francisco explains it nicely (emphasis mine):

U.S. population growth averages about 1% per year. Assuming no change in labor force participation, the economy would need to create about 100,000 jobs per month on net to keep the unemployment rate at its August 2010 value of 9.6%.

Holding the labor force participation rate constant, job growth above 100,000 per month would bring the unemployment rate down, while job growth below 100,000 would push the unemployment rate up. However, changes in participation can make a huge difference. The higher the participation rate, the greater the number of jobs needed to keep the unemployment rate down.

To put it bluntly, we count on older workers moving into retirement to make room for newer, younger workers. The jobs cycle is like a conveyor belt, with one end bringing new workers into the workforce, and the other pushing older workers off into retirement. Right now, the latter end of that belt is working slower than it has in at least 20 years.

When I began thinking about this topic, I expected the 65+ labor participation rate to show a huge spike over the past two years as the financial crisis obliterated assets and pushed retirements out of reach. That was surely the case for many, but this chart doesn't show much of a change in trend around the 2008 meltdown. Working well into our later years is a phenomenon that began long before the financial crisis.

Why is that, and what's causing the trend? It's hard to say definitively. The fact that we're healthier and living longer could be one reason. The need to pay for educations whose price blows relentlessly higher year after year is another reason. More women participating in the labor force is another still.

What's likely the biggest reason, though, is the change in how we fund our retirements.

In decades past, retirement was primarily based around a pension. Work for a certain period of time, and you're good to go. That's still the case for many of us; besides Social Security, large employers including ExxonMobil (NYSE: XOM), Intel (Nasdaq: INTC), and Ford (NYSE: F) support retirees through various types of pension plans. But there's no question that a serious shift in the dynamic of retirement funding has taken place over the past few decades. We've gone from a predominant pension system toward more individually funded means such as 401(k)s and IRAs. In his book While America Aged, Roger Lowenstein notes that 60% of American jobs were covered by a pension in 1960. Today, it's less than 20%, with the remaining workers left with either 401(k)s or private savings. For better or worse, we're on our own.

And for many, it's been worse. Why? Because left to our own devices, too many of us are terrible savers and even worse investors. In their book Nudge, Richard Thaler and Cass Sustein note that "roughly 30 percent of employees eligible to join a 401(k) plan fail to enroll." For those who do, the gnats-to-bright-lights inclination to buy high and sell low is well-documented. A recent survey by Towers Watson shows 40% of workers are delaying retirement because they worry about how they'll pay for it. Bottom line: Many self-directed plans simply haven't been sufficient ways to finance retirements. To make up for it, we're working longer.

And that's just another variable in the ever-frustrating road to putting our ranks of unemployed back to work. As if it weren't already complicated enough.

Thoughts? Fire away in the comment section below.                   

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Fool contributor Morgan Housel owns shares of ExxonMobil. Intel is a Motley Fool Inside Value pick. Ford Motor is a Motley Fool Stock Advisor selection. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of ExxonMobil and Intel. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.