Can AI Make Up for America's Rapidly Retiring Workforce? The Economy May Depend on It

By

Diccon Hyatt

Full Bio Diccon Hyatt is an experienced financial and economics reporter. He's written hundreds of articles breaking down complex financial topics in plain language, emphasizing the impact that economic currents would have on individuals' finances and the market. He has a Bachelor's degree in English from the University of Delaware.

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Published May 22, 2026

03:49 PM EDT

AI is expected to increase productivity enough to offset a slowing growth in the number of U.S. workers. cofotoisme / Getty Images

Key Takeaways

• With U.S. labor force growth flatlining, only productivity gains, such as those from AI, can keep the economy expanding.
• Labor force participation has fallen as the population ages, and the immigration crackdown has further slowed workforce growth.
• Increased education and flexibility for working parents could encourage more people to work.

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If the U.S. economy is to keep expanding this decade, it will have to do so with far less growth in its workforce.

That's the conclusion of analysts at Oxford Economics, who found labor force growth has been slowed by baby boomer retirements and, since 2025, a sharp drop in immigration. With the workforce barely expanding, the economy can only grow at its former rate if AI delivers on industry hype and makes workers significantly more productive.

"As baby boomers age out of the labor force, there isn't an obvious pool of available workers to offset the increase in retirees and the slowdown in net immigration," Matthew Martin, senior U.S. economist at Oxford Economics, wrote in the analysis.

"We forecast almost no growth in the labor force over the coming decade, leaving the economy increasingly reliant on productivity to keep real potential GDP growth north of 2%," said Martin. He added that AI should promote "an acceleration in productivity" that supports economic growth in the near term.1

Why This Matters to You

Immigration, advances in productivity and population growth have all contributed to U.S. economic expansion in the past, but future economic growth will increasingly rely on technological innovation if current trends continue.

Oxford’s analysis noted how dramatically the labor market has shifted recently from long-term patterns. The economy barely created any jobs last year, reflecting a hiring slowdown from tariff-related uncertainty. The federal crackdown on immigration has also cut the number of available workers, the analysts noted.

A key statistic in analyzing labor force trends is the labor force participation rate, which shows how much of the population has a job or is looking for one. That figure took a nosedive when the pandemic hit, causing a wave of early retirements, and labor force participation hasn't recovered since—it's now at 61.8%.2

Oxford expects workforce participation to fall even further, about another percentage point. That might not sound like much, but it equals about 2.1 million workers—about a full year's worth of job growth in a healthy economy. That workforce gap could leave the economy dependent on gains from AI or some other boost in productivity to make up for fewer workers.

Related Education

[Labor Force Participation Rate: Purpose, Formula, and Trends

](https://www.investopedia.com/terms/p/participationrate.asp) [Understanding Labor Productivity: Definition, Calculation & Enhancement

](https://www.investopedia.com/terms/l/labor-productivity.asp)

Oxford looked at several ways to draw more people into the workforce. One involves continuing to increase the education level of the U.S. population. Enrollment in higher education has increased since the Great Recession, and more-educated workers tend to have better employment prospects and longer careers, according to the analysts.

Another possibility: Congress fails to shore up Social Security's OASI trust fund before 2033, when projections say it will run out. That could trigger an increase in the retirement age or benefit cuts that force workers to delay retirement.

Increases in remote work and government policies that expand family leave and childcare could also allow more parents, especially mothers, to stay on the job.

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Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

1. Oxford Economics. "Where will the new workers come from?"
2. U.S. Federal Reserve of St. Louis. "Labor Force Participation Rate."

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