Pandemic Retirements: Older Workers Didn’t Jump. They Were Pushed.
Has the Covid-19 pandemic created a “great resignation” among older workers?
Not really. True, the size of the retired population between ages 55 and 74 has expanded sharply – by an additional 1.1 million people beyond what we think of as a normal trend line.
The Retirement Rate Rose Sharply in 2020.
Source: Schwartz Center for Economic Policy Analysis.
But our recent research shows that many older workers did not leave their jobs voluntarily – what you would normally think of as resigning. Instead, they got pushed out of the labor force after periods of unemployment rather than directly from employment.
Retirement after passage through unemployment is a departure from the common pre-pandemic retirement scenario, and may be an indicator that many of these excess retirements were involuntary.
Older workers were severely impacted by job loss in the early months of the pandemic. In March 2020, 35 million older workers were employed. At least 3.8 million workers ages 55 to 74, or 11 percent of all workers in that age group, lost their jobs the following month.
One year after the beginning of the pandemic, the number of people who retired from a state of unemployment increased more than tenfold compared to pre-pandemic times.
The Number of Workers who Retired Out of Unemployment Increased Drastically.
Source: Schwartz Center for Economic Policy Analysis.
Out of 3.8 million older workers who had a job in March 2020 and became unemployed in April 2020, 400,000 workers were retired involuntarily one year later. The comparison to a normal year illustrates the impact of this mass unemployment: normally, 180,000 older workers would experience job loss in a given month and 30,000 of them would be retired one year later.
People who retired from a state of unemployment did not retire by choice. In fact, the number of retirees who were employed one year before – the year-to-year flow from employment to retirement – decreased slightly during the pandemic, which signals that older workers were more likely to postpone retirement if they were able to keep their jobs during this period.
As we continue to emerge from the pandemic and the economic landscape remains volatile, it is still too soon to tell whether improved labor market conditions will bring some retirees back into the labor force.
While our data show that some older workers are returning, these flows do not make up for excess retirement; retirement to employment flows are still below or at pre-pandemic levels.
Relatively low wage growth for older workers, among other factors, suggests that a labor demand problem may be at the source of low rates of return to the labor market. While wage growth for young and mid-career workers is significantly above pre-pandemic levels (from 8.3 and 3.9 percent in February 2020 to 11.4 and 4.4 percent in February 2022, respectively), wage growth for older workers has not exceeded its pre-pandemic peak of 2.6 percent.
Such low levels of wage growth suggest that the decision to remain retired may not reflect the preferences of many retirees, but rather the lack of demand for their skills and experience. Indeed, given the low rates of retirement readiness among older workers, one might expect that retirees may “un-retire.” However, many may face countervailing forces in a labor market that has proven inhospitable to older workers – particularly as employers do not hire older workers.
The public policies needed to confront this reality include:
Creating a Federal Older Workers Bureau. As older workers make up an increasingly large part of the U.S. labor market, it is long past time that we form an Older Workers Bureau (OWB) to hear from older workers and their employers, investigate their needs, coordinate the vast resources of the U.S. government, and modernize age discrimination laws and worker training. An effective OWB fulfills three functions: identify and analyze issues of concern for older workers; devise innovative policies to address these issues; and engage in outreach and education.
Enforcing Anti-Discrimination Laws. Several studies document the effectiveness of State and Federal anti-discrimination laws in combating age discrimination and increasing employment of older workers. Yet the Age Discrimination in Employment Act (ADEA), which protects older workers from age discrimination, was weakened by a 2009 U.S. Supreme Court Decision. Congress must strengthen the ADEA and ensure that any discrimination motivated by age is illegal.
Lowering the Medicare Eligibility Age to 50 and Making Medicare “First Payer.” Setting Medicaid eligibility at 50 would ensure laid-off older workers get the care they need. Moreover, making Medicare first payer – having it cover medical expenses before private insurance – would lower firms’ costs associated with providing health insurance to older workers.This would help prevent involuntary retirements while increasing older workers’ health coverage.
Advancing Workers’ Bargaining Power: One of the most effective ways to improve older workers’ pay, conditions, and retirement options is to expand unions. Across the board, unionization substantially improves workers’ access to, coverage in, and use of healthcare plans. Greater access to higher-quality healthcare – a typical characteristic of unionized work – is especially important for older workers. In addition, union safety values influence safety outcomes in the workplace. What’s more, research shows that unionized employees earn far more than their non-unionized counterparts, on average, and provide important workplace protections.
Make Work More Age-Friendly. Improving health and safety standards and providing paid sick leave and time off will make the workplace better for all workers – including older workers.