Almost 40 million claims for unemployment insurance have been filed in the past two months as a result of the coronavirus pandemic, and it appears that not everyone is looking to go back, particularly older workers.
A recent working paper from the University of Chicago’s Becker Friedman Institute finds that the unemployment rate has not risen to levels that would correspond with the numbers of jobs lost. Through surveys conducted earlier in 2020 and again at the height of the pandemic, they found that some of those who lost jobs have not been counted in the BLS unemployment rate because these workers have dropped out of the labor force. Furthermore, a striking percentage of these former workers cited retirement as their reason for not seeking additional work, rising from 53 percent in the first survey to 60 percent in the follow-on survey. The authors believe that these retirements are likely earlier than originally planned, given the age range of the participants.
There are numerous variables affecting retirement decisions, including household income, personal health, lifestyle preferences, and caretaking responsibilities. Researchers disagree on whether economic downturns postpone or hasten retirement decisions, though it does seem that a household’s financial assets play an important role in this decision.
A unique feature of the current recession is that health officials have been warning the public for months that older people, and especially those living with underlying health conditions, are more at risk of developing more serious forms of the disease than their younger, healthier counterparts. Anxiety about the disease and lower rates of telecommuting might be combining to encourage more early retirement.
Prior to COVID-19, the number of older workers remaining in the workforce was growing at a rapid rate. The US Senate’s Special Committee on Aging found that older workers are on track to make up one quarter of the workforce by 2026. We will have to wait and see whether the pandemic has changed this calculus by creating an exodus of our most experienced and knowledgeable workers.
This article by Brent Orrell first appeared in AEIdeas on May 21, 2020.