Pandemic-era retirements have left a gap in the labor force
Pandemic-era retirements have left a gap in the labor force
Last week, the Federal Reserve delivered a report to Congress on why the labor market is still so tight and why it will not return to pre-pandemic levels. One key factor is excess retirements. Right now, 2.2 million more people are retired than the Fed had expected.
There are literally millions of personal stories about why older workers retired earlier than planned during the pandemic. They were scared of contracting COVID at work. They cashed in on the hot housing market and record-breaking 401(k) plans. They took a buyout package, or they were laid off.
Teresa Ghilarducci, a labor economist at the New School for Social Research, said coaxing them back to work would help companies that face labor shortages.
“They could be more clever in dipping into that reserve army,” she said. This would be especially helpful in industries like health care and child care, but “a lot of employers would rather not,” according to Ghilarducci.
She said age discrimination increased layoffs of older workers and helps to keep them on the sidelines. Plus, they often come with higher salary demands.
Also, some retired workers just don’t want to come back.
“If you’re in your 60s and you’re treading water for three years, can I just count you as retired?” said Alicia Munnell, who directs the Center for Retirement Research at Boston College. “We’re getting to that point.”
Three years is a lot of working life. So, if someone retired early, they may have simply hit their planned retirement age. In reality, these 2 million-plus excess retirements shouldn’t be that shocking, per Kathryn Edwards, a labor economist at the Rand Corp. Retirement rates have been increasing as baby boomers age.
“Rather than incremental, it was a large exodus from the labor force of people who were going to leave pretty soon anyway,” Edwards said. “This story is genuinely about 30 years of labor force trends that we have been very slow to see. And I think a little reluctant to see.”
It’s another way the pandemic has had an outsize effect on certain populations and put a spotlight on the holes in our economy.
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