Older workers, many of whom are worried about contracting COVID-19 and may be experiencing issues with remote work environments, are leaving the workforce earlier than they planned.
According to the U.S. Bureau of Labor Statistics (BLS), the rate of employed U.S. workers age 65 years or older has fallen by roughly 16%, compared with an approximately 11% decline for workers older than age 16. A working paper conducted by researchers at Tulane University, in conjunction with the National Bureau of Economic Research (NBER), found older workers are disproportionately affected by the coronavirus, more so than any other generation.
Patrick Button, professor of economics at Tulane and an author of the study, tells PLANSPONSOR that while previous recessions affected employment outcomes less so for older workers than younger workers, the current recession caused by the pandemic disproportionately affects this older group. The study found that, in April, unemployment rates among those 65 years and older grew to 15.4%, compared with 12.9% among those ages 25 to 44.
“In this situation, unemployment rose more for those older, nearly retired workers than younger workers, whereas in previous recessions, it had risen more for younger workers than for those near retirement age,” he states.
Workers discouraged by remote working environments or wary of returning to work, such as schoolteachers, for example, are turning to early retirement, says Richard Johnson, a senior fellow in the Income and Benefits Policy Center and director of the program on retirement policy at the Urban Institute. While seniority would ordinarily protect older workers from layoffs and job losses, concerns about workplace safety and the possibility of developing serious complications from COVID-19 are hindering these employees, Johnson says. If older workers choose to leave the workforce or lose their job, it’s unlikely they’ll return to work, he adds.
“We know, historically, that when older folks lose their jobs, they have a lot of trouble becoming re-employed,” he continues. “Many people search for a while, but then they just give up and take early retirement, and some people aren’t old enough to retire early.”
Retiring early can have lasting consequences on workers. As longevity rises, workers will have to consider how to stretch their retirement savings over 25 to 30 years. Additionally, if a worker claims Social Security at the earliest age of 62, they’ll see much smaller benefits—a potentially 30% reduction—than if they waited until age 66 or 67. If workers retire at 70, the latest age to delay Social Security benefits, they’ll receive their highest claim.
According to a study from the University of Chicago Booth School of Business, a surge of older workers had already claimed early retirement due to the pandemic by April. Among those who had left the workforce, 60% said they were now retired, compared with 53% in January.
Some essential workers, those who went in to work each day during the height of the pandemic, have also left their jobs over worries about contracting their virus. According to Johnson, among workers 65 and older, the leisure and hospitality industry has seen the biggest unemployment rate, at 25%, followed by transportation and warehouse employees, at 22%.
The airline industry, which also has had employees work throughout the pandemic but has seen customers plummet, is likely to see big layoffs this fall, Johnson notes. This may result in buyouts, where an employer offers a select number of employees a large severance package in exchange for an agreement to terminate employment.
“We’ll be seeing more of that as some of these bigger companies that had an incentive to keep folks on the payroll initially lose that incentive,” he adds. “Larger companies had this financial will to see how this would develop and how long the virus would continue to impact economic activity, but I think that now, as it’s taking longer, I suspect we’ll see more buyouts in the coming months.”
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