It’s been more than two years since the pandemic arrived in the US and upended millions of American workers’ lives. While some measures of the labor market show a nearly full recovery to where we were pre-pandemic—such as the so-called “prime age” labor force participation rate—the story is different for older workers. Even as news headlines raise the possibility of a “great return” of retirees to active employment, the older labor force remains depressed relative to pre-pandemic levels.
To nail down what happened to older workers in the pandemic, I interviewed Owen Davis, PhD research fellow at the New School’s Schwartz Center for Economic Policy Analysis, who is an expert in labor flows for people aged 55 and older.
Owen, how many people did we expect to retire if we hadn’t had a pandemic in 2020 and a recession to go along with it?
One way to get at this question is to look at the total retired population now and see how differs from what we would have expected if pre-pandemic retirement trends had continued. By that measure, roughly 1.3 million more people age 55 and older are retired today than we would expect to be in the retired population absent the pandemic.
And how do you get to that number?
The monthly Current Population Survey (CPS) asks American households about whether they are working and, if they aren’t, why not. If people tell government survey-takers that they are not working because they are retired, we count them as retired (so this definition excludes people who have left their main career job and now work part-time somewhere else).
If we simply track retirement over time using this survey-based measure—what people say they are doing—we see a sharp jump after March 2020 in the share of the older population saying they are retired. In February 2020, 48.1% of people 55 and older were retired; in March, 2022, that number was 49.6%, or 1.8 percentage points higher. That may not seem like a huge jump, but the number of people it represents is measured in the millions.
Of course, we can’t assume that population trends would have been frozen in time after February 2020. The aging of the Baby Boom population would have pushed the retired share up in any case. The question then becomes how to estimate what the retired share—and thus the total retired population—would have been in the absence of Covid-19. If we just assume that the retired share would have increased in a simple straight-line fashion between 2015 and now, we get to the estimate of 1.3 million excess retirees.
But there are other ways to make these assumptions. For instance, Miguel Faria e Castro, senior economist at the St. Louis Federal Reserve, recently arrived at an estimate of 2.6 million excess retirees in the population (as of late 2021).
So you are telling me that as we sit here in April 2022 many more people actually retired than we expected. Isn’t that right?
Yes, we continue to see a significant number of excess retirees in the older population. One caveat to the 1.3 million number is that the Census Bureau adjusts total population counts every January, and the most recent adjustment “reduced” the population of people 65 and older. That adjustment tilted the 55-and-up population toward the younger part of that group, a group less likely to be retired. The impact of this mechanical adjustment was to reduce the retired share of the population. So a substantial part of the recent drop in the retired share is a statistical artifact, Even taking all this into account, however, the retired population remains elevated.
I also pay attention to trends in “unretirement,” a phenomenon the economist Nick Bunker of Indeed.com has recently brought attention to. The unretired are people who previously said they were retired but now have a job; In the US, there are always some people who alter their retirement plans or simply misreport their labor force attachment in one month or the next. The most recent data on unretirement shows people are returning from retirement at pre-pandemic levels or slightly above. It is worth watching to see if unretirement flows increase to a significant enough level to bring the excess retiree population down to historical trend.
Does the evidence point to these millions retiring because they had enough money and were sick of working under the anxiety of the pandemic? Or were they pushed out? And since the average is never the story, how did retirement trends differ by different groups?
In ongoing research, I have used CPS data to examine retirement transitions during the pandemic. Since the CPS repeatedly interviews households over a 16-month period, we can see retirement transitions directly in the data. This can illuminate where the retirement surge came from.
Though there were some faint signs of demographic differences in excess retirement, these were not statistically significant at conventional levels. It does appear that non-college-educated people were slightly more likely to retire at elevated rates, especially at earlier retirement ages (55-64). But again, the statistical significance here was low.
The two characteristics of older workers that best predicted excess retirement in the pandemic were working part-time pre-pandemic and being in an occupation that requires close physical contact with others. It’s not hard to see that these two categories of workers were also hit hardest by the pandemic.
Early job losses were greatest in high-physical-proximity jobs especially. And of course the pandemic meant much greater health risks for older workers in close-contact jobs that can’t be done remotely. Unfortunately, the data can’t help us distinguish much between workers driven to retirement by health fears or by job loss (or some combination of these factors).
The role of part-timers is also difficult to interpret. On one hand, part-timers are more likely to work in service jobs of the sort that were jolted by the pandemic. But many older workers also work part-time as a bridge to retirement. Did a large share of these workers decide it was simply time to throw in the towel when the pandemic hit? If so, does this count as an early retirement?
There is another type of evidence that casts doubt on the notion that the pandemic’s excess retirements were driven by voluntary leavers enticed into retirement by their swelling stock portfolios. As my colleagues have found, a significant share of pandemic retirement transitions were unemployed-to-retired transitions, not employed-to-retired transitions. Retiring out of unemployment is what happens when people have run out of options.
I would imagine all these retirements meant some pressure on the Social Security system. Did claims for Social Security go up much more than expected?
This is one of the big surprises of the pandemic. As researchers Gopi Shah Goda, Lauren Nicholas and Sarah See Stith recently foundapplications for Social Security retirement benefits were largely unaffected by the pandemic, and applications for Social Security disability benefits actually fell (as did Google
What explains the divergence? Two factors are worth considering. One is that many older part-time workers already claim benefits and yet continue to work. This is one of the important findings in your work with Tony Webb and Mike Papadopoulos. So if we saw a large flow of people from working part-time to being retired, it could be that they were already claiming all along, which explains the muted impact on Social Security claims.
Another potential factor is that Social Security field offices were closed for more than two years, only recently reopening to in-person visitors. This could have reduced the number of retirement benefits claims, since not everyone has the resources to claim via the internet.
Credit: www.forbes.com /