The Rapidly Changing Landscape for Older Workers

Why did Covid-19 cause some older people to retire and others not? Experts discuss the longer-term implications.

Among its far-reaching impacts, Covid-19 has upended the workplace, especially for older workers, say experts.

“We were in the middle of a long-term trend of working longer” before Covid-19, economics professor Courtney Coile, a Wellesley College economics professor, told the Longevity Project in late May. She focuses her research on aging and health, particularly retirement and disability policy.

Coile co-authored a study that found health concerns loom larger in retirement decisions since Covid-19 emerged in March 2020 to kill more than 1 million Americans, disproportionately by advanced age. She is co-director of the National Bureau of Economic Research’s International Social Security project. The NBER project includes researchers in a dozen countries who are exploring why workers in the U.S. and other developing countries are retiring later and how much of this trend can be explained by social security reforms.

Tweaks in government and business policies could help keep older workers on the job, she said. Proposals include eliminating or reducing the 7% payroll taxes after workers start collecting Social Security and strengthening employer incentives when Medicare is the first healthcare insurance payer for workers 65 and older.

One effect of the pandemic recovery was that consumption overheated, which in turn drove employers to scramble to fill 11.5 million open jobs as of April 1. Meanwhile, an escalating monthly record of 4.5 million workers left their jobs the next month, according to U.S. Labor Department data. All of which, coupled with historic and continuing pandemic problems like supply-chain disruptions, have fueled inflation.

“We keep talking about the Great Retirement, but are we really looking at a Great Un-retirement?” asked JoAnne Moore, vice president of thought leadership and strategic programs at AIG, a sponsor of the Longevity Project research partnership of Palisades Media Ventures.

Coile, Moore and William Rodgers III, vice president and director of the Institute for Economic Equity at the Federal Reserve Bank of St. Louis, spoke in late May on the rapidly changing landscape for older workers. The Longevity Project presented the program.

Deciding Forces

Two key factors have driven retirement decisions during Covid-19: telework and public-health action, Coile said.

“We found that people with the ability to telework are less likely to retire” Coile said. “That’s true all the time, because those tend to be nicer jobs, but the ability to telework has become twice as important during the pandemic than it was pre-pandemic.”

Workers in states with more aggressive pandemic responses said they were less likely to retire, the study found.

Contrary to the usual correlation of the labor market on retirement, the avalanche of available jobs has had little, if any, impact on retirement decisions right now, she said.

Policymakers need to take a closer look at hospitality and service industries, where one in five older workers had been employed when Covid-19 emerged, Coile said. “Sometimes we think of the service sector as dominated by younger workers, the people who work at the bars and restaurants and behind cash registers, but actually older workers 55+ are only slightly less represented in the service sector.”

The ‘Reimagining’

Rodgers, the lead author of the St. Louis Fed’s recent study showing over-65 workers lagging behind, agreed the focus now should be on segments of the workforce that were underserved before Covid-19 and are encountering even more disproportionate recovery.

The St. Louis Fed found 3.3 million, or 7%, more retirees as of October 2021 than in January 2020. Some of the estimated 2 million or more excess retirements in the first year of the Covid-19 pandemic were forced by business closures, while other retirees cited health concerns and inability to find appropriate work during the pandemic, said Rodgers.

The “3 R’s” — relief, recovery and re-imagination — was a catch-phrase during the Depression, Rodgers said. In the Covid-19 crisis, “we’ve done a good job at providing relief and recovery, better in some places than in others, but now where we’re really at is the re-imagination part of the conversation.”

Rodgers said the study notably found the typical retiree among the recent elevated levels was between 65-74 years old, not 55-64. Most were women, and most of them did not have college degrees.

Rodgers pointed to Covid-19’s severe disruption in hospitality and service industries as a frequent reason, whether because their employers went under, they feared for their health, or they became responsible to care for grandchildren and orphaned family amid Covid-19 deaths and job upsets.

Yet, younger and less educated men made a remarkable recovery, Rodgers said, except for contours in some segments, including minorities.

The ‘She—cession’

Even before the pandemic hit in March 2020, almost 38% of American households were living below what the United Way calls a “living wage,” Rodgers said. Families in 2019 had no reserves to pay an unexpected bill of $400, and 15% more said $400 would be very difficult to pay, he said.

“Families going into Covid were not as resilient as they needed to be,” he said. “The structural problems didn’t arise during the pandemic. They existed and were amplified by the pandemic.”

The pandemic drove existing income inequalities even deeper for women, Rodgers said. As many as 10% of day-care facilities are estimated to have closed after March 2020, which provided jobs that women predominantly do, he said.

Women, in general, tend to be family caregivers who step in and out of the workforce throughout their lives, leaving them less prepared for retirement, Moore said.

Proposed legislation would allow more workers to borrow from their own retirement funds without the 10% tax penalty that’s now law, Moore said. Then, a family could pay that $400 emergency car repair, she said. Their own retirement account could earn any interest on the loan as they repaid it to themselves.

AIG is interested in those proposals that will drive more retirement savings. “What is the greater likelihood that people would save if they knew they had access to some of it, should needs come up?” Moore asked. “We all know what competing priorities do to us.”
Now is the time for workers to leverage job flexibilities to contend with the various life responsibilities coming at them, she said.

“Policies can be put in place for workers to allow people to have access to maintain retirement plans if they’re stepping in and out of the workforce” and working gig jobs, Moore said. “During Covid, working from home and flexibility became the way of the world.”

Even people living paycheck to paycheck, when given an opportunity to save in their employer-sponsored plan, consistently participate in the employer-sponsored plan, according to the annual survey of the American Payroll Association.

The government could do more to help employers to participate in those federal incentives for retirement savings, Coile said.

Beyond businesses, gig workers, freelancers, at-home caregivers, part-timers and others in the new-normal workforce need access to contribute to IRA and 401(k) retirement programs.

“Access to the same benefits is an infrastructure that still needs to be built,” Coile said.

Government-backed retirement savings programs can’t be created exclusively for women, Moore said, but the system as it stands was established for a male-centric labor force. It needs to be retooled to reverse the gender and racial disparities in retirement wealth by targeting sectors known to be heavier in women and minority workers, like gig work and the hospitality and service sectors, she said.

Legislative proposals mean nothing without completion, Moore said. “We have a lot of work to do. What we need now is action. We have a lot of talk, a lot of salons. Now is the time” to push for action, he added.

The Security of Social Security

Job losses raised concerns about the solvency of Social Security, but jobs and consumers in overdrive coming out of the pandemic have eased those fears, Coile said.

May’s unemployment rate was 3.6%, just 0.6 percent above what’s considered full employment. That’s not been seen in the U.S. since the Korean War was ending in the 1950s, according to a Reuters report on St. Louis Fed data.

“Just the demographics of our society are such that we don’t have the workers coming through to balance the older cohort getting ready to retire,” Moore said, referring to the bulge of baby boomers now at retirement age.

AIG surveyed Americans 50 and older at the end of 2021 to see how much they expect from Social Security.

Surprisingly, Moore said, many people 55 and older who left the workforce during the pandemic still had not considered how it would reduce the sum they could collect later. They didn’t recognize that starting to collect Social Security early at 62 would reduce their monthly check for the rest of their lives. Couples hadn’t considered their shared effect on whether the higher or lower earner left the workforce earlier.

Educating older workers pre-retirement is essential, she said.

“Not surprisingly, the lower the income of the segment that we looked at, the more they expect (Social Security) to fulfill 50 to 70%” or more of their retirement needs, Moore said.

The impact of disability claims on Social Security, though, is a wild card, Coile said.
Because Covid-19 was new in 2019, little is known about lasting health effects for those who survive any of its mutated forms. Meanwhile, people with qualifying disabilities who were in the workforce pre-Covid were able to collect Social Security Disability Insurance when their businesses closed after March 2020.

“There’s interesting research that shows that people who come onto SSDI during these weak economic times tend to be healthier than people who come on at other times,” Coile said. “And long-Covid means more people could come into SSDI because of damage to their health. There are more unknowns right now than knowns about Covid-19’s effects on the system’s solvency.”

Ageism Is Real

The tight post-Covid job market has the potential to benefit the older workforce, especially women, and workers with disabilities, Coile said.

However, “age discrimination is real, and it exists despite the fact there are laws outlawing it,” Coile said.

Resume studies consistently pile up evidence that older workers, especially women, get fewer callbacks with resumes that are identical, except for age. Paradoxically, when labor markets are bad for workers, it’s even easier for employers to discriminate against those with the least leverage, she said.

“The fact there are unfilled positions in this economy now does put older workers in a more powerful position,” Coile said.

That’s why it’s important to sustain the current economic expansion, Rodgers said.

The U.S. economy grew by 5.7% last year, the fastest pace since 1984, according to Commerce Department data. Disparity gaps close most effectively when a low unemployment rate is sustained for 12 to 14 months, Rodgers said, because it causes employers to settle into better practices to recruit, hire and retain workers from diverse segments of the labor force.

Moore agreed: “Flexibility benefits everyone, not just the older worker, not just the employer.” It helps fill the tight labor market, and with better efficiency all-around.
Covid-19 accelerated “three-phase retirement,” where older workers reduce hours and help prepare younger workers to fill their shoes, Moore said. It’s a win-win for employers and labor, panelists agreed.

Making sure Medicare becomes first-payer after age 65 changes the cost equation for employer-based medical insurance, for example, Moore said.

“We see older workers voting with their feet in this respect,” Coile said. She said she sees a lot of workers choose “bridge retirement.” They’ll leave their inflexible 40-hour job at retirement age, then transition for a time elsewhere, generally in more flexible work with fewer hours or less responsibility. Covid-19 aside, most people don’t retire for health reasons, she said.

“The U.S. is pretty remarkable in the number of people working at age 70, about a quarter of the population, which by international standards is really high,” Coile said.

Rodgers said it’s not just older folks “voting with their feet” and changing jobs for less stressful or more fulfilling work.

“This is the whole Great Resignation,” Rodgers said. “A chunk of it is wanting to do something more meaningful for their communities.”

The great disruption has led to more people needing more social services and a clarification of values for many people, he said.

Other Data Points

AIG’s Life & Retirement survey of 2,202 U.S. adults ages 25-75 and Longevity Project focus groups found:

• Of the respondents who retired during the pandemic, 40% said their retirement already had been planned. A range of unexpected economic and health circumstances drove the other 60% out of the workforce.

• 25% cited health as a primary reason for retirement, with recent retirees expressing fear of getting sick and being isolated from family caregivers.

• Many recent retirees cited job loss and the difficulty of finding new work during the pandemic as reasons for early retirement. In focus groups and verbatims, recent retirees spoke about the stress of the pandemic, fears of job loss, and rapid changes in the work environment as additional reasons for early retirement, as well as the difficulty of starting over in such a harsh economic climate.

• 71% cited inflation as a source of primary concern, particularly strong among recent retirees.

• 15% of recent retirees said that they miss working and only 19% indicated that they would want to work part-time in retirement.

Morning Consult conducted the survey from April 12 to April 15. The Schlesinger Group conducted the focus groups

Longevity Project is a 3-year-old initiative developed in collaboration with the Stanford Center on Longevity. Founder Ken Stern said its mission is to generate research and foster public dialogue on the far-reaching impact of increased longevity.

Linda Hildebrand is a longtime newspaper editor and consumer-action reporter.

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