It’s been more than two years since the pandemic triggered massive unemployment in the U.S. Some might say we have almost fully recovered to pre-pandemic levels, for instance, by referring to the recovery of the ‘prime age’ labor force participation rate. But that success story doesn’t extend to older workers. Even if the news recognizes the possibility of a “great return” of retirees to the workplace, they seem to interpret not as many older people working as a Great Resignation—implying older people are choosing not to work en masse. The true story is a lot more complicated.
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 writing his dissertation on labor flows for people age 55 and older.
Owen, let’s start from the beginning. How many people would have retired if the pandemic recession in 2020 had not happened?
Comparing the total retired population now to what we expected if pre-pandemic retirement trends had continued, roughly 1.3 million more people age 55 and older are retired today than we would have expected. Here is a graph that shows how many excess retirements we have.
Actual versus predicted retired population. Data: monthly Current Population Survey.
Schwartz Center for Economic Policy Analysis
And how do you get 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. So we estimated what the retired share—and thus the total retired population—would have been in the absence of Covid-19. If the retired share have increased along a simple straight-line fashion between 2015 and now, we estimate 1.3 million excess retirees.
But Miguel Faria e Castro, senior economist at the St. Louis Federal Reserve, using less conservative assumptions, estimates 2.6 million excess retirees (as of late 2021).
So you are telling me that as we sit here in April 2022, there are 1.3 million or more people who say they are retired—whether voluntarily or not—than would have been the case if we hadn’t had the pandemic recession. Is that right?
Yes, there are somewhere between 1.3 and 2.6 million excess retirees in the older population, depending on the assumptions you make. I have to add that a routine Census Bureau adjustment may be causing an undercount of excess retirements as of January 2022.
Are people “unretiring,” as economist Nick Bunker of Indeed.com has suggested?
The “unretired” are people who previously said they were retired but now have a job. In the U.S. there are always some people who alter their retirement plans or simply misreport their status. The most recent data on unretirement shows people are returning from retirement at pre-pandemic levels or slightly above. So Bunker is right that these flows are increasing. But given the longstanding challenges that we know older workers face in finding new employment—age discrimination chief among them—it’s worth watching to see if unretirement flows increase to a significant enough level to bring the excess retiree population down to what we would expect to see.
Does the evidence point to these millions retiring because they had enough money and were sick of working with the anxiety caused by 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’ve used CPS data to examine retirement transitions during the pandemic, and it allows us to see retirement transitions directly in the data to identify just who accounts for the retirement surge.
What best predicted excess retirement was whether older people were working part-time pre-pandemic. And, this is not a surprise, whether they were in occupations that require close physical contact with others. Workers in these two categories were hit the hardest by the pandemic.
There is some evidence that people without a college degree were slightly more likely to retire, especially at earlier retirement ages (55-64). There weren’t really any significant differences by race or gender, which surprised me.
As I said, early job losses were greatest in high-physical-proximity jobs especially. Of course, the pandemic meant much greater health risks for older workers in close-contact jobs that can’t be done remotely.
Why were part-timers more likely to retire?
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? We don’t know from this data.
But some of the labor flows we’ve observed cast doubt on the notion that excess retirements were mostly made up of voluntary leavers enticed into retirement by (say) their swelling stock portfolios. As you know, Teresa, our colleagues at the New School have found that 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.
We have been following the odd fact that all these retirements have not translated to pressure on the Social Security system because claims for Social Security did not go up much more than expected. Can you explain?
This is one of the big surprises of the pandemic. As economists Gopi Shah Goda, Lauren Nicholas, and Sarah See Stith recently found, applications for Social Security retirement benefits were largely unaffected by the pandemic, and applications for Social Security disability benefits actually fell (as did Google
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searches for disability benefits). So although there was a surge in retirement, there was not a comparable surge in retirement benefit claiming.
So 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.