Dee Dee Patten, 57, had no intention of leaving her job so soon. They decided to close their mechanical repair shop in Platteville, Colorado, when the coronavirus-induced lockdown took hold in 2020 and business dried up at the location where she and her husband Dana worked.
Mildred Vega, 56, had even less say in the matter than she did. When she lost her job as a result of a restructuring at a Pfizer office in Vega Baja, P.R., the pandemic forced her to look for other employment opportunities.
They are just three of the millions of Americans who have made the decision to leave the workforce since the pandemic began, as part of a nationwide trend in which people are leaving the workforce earlier than usual. The trend has wide-ranging implications for the labour market and is a manifestation of how the pandemic has altered the overall economic environment.
For a select group of individuals, the decision was made possible by 401(k) accounts bulging with profits from record stock prices. That wealth, combined with an increase in home values, has provided some people with the financial security they need to retire well before Social Security and private pensions begin to pay out.
However, according to Teresa Ghilarducci, a professor of economics and policy analysis at the New School for Social Research in New York City, the majority of early retirements are taking place among lower-income workers who have been displaced by the pandemic and see little opportunity to return to the workforce after they leave it.
Mr. Ghilarducci explained that while some people consider themselves retired, they are actually unemployed and in a precarious financial situation. Economic downturns typically result in a greater number of people leaving the workforce, but the current wave of departures has been more rapid than the wave that occurred during the 2008-9 recession, she said.
Using data from the Bureau of Labor Statistics and the University of Michigan Health and Retirement Study, Ms. Ghilarducci discovered that 55 percent of retirements in the last year occurred involuntarily among people with incomes at or below the national median.
In contrast, only 10% of exits were due to involuntary resignations among the top ten percent of income earners. “It’s a storey about two different retirements,” Ms. Ghilarducci explained.
When it came to the Pattens’ business, the majority of their revenue came from inspecting school buses in the state’s northern region. When schools began to transition to online learning in March 2020, the company’s website stopped receiving its usual amount of traffic.
On average, Mrs. Patten said, “we had 10 to 20 buses a day that we brought in and inspected before putting them out on the road for the kids.” “When spring break rolled around, we didn’t see another bus anywhere.”
Schools were having difficulty locating a mechanic when classes resumed. They were able to hire one in July, but he left almost as soon as he was hired. And Mrs. Patten stated that the physical demands of the work made it impossible for the couple to complete on their own.
It was decided that they would sell their shop and equipment, as well as their house, and put some of the proceeds into a retirement account. It is their intention to purchase a home in Denver when a separate certificate of deposit account matures. Mr. Patten, who is 62 years old, has applied for Social Security benefits. However, his monthly benefits will be significantly lower than what he would have received if he had waited a few years longer.
The trend toward early retirement is reversing itself after a long period of time. The proportion of Americans over the age of 65 who are still employed is 50 percent higher today than it was twenty years ago. Some people are working longer hours because they have no choice and cannot afford to retire, while others are living longer and in better health and want to continue to work.
Early retirements not only reflect the economic impact of the pandemic, but they also have the potential to slow the recovery process because retired workers tend to spend more conservatively. They will also begin drawing benefits from Social Security sooner rather than later, thereby contributing to the program’s long-term viability and sustainability.
“Older generations have a tendency to earn more and spend more,” said Gregory Daco, chief economist for the United States at Oxford Economics. Because this group is dropping out of the labour force in greater numbers, “it has a greater negative impact on the economy than a positive impact.”
Mr. Daco estimates that approximately 2.5 million Americans have retired in the 15 months since the pandemic began. That is nearly twice the number of people who retired in 2019, implying that there are 1.2 million fewer people over the age of 55 in the labour force than would otherwise be expected.
According to the way people describe their work status in monthly government surveys, the sudden increase in retirements has also fallen unequally among groups with varying educational and ethnic backgrounds, as well as among men and women.
According to a Pew Research Center study published in November 2020, the proportion of Americans born between 1946 and 1964 who have only a high school diploma and are retired has increased by two percentage points since the previous February, more than doubling the proportion of those with a college degree.
What is more, the proportion of Hispanics in this age group who are retired increased by four percentage points, compared to increases of one percentage point for white and Black boomers.
According to Richard Fry, a senior researcher at the Pew Research Center, Hispanic workers, particularly Hispanic women, were hit disproportionately hard by the decline in leisure and hospitality employment during the Great Recession.
Mr. Fry stated that it is “anyone’s guess” whether or not older workers will return to the company in the future.
The proportion of adults 16 and older who are employed or looking for work has been declining for years, having fallen from 66 percent in 2009 to 63 percent in early 2020, according to the Bureau of Labor Statistics. However, it plummeted when the pandemic struck, and it has been slow to recover.
The ageing of the population, combined with the tendency of less educated workers to drop out of the labour force in the face of stagnant wages and fewer opportunities in higher-paying fields such as manufacturing, has also contributed to lower labour participation rates.
And there is mounting evidence that more and more older workers are looking for ways out of their jobs.
According to a recent household survey conducted by the Federal Reserve Bank of New York, the average probability of working past the age of 67 was 32.9 percent, which was the lowest level recorded since the question was first posed in 2014 by the researchers. In November 2020, the figure was 34.9 percent, according to the data.
Many businesses are scrambling to find employees, which makes the premature retirement of millions of workers due to a lack of opportunity seem puzzling. This conundrum has forced economists to rethink the way the labour market operates, forcing them to rethink the way the labour market works.
A mismatch in skills between available workers and job requirements appears to be a contributing factor. In addition, salaries in many open positions have remained at historically low levels, making it difficult to recruit qualified candidates from the sidelines.
If the newly retired workers do not return to the workforce, the labour market could become much tighter, increasing the likelihood that the Federal Reserve will be forced to raise interest rates in order to keep inflation under control, according to Carl Tannenbaum, chief economist at Northern Trust, a Chicago-based financial institution.
“We already face a challenge in terms of maintaining reasonable levels of labour force growth,” he said. “Immigration is down, the birthrate is down, and it will be much more difficult for the economy to maintain its productive potential if all of these people remain in retirement,” says the economist.
The rest of her time will be spent caring for her parents and children, according to Mrs. Vega, who may consider taking on a part-time job once the pandemic has subsided enough that she can work comfortably in an office setting once more.
She was eligible for a Pfizer pension, which is available to retirees who are 55 years or older. She is attempting to make the most of her current situation, despite the fact that early retirement was not in her plans.
“I enjoyed my job, but I don’t miss the high levels of stress,” she admitted. “The constant stress has a negative impact on both my mental and physical health. It was only after the pandemic that I realised how much time my job was stealing from me to spend with my family.”
The Pattens are apprehensive about the abrupt change after 22 years of nonstop work, but they, too, are looking for the positive aspects of the situation.
“We both realise that, at our ages, it was probably the best thing for us,” Mrs. Patten said of the divorce. Eventually, we’ll get used to having so much free time on our hands. It is our intention to volunteer and travel while also looking for a new place to live after 30 years on the old homestead.”