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What's Next for Older Workers?

Updated: Oct 2, 2020

The labor force 65 and older continues to grow. That surge of older workers accelerated after the financial crisis of 2008-9. Labor force participation rates for all 65+ age brackets have all steadily trended up, with slight moderation over the last few years.

Before this recession hit, we projected that the 65+ labor force would grow by nearly six million workers by 2030. We assumed that labor force participation rates and the population pool would continue to rise, especially for those in their mid- to late-60s.

Why the rise in participation rates? For a large share of the older work force, work was more of an economic necessity than a choice. And the corona virus crisis has made that necessity even more apparent: many older workers are now risking their lives to stay on the job.

What drives the necessity? High levels of debt (including a much higher share carrying mortgages), poor retirement financial prospects (with net worth making little gains since 2009, despite surging stock prices), the erosion of defined-benefit pensions, and fast-rising health care costs were among the many factors keeping the typical 65+ person in the labor force.

Retirement prospects were already precarious, and the savage and sudden onset of the current recession poses even greater challenge. Any retirement savings in stocks have already shrunk by 25%, home prices are likely to drop again, unexpected protracted periods of unemployment will require dipping into retirement funds, and prospects of 0% interest on CDs and money markets for the foreseeable future significantly shrink income growth. Dreams of eventual retirement recede further into the horizon.

A significant share of older workers found jobs in retailing, which is now undergoing a painful retrenchment. Many firms will not reopen, and when the survivors do, older workers will encounter intense competition from younger, newly unemployed workers for the same jobs.

Barring a major policy shift, new (and existing) employers will sharply increase reliance on gig workers to fill labor needs. Older workers will be able to fill those needs, especially since benefits are not as critical. As always, healthier and better educated segments will be better equipped for these tasks, even for such lower-skilled work as delivery services.

And sectors that were gradually moving into a virtual world will likely accelerate that move (education, health, financial services, for example). Expect older workers to compete more aggressively for those jobs.

The net result could be an even bigger surge of older workers than we expected, as those who had previously retired jump back in to make ends meet, and those who had planned to retire push off that decision indefinitely.

We will have more to say in the coming weeks about how the overall job market may evolve as we adjust to the pervasive impacts of pandemic and recession. For now, it is obvious that the previous challenges faced by the older work force have become significantly more intense.



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