Americans Retire Earlier Due to the Pandemic

[ad_1]

Dee Dee Patten, 57, did not plan to retire early. But when the coronavirus lockdown came into effect in 2020 and things dried up at the mechanical repair shop she and her husband Dana owned in Platteville, Colo., they decided to quit.

Mildred Vega, 56, had even less choice in the matter. Shortly after PR lost her job due to restructuring at a Pfizer office in Vega Baja, the pandemic occupied other options.

Ms. Vega and Pattens, three of the millions of Americans who have decided to retire since the start of the pandemic, are part of the rise in early exits from the workforce. The trend has far-reaching implications for the labor market and is a sign of how the pandemic is transforming the economic landscape.

The decision of a lucky few was made possible by the 401(k) accounts that came out of record stock values. This wealth, along with the rise in home values, provided financial security for some before Social Security and private pensions stepped in.

But according to Teresa Ghilarducci, professor of economics and policy analysis at the New School for Social Research, most early retirements occur among low-income workers who have been displaced by the pandemic and see little way back into the job market. York City.

“They may call themselves retirees, but they are basically unemployed and in a precarious situation,” said Ms. Ghilarducci. Economic downturns typically encourage more people to leave the workforce, but this time there has been a faster wave of departures than during the 2008-9 recession, he said.

After analyzing data from the Bureau of Labor Statistics and the University of Michigan Health and Retirement Study, Ms. Ghilarducci found that among people with incomes at or below the national median, 55 percent of recent retirements were involuntary.

In contrast, among the top 10 percent of winners, only 10 percent of exits were involuntary. “A tale of two retirements,” said Ms. Ghilarducci.

For Pattens, most of their company’s income came from inspecting school buses in the northern part of Colorado. When schools switched to distance learning in March 2020, the business stopped receiving its normal traffic.

“On average, we brought in and inspected 10 to 20 buses a day and then got them on the road for the kids,” Ms Patten said. “When spring break came, we didn’t see any other buses.”

When schools reopened, they had a hard time finding a mechanic. They managed to get one last July but he left right away. Ms Patten said the job was physically too demanding for the couple to continue on their own.

They sold their shop and equipment along with their home and deposited some of the money into their retirement account. They plan to buy a home in Denver once a separate certificate of deposit has matured. Mr. Patten has applied for Social Security at the age of 62 – but his monthly benefits will be much lower than he would have received if he had waited a few more years.

The transition to early retirement is reversing a long-standing trend. Americans over 65 still have a 50 percent higher share of the workforce than it was 20 years ago. Some work longer because they have to retire and cannot afford to retire, while others live longer and healthier and want to stay in the office.

Early retirements not only reflect the economic impact of the pandemic, but may also delay recovery as retired workers tend to spend more cautiously. They will also get Social Security benefits sooner rather than pay for the program and support the long-term viability of the program.

“Older generations tend to earn more and increase spending,” said Gregory Daco, US chief economist at Oxford Economics. With this group leaving the workforce in greater numbers, it’s “more negative than positive for the economy.”

Mr. Daco said about 2.5 million Americans have retired in the 15 months since the pandemic began. That’s nearly double the number of people retiring in 2019, which means there are essentially 1.2 million fewer people in the 55+ workforce than would normally be expected.

The spike in pensions – reflected in the way people describe their employment status in monthly government surveys – also fell unevenly among groups of different educational and ethnic backgrounds.

A November study by the Pew Research Center He found that the share of Americans born between 1946 and 1964 who retire with only a high school diploma rose two percentage points from the previous February, and the proportion among those with a college degree doubled.

Moreover, the share of the Hispanic population retiring in this age group increased by four percentage points, compared with increases of one percentage point for white and Black boomers.

Hispanic workers, especially Hispanic women, have been disproportionately affected by the decline in leisure and hospitality employment, said Richard Fry, a senior researcher at the Pew Research Center.

In terms of older workers in general, “no one can predict whether they will come back,” Mr. Fry said.

Proportion of adults aged 16 and over working or looking for a job now 61.6 percent, It has been slipping for years, falling from 66 percent in 2009 to 63 percent at the beginning of 2020. But it fell when the pandemic hit, and its recovery has been slow.

Population aging and the tendency for less educated workers to leave the workforce Amid stagnant wages and fewer opportunities in higher-wage areas such as manufacturing, it also hurt workforce participation.

And the evidence is accumulating that older workers are watching the exits.

A recent household survey by the Federal Reserve Bank of New York It found that the odds of working after age 67 averaged 32.9 percent, which was the lowest since 2014 when researchers started asking the question. In November, this figure was 34.9 percent.

It may seem puzzling that millions of workers, feeling the lack of opportunity, retire early as many businesses struggle to find employees – a conundrum that forces economists to rethink the workings of the labor market.

Part of the answer seems to be a skills mismatch between current workers and jobs. Additionally, salaries for many open positions have remained too low to lure people over the edge.

Carl Tannenbaum, chief economist at the Northern Trust in Chicago, said if newly retired workers don’t return, the labor market could become much tighter, raising the risk that the Federal Reserve will have to raise interest rates to keep inflation down.

“We already have a challenge in keeping workforce growth at reasonable levels,” he said. “Migration has decreased, the birth rate has fallen, and if all these people are retired, it’s much harder for the economy to sustain its productive potential.”

Ms Vega said she might find a part-time job once the pandemic subsides enough for her to return to her office environment comfortably, but plans to spend the rest of her time with her parents and children.

Eligible for a Pfizer pension offered to retirees aged 55 and over. Although there is no early retirement in his plans, he is trying to make the most of his situation.

“I loved my job but I don’t miss the stress levels either,” she said. “Constant stress affects my mental and physical health. The pandemic has made me realize how much time my job takes from me to spend with my family.”

The Pattens are feeling uneasy with this sudden change after 22 years of continuous work, but they are also looking upwards.

“We know at our age that this is probably the best thing for us,” Ms. Patten said. “We will get used to it all this time in our hands. Our plan is to volunteer, travel and look for a new place to live after 30 years on the old farm.”

[ad_2]

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *