America’s tight labour market should absorb retired workers
PremiumAge discrimination and market disincentives need to be overcome
To solve the labour shortage, all eyes are turning to over 1.3 million older workers who were pushed out or voluntarily left the US labour force during the pandemic. But don’t hold your breath for all of them to return. Sure, some older workers are returning, but they’re outliers. Displaced older workers face challenges returning to work and won’t return en masse until the US government takes significant steps to end age discrimination and assist with healthcare costs. In the meantime, there are a few things individuals can do if they want to get back to work.
First, there’s no evidence showing the extra number of people who retired during the pandemic beyond the usual were mostly those with overflowing retirement accounts who were sick of working. Most additional retirees had unemployment foisted on them. If US history is any guide, 55% of low-income workers aged 55 and over were forced to leave the workforce from 2010 to 2018, while 32% of middle-income workers faced the same fate. Even among high-income workers in the top 10% of the income distribution, 30% were forced to retire before they had planned.
Since most people would rather say they retired than admit they were pushed out, I believe there are a lot of discouraged older workers out there who may be covering up and don’t think they’ll ever be rehired.
The US unretirement rate, or the number of retirees who are working again, has risen to be more in line with pre-pandemic levels. Still, this is all happening at the margin; the rate is increasing, but the number of people back at work is nowhere near how many older workers actually lost their jobs. Another sign that retiring may not have been by choice but because of employers’ preference for younger workers is that wage growth for older workers has fallen substantially behind inflation and continues to trail the wage gains of mid-career workers. Older workers’ wages rose by 3.7% in April from a year earlier, while workers aged 35 to 54 saw earnings increase 4.9%. If older workers are going to fill in some of the labour gaps, pay and/or working conditions will have to improve to entice them back.
Age discrimination stops many retirees from returning to work. Whether older people take up work depends a lot on whether employers want to hire them. America’s federal government could help.
Ageism carries unproven beliefs that older workers aren’t trainable, move slow, get sick often and are too expensive. Without strict anti-discrimination laws and enforcement, older workers can’t compete for jobs. The American Association of Retired Persons (AARP) reported that concern among older workers about age discrimination reached its highest level in decades recently. The good news is that when the US labour market is tight, it weakens.
The federal government could help by lowering the eligibility age to 50 for Medicare. That way, Medicare would cover certain healthcare costs before an employer’s health insurance kicks in. That would substantially lower firms’ expenses for hiring older workers, who are at a disadvantage because health insurance for older workers is much higher than for younger workers.
Older workers also need more bargaining power. Across the board, unionization substantially improves workers’ access to healthcare plans and pensions, and increases safety outcomes, including paid sick leave and time off. Also, unionized employees earn far more than their non-unionized counterparts in the same jobs.
The government could also pay closer attention to the unusual problems faced by older people. For example, worker training programmes aren’t incentivized to accept older workers because it takes longer for them to find new jobs and that makes the programmes’ success rates look bad. Lawmakers have introduced a bill that would create an Older Workers Bureau to better coordinate government resources and modernize age discrimination laws and worker training.
What can individuals do? First, stay in the game. Working longer will help one delay drawing down your savings. Instead of investing in training, pay attention to the skills you have. Do you use the internet to order items and connect with friends and family? You are tech-savvy. There are also services that offer virtual coaching sessions for people aged 55 and older. The AARP provides up-to-date tips for older workers seeking jobs. In addition, the US National Council on Aging has Mature Work Councils along with dedicated programmes for low-income seniors seeking work.
Unfortunately, most older people aren’t anywhere near being financially ready for retirement. If the labour market were friendlier to them, they might have a decent chance. Until then, most “Help wanted" signs won’t be filled by unretirements anytime soon.
Teresa Ghilarducci is the Schwartz professor of economics at the New School for Social Research, co-author of ‘Rescuing Retirement’ and a member of the board of directors of the Economic Policy Institute.