Dee Dee Patten, 57, had no plans to retire early. But when the lockdown caused by the coronavirus took hold in 2020 and business dried up in the mechanical repair shop she and her husband Dana owned in Platteville, Colorado, they decided to shut it down.
Mildred Vega, 56, had even less choice. Shortly after she lost her job due to a reorganization of a Pfizer office in Vega Baja, PR, the pandemic ruled out other options.
Ms. Vega and the Pattens are three of millions of Americans who have opted to retire since the pandemic began, part of a surge in early exit jobs. The trend has far-reaching implications for the labor market and is a sign of how the pandemic has changed the economic landscape.
For the lucky few, the decision was made possible by 401 (k) accounts, which assume record holdings. This wealth, along with a surge in home values, has provided the financial security for some to quit working long before social security and private pensions hit.
However, according to Teresa Ghilarducci, professor of economics and policy analysis at the New School for Social Research in New, most early retirements are among lower-income workers displaced by the pandemic who see little way back into the labor market in York City.
“They may call themselves retirees, but basically they are unemployed and in a precarious state,” said Ghilarducci. Economic downturns usually result in more people leaving work, but this time there has been a faster wave of leaving than during the 2008-9 recession, she said.
After analyzing data from the Bureau of Labor Statistics and the University of Michigan Health and Retirement Study, Ms. Ghilarducci found that among those with incomes at or below the national median, 55 percent of recent retirements were involuntary.
In contrast, among the top 10 percent of those in employment, only 10 percent of those leaving were involuntary. “It’s a story of two retirements,” said Ms. Ghilarducci.
The Pattens earned most of their business from inspecting school buses in northern Colorado. When schools switched to distance learning in March 2020, the company stopped receiving its usual traffic.
“On average, we had 10 to 20 buses a day that we brought in, viewed and then put out on the street for the children,” says Ms. Patten. “When the spring break began, we didn’t see any other bus.”
When the schools reopened, they struggled to find a mechanic. They managed to get one in July, but it left almost immediately. And the work is physically too strenuous for the couple to continue on their own, said Ms. Patten.
They sold their shop and equipment along with their house and put some of the money in a retirement account. When a separate certificate of deposit comes due, they plan to buy a home in Denver. Since Mr Patten is 62 years old, he has applied for social assistance – but his monthly benefits will be far lower than he would have received if he had waited a few more years.
The shift towards early retirement reverses a longstanding trend. The percentage of employed Americans over the age of 65 is 50 percent higher than it was 20 years ago. Some work longer because they do not have to and cannot afford to retire, others live longer and healthier lives and want to continue to work in the office.
Not only does early retirement reflect the economic impact of the pandemic, but it can also slow recovery as retired workers tend to be more cautious about spending. You will also be taking out Social Security sooner instead of paying into the program and strengthening its long-term viability.
“Older generations tend to earn more and to spend more,” said Gregory Daco, chief US economist at Oxford Economics. Since this group is leaving the labor force in larger numbers, “this is more negative than positive for the economy”.
About 2.5 million Americans have retired in the 15 months since the pandemic began, Mr Daco said. That’s roughly twice the number of those who retired in 2019, which means that essentially 1.2 million fewer people over 55 years of age are in employment than would otherwise be expected.
The abrupt rise in retirement times – reflected in the way people describe their job status in monthly government surveys – has also declined unevenly among groups of different educational and ethnic backgrounds.
A November 2020 study by the Pew Research Center found that the proportion of Americans born between 1946 and 1964 with only one high school diploma who were retired was up two percentage points from the previous February, which is the proportion of those with college degrees doubled.
In addition, the proportion of the retired Hispanic population in this age group rose four percentage points, compared with a one percentage point increase for white and black boomers.
Hispanic workers, especially Hispanic women, have been hit disproportionately hard by the decline in leisure and hospitality employment, said Richard Fry, a senior researcher at the Pew Research Center.
As for older workers as a whole, “anyone can guess whether they will return,” said Mr Fry.
The proportion of employed or job-seeking adults aged 16 and over has been declining at 61.6 percent for years, falling from 66 percent in 2009 to 63 percent in early 2020. But it fell when the pandemic hit and was slowly recovering.
The aging of the population, as well as the tendency of less educated workers to retire with stagnating wages and fewer opportunities in higher paid areas such as manufacturing, has also impacted participation.
And evidence is mounting that more and more older workers are keeping an eye on exits.
A recent household survey by the Federal Reserve Bank of New York found that the average likelihood of working past age 67 was 32.9 percent, the lowest since researchers began asking this question in 2014. In November 2020 it was 34.9 percent.
The early retirement of millions of workers feeling a lack of opportunity may seem confusing as many companies hunt down – a conundrum that has forced economists to rethink how the labor market works.
Part of the answer seems to be a skills mismatch between available labor and jobs. In addition, salaries in many open positions have remained too low to lure people off the sidelines.
If the freshly retired workers don’t return, the job market could become much tighter, increasing the risk that the Federal Reserve will have to raise interest rates to curb inflation, said Carl Tannenbaum, chief economist at the Northern Trust in Chicago.
“We are already facing the challenge of keeping workforce growth at an appropriate level,” he said. “Immigration is falling, the birthrate has fallen, and it is much more difficult for the economy to maintain its production potential with all of these people in retirement.”
Ms. Vega said she could get a part-time job once the pandemic subsides enough to comfortably return to an office setting, but she plans to spend the rest of her time with her parents and children.
She is entitled to a Pfizer pension for retirees aged 55 and over. Although early retirement was not planned, she tries to make the best of her situation.
“I loved my job, but I don’t miss the stress,” she said. “The constant stress affects my mental and physical health. The pandemic made me realize how much time my job for my family is taking away from me. “
The Pattens are unnerved by the sudden change after 22 years of uninterrupted work, but they too are looking up.
“We both know that at our age it was probably best for us,” said Ms. Patten. “We will get used to all this time on our hands. Our plan is to work on the old farm as a volunteer after 30 years, to travel and look for a new place to stay. “