There is a growing concern that older Americans who were displaced from their job due to the COVID-19 pandemic will remain unemployed as state economies begin to reopen in the coming weeks and months. Historically, older workers have found difficulty reentering the workforce following an economic downturn or recession, forcing many into early retirement. These instances can turn retirement planning on its head for individuals nearing the end of their career as they are forced to make up for the lost income. Often times this results in taking social security earlier than anticipated, staying on unemployment longer, or even diving into other retirement accounts to make ends meet.
The COVID-19 pandemic has created a worse outlook for older, unemployed Americans because they are the at-risk population to contract the virus and experience the more severe side effects, like respiratory issues. Unlike the 2008 Great Recession, older workers have their health and their finances to worry about when attempting to reenter the workforce, which may ultimately lead to employers considering younger employees to fill positions in the coming months.
The American Association of Retired Persons (AARP) conducted a study in 2015 following the 2008 financial crisis to analyze how older workers reassimilated back into the economy. They found that it was very difficult for these workers who were nearing the end of their careers to find full-time employment or the job that they previously held before being laid off. A number of factors contributed to these findings, such as payroll and rebuilding with younger employees who the companies didn’t have to pay as much.
According to the AARP study, older workers faced issues with unemployment, reduced pay, and some were forced into early retirement. 45% of all workers aged 55 or older spent on average 27 weeks on unemployment after being laid off during the 2008 crisis. 59% of older workers who spent more than 27 weeks on unemployment experienced reduced pay compared to the job they held pre-crisis and 41% for older workers who spent less than 27 weeks on unemployment following the 2008 crisis. Thus, the AARP study showed a correlation between time spent on unemployment and the increased likelihood of making less income once finding a new job.
With the COVID-19 pandemic, the likelihood is that workers aged 55 or older will spend 27 weeks or more on unemployment due to the health risks of the virus in the absence of a vaccine. As long as a vaccine remains unavailable for these workers they may not return to work or seek employment, paving the way for younger workers to take their place – reducing the opportunities for older workers down the road. Furthermore, workers nearing the end of their careers that do go back to work face the threat of losing their job due to automation in certain industries.
A report published by the Center for Retirement Research at Boston University concluded that a rise in automation would ultimately push workers aged 55 and above out of the workforce and into non-traditional jobs. In their study, they define non-traditional jobs as those that offer reduced pay and no medical or retirement benefits. In certain industries where this is a possibility, it is another obstacle that those nearing the end of their career must consider while planning for retirement. One glimmer of hope that is not connected to this study is the passage of the SECURE Act, which was signed into law by the Trump administration in December of 2019 and opened the door for companies to expand certain benefits to part-time employees. Therefore, whether it’s COVID-19 or the introduction of automation into the workplace, older workers may be able to find part-time work with benefits that otherwise wouldn’t be available if it wasn’t for the SECURE Act – this bright side certainly was not existent from 2008 to 2015 when AARP conducted their analysis.
Older Americans who had jobs before the COVID-19 crisis face the risk of being left behind as the economy begins to take-off again. Statistically and historically, workers above the age of 55 have faced more hardship trying to find new jobs or returning to jobs previously held before being laid off. While the research conducted by AARP is valuable, it only represents a financial crisis that impacted this age demographic, while the COVID-19 pandemic adds the element of health into the mix on top of a financial crisis. The COVID-19 financial crisis was also artificially created by states shutting down their economies while the 2008 crisis was a mixture of bad policies and greed.
The added health risk of returning to work for older Americans may force some into an early, involuntary retirement, which will make financial security a hardship for their retirement. If older workers are unable to find employment following the COVID-19 crisis, similar to the 2008 crisis, the possibility of Americans falling into poverty in their senior years will be raised significantly for those with inadequate retirement planning. Individuals planning on social security to supplement the majority of their income are especially vulnerable to this scenario.
Only time will be able to tell what the outcome of the COVID-19 crisis has on the older population of workers, however, if history stands to repeat itself, the aforementioned outcomes are likely to be repeated. If individuals can’t obtain their previous job, there is a high chance that they remain on unemployment, or worse, take an early retirement. Some may have the option to enter the workforce again but generally, this is done at reduced pay and or benefits. Often times, this demographic will settle for part-time work as a way to make ends meet, ultimately sacrificing time to continue building their retirement nest egg.