Why some older workers fared worse than the Great Recession during Covid-19
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It’s no secret that the Covid-19 pandemic has hurt workers of all ages.
Among older workers aged 50 to 62 and over, some may have fared worse than they did during the Great Recession. This is the result of recent research by the Center for Retirement Research at Boston College.
How older workers were affected depends on their age cohort and whether they are 50 to 61 or 62 years or older. This is evident from the analysis of the data from the current Census Bureau population survey.
For 50 to 61 year olds, the data shows that Covid-19 was heavier in low earners than high earners.
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Nineteen percent of those with the lowest earnings were no longer employed in 2020 compared to a year earlier, the data shows. By comparison, 17% of people in this category stopped working during the Great Recession in 2009.
Meanwhile, 9% of the highest-income Terciles stopped working in 2020, compared to 11% in 2009.
“The big characteristic of a recession, including the Covid recession, is just the extent to which lower-income people are injured more,” said Geoffrey Sanzenbacher, a research fellow at the Center for Retirement Research at Boston College.
Despite the negative consequences for people in this age group, there has been no noticeable increase in the number of people who consider themselves retirees. Part of this may be due to the fact that they are under 62 years of age and therefore not entitled to social security retirement benefits.
For people aged 62 and over, that’s a different story.
Low-wage earners in this age cohort were still more likely to be out of work. However, compared to the Great Recession, the unemployment rate was roughly the same: 38% in 2020 versus 37% in 2009.
However, high earners aged 62 and over were more likely to be unemployed. In 2020, 22% of those in the highest income quartile stopped working year-over-year, up from 18% who fell into that category during the Great Recession in 2009.
High earners withdrew to a greater extent during Covid-19 than they did during the Great Recession. In 2020, 15% of this cohort retired one year after work, up from 10% in 2009. However, the rate at which low-income workers retired remained roughly the same, 26% in 2020 versus 25% in Year 2009.
The best thing you can do to retire if you have a high income is to delay getting social security benefits.
research fellow at the Center for Retirement Research at Boston College
The results compare the data from December 2020 to December 2019. There would likely have been a more dramatic difference in unemployment rates if the data had been measured for earlier months in 2020, Sanzenbacher said.
Admittedly, the health risks associated with Covid-19 could have led some employers to encourage workers to retire.
“From the data we can not really see whether it is a pure decision by the employee or whether it is a joint decision,” said Sanzenbacher.
With the pandemic going on far longer than many expected, some workers who initially identified themselves as unemployed can now say they are retired.
That decision could also prompt them to seek social security benefits early, which is cause for concern, Sanzenbacher said.
If you claim the earliest age at which employees are generally entitled at 62, you will generally receive permanently reduced benefits. Ideally, workers wait until full retirement age to receive 100% of their benefits or until age 70 to receive higher benefits by waiting to be eligible.
“The best thing you can do to retire if you have a high income is to delay getting social security,” Sanzenbacher said.