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in the UK, the over 50s are quitting en masse

Britain’s economy appears to be having a problem with its over-50s: as a result of the Covid-19 pandemic, they have left the workforce in droves, much to the chagrin of business and government. About 300,000 older workers aged 50 to 65 than before the pandemic have now joined the category of “economically inactive”, leading one tabloid to label the problem a “senior exodus”.

“Economically inactive” means that these older workers are neither employed nor looking for work. Of course, it may just be that workers have saved more during the pandemic and can now afford to retire comfortably sooner than expected.

But if older workers have been thrown out of work due to health risks or a lack of opportunity, it means the economy remains starved of potentially productive workers – which could cost the state dearly in various ways. manners. So what’s going on?

Less exodus among the most qualified

In our recent study, we looked at the growing economic inactivity of the over-50s and its implications for the economy, using the latest survey data from the UK Labor Force Survey (LFS).

First of all, we were able to observe that the exodus of seniors is not concentrated in the richest segments of the population, even if one would expect them to be the most apt to retire. On the contrary, it is rather a phenomenon that mainly affects middle and lower middle incomes.

As the charts below show, the biggest rise in post-Covid inactivity is seen among workers in the lower middle income category. The latter earned around 18,000 to 25,000 pounds sterling per year (21,000-29,200 euros) in their most recent job. In each graph, the line indicates the percentage of employed workers aged 50 to 65 who became economically inactive one year later.

Workers becoming inactive (%) by income quartile

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The data comes from the five-quarter longitudinal labor force survey for individuals aged 50 to 65. Each graph presents a different quartile of the wage distribution (0-25ᵉ, 25-50ᵉ, 50-75ᵉ and 75-100ᵉ). For example, the latest panel data point for lower average wages shows that 12.8% of workers who were employed in the fourth quarter of 2020 with wages in the 25th-50th percentile were economically inactive in the fourth quarter of 2021. Author provided

Other elements also support the idea that the increase in inactivity remains concentrated in the lower middle part of the income distribution. For example, the increase in inactivity was greater among people who rented their dwellings than among owners, and among those working in lower paid sectors and occupations. The increase in inactivity was also less among highly skilled workers.

The sectors where the inactivity of the over 50s has increased the most are wholesale and retail trade (+40%), transport and warehousing (+30%) and manufacturing (+25%) . At the same time, the occupations with the largest percentage increases are Plant and Process Machine Operators (+50%) and Sales and Customer Service (+40%). To put these numbers in context, the comparable percentage increase for over-50s across the economy is 12%.

Several factors may explain these differences. First, the sectors in question were already experiencing economic difficulties before the pandemic and they have been hit hard in the past two years. Workers were thus able to consider that it was unlikely that they would find their jobs in a declining sector, and could choose to retire rather than seek another job or retrain. These are also sectors where there are many social contacts and where it is not possible to work from home. Some older workers may therefore have chosen to quit out of fear for their health.

Overall, the increase in inactivity is explained by the fact that older workers perceive a decline in the return to their work: indeed, why continue to hold a low-paid job in a sector in decline and affected by a pandemic?

Will they come back to work?

It is not uncommon for workers to become economically inactive after a recession, as it becomes more difficult to find a job and candidates can become discouraged. This is particularly what happened after the global financial crisis of 2007-2009 – following which the increase in inactivity among the over 50s nevertheless remained three times lower than at present.

Admittedly, the workers currently in “exodus” could start looking for a job again if the economic situation improves, but the outlook remains bleak.

Several facts also suggest that these people really do not want to return to work. All of the rise in inactivity comes from workers who say they don’t want a job and think they will “definitely” never work again. Health “health reasons” can be mentioned (even if the rise in health-related inactivity had started at least two years before the pandemic and was not much affected by the health crisis itself), but the desire to retire is indeed the main reason for the increase in inactivity.

It should be noted that before the pandemic, the number of retirees was declining, with workers retiring later. This phenomenon was due to the increase in the legal age for obtaining the state pension, which rose from 65 to 66 as of 2019-20. The rise in retirements that we have observed during and after the pandemic is therefore also partly the emergence of an underlying trend related to this measure.

This unprecedented rise in inactivity among the over-50s now poses significant challenges for the UK economy. It comes at a time when the government has to deal with rising resignations in other age groups, labor shortages, the rising cost of living and the effects of Brexit. . Given their relatively low incomes, these retirees could also potentially face financial difficulties later in retirement and add pressure on public spending. So what can be done to stop, or even reverse, the exodus of seniors?

The rise in inactivity is not in the lower income strata of society, where the government is now focusing its efforts to incentivize work through the benefit system. The government could therefore consider extending these incentives to lower-middle-class people in an attempt to encourage them to return to work.

Perhaps the cost of living crisis will force the over-50s back to work, which will partly solve the labor shortage in the UK. But solving one problem with another is not likely to make anyone – workers, businesses or government – any happier. Difficult days seem to be ahead of us.

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And in France ?

In France, the pension reform project of re-elected President Emmanuel Macron provides for a postponement of the legal retirement age to 65 years. An objective which implies, in parallel, an effort to keep seniors in employment for one more year. Since the beginning of the 1990s, the four pension reforms (1993, 2003, 2010 and 2014) have already contributed to increasing the employment rate of seniors: it has notably increased by nearly 20 points between 2003 and 2021, according to a Dares study.

However, France still lags nearly 6 points behind among 55-64 year olds compared to its European neighbours. However, bridging this gap will not be easy, especially if the trends observed by British researchers Carlos Carrillo-Tudela, Alex Clymo and David Zentler-Munro (University of Essex), who are the subject of an article for The Conversation UK, the translation of which we offer, was also confirmed in France.

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By Carlos Carrillo-Tudela, Professor of Economics, University of Essex; Alex ClymoAssistant Professor of Economics, University of Essex and David Zentler-MunroAssistant Professor in Economics, University of Essex.

The original version of this article was published in English.