Americans of all ages are feeling the devastating economic impacts of the coronavirus outbreak. But older workers in their 50s and 60s — especially women — have been among the hardest hit. Based on recent studies and views of retirement and aging experts, this much is clear: The whacks older workers have felt to their jobs and retirement savings may have long-lasting, painful financial implications for many of them.
“The pandemic could be devastating to older workers who are too young to retire and are forced out of work,” said Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies.
In his recent webinar I attended, about COVID-19 and an aging society, London Business School economics professor Andrew Scott noted that the combination of job losses and investment losses (the Dow is down 14% this year) will mean more older workers will need to work more years than they had planned, if they can.
‘The Labor Market Is Going to Be a Tough Place for Older Workers’
“The ‘working longer agenda’ has become more urgent, but also more difficult,” Scott said. Getting hired after 50 is normally difficult, due to age discrimination by employers. Add to that fears by hiring managers that older applicants could contract the coronavirus due to their age (making them potentially unable to work and an added health-insurance cost) and, Scott said, “the labor market is going to be a tough place for older workers.”
Call it the “pandemic paradox” for older workers. If they’re able to keep their jobs, they may worry their age and health could lead them to contract the coronavirus by returning to their workplace. But if they tell their employers they’re concerned about returning to work, they could risk losing their jobs and unemployment benefits and then finding themselves either unable to get hired or to get a similar-paying job when the pandemic has faded.
Although 18% of adults didn’t expect to be able to pay all their April bills in full, 35% of those who’d lost a job or had their employment hours reduced felt that way.
Perhaps economist Teresa Ghilarducci of The New School has the bleakest view of the effect of the coronavirus outbreak on older workers. She expects the economic fallout from the pandemic to push 3.1 million more older workers into poverty when they retire.
“The recession affects all 67 million people in near-retirement households by decreasing their financial preparedness for retirement,” Ghilarducci wrote in her Retirement Equity Lab Status of Older Workers May, 2020 report.
Generally, retirement analysts want people to be able to replace 70% of their pre-retirement income in retirement, through savings, Social Security and perhaps a pension. But Ghilarducci expects that due to the pandemic, the median replacement rate for older workers “will drop 7 to 9 percentage points (from 55% to 48% if they retire at age 62, or from 69% to 60% if they retire at 65).”
A Look at the Pandemic’s Job Losses and Furloughs
Job losses and reduced hours are, understandably, making it much harder for people to pay their bills.
In its recent survey of Americans’ finances, the Federal Reserve found that although 18% of adults didn’t expect to be able to pay all their April bills in full, 35% of those who’d lost a job or had their employment hours reduced felt that way.
A close look at recent unemployment rates, job losses and furloughs of boomers and Gen Xers shows how rough things have been.
According to AARP, when the overall U.S. unemployment rate spiked from 4.4% in March to 14.7% in April, the unemployment rate for women 55 and older rose even more: from 3.3% to 15.5%. The unemployment rate for men 55+ also soared, though a little bit less, from 3.4% to 12.1%.
“Who knew things could change so quickly, going from the lowest unemployment rate in almost fifty years?” asked Collinson.
How many boomers and Gen Xers who’ve lost their jobs will get them back?
As Federal Reserve Board Chairman Jerome Powell told 60 Minutes on Sunday, May 17: “The people who’ve been getting hurt the most — it’s women to an extraordinary extent.” And women are often in worse financial shape than men for retirement because, on average, they earn less, have saved less and live longer.
How Boomers, Gen Xers and Millennials Are Feeling Employment Impacts
In mid-April, the Transamerica Center for Retirement Studies surveyed 1,248 Americans who work or were laid off or furloughed due to the COVID-19 pandemic. Roughly the same percentage of boomers, Gen Xers and millennials felt an employment impact (58%, 53% and 59% respectively). But they’ve felt that impact in different ways.
For instance, 13% of boomers and Gen Xers were laid off; by contrast, 18% of millennials were.
Have you experienced any of the following employment impacts as a result of the coronavirus pandemic?
But boomers were the most likely to have been furloughed — a mandatory unpaid suspension from work, typically with benefits and the expectation they’ll return to their jobs. Transamerica found 16% of boomers have been furloughed, while only 11% of millennials and 8% of Gen Xers have.
Boomers were the most likely to say the pandemic has led them to retire early: 6% said so, compared with 3% of Gen Xers. And in a MoneyRates.com survey, 36% of respondents between age 45 and 64 said they expect the financial damage done by the pandemic will force them to delay retirement.
Will the Lost Jobs Come Back?
The big question: How many boomers and Gen Xers who’ve lost their jobs will get them back?
In the Federal Reserve survey, 91% of Americans who lost their jobs in the pandemic said they anticipated they’d return to work for the same employer or already had.
“That sounds optimistic to me,” said Collinson.
A new paper by University of Chicago economists at the Becker Friedman Institute estimates that 42% of jobs eliminated in the pandemic are not coming back.
The actual percentage of lost-forever jobs will depend on how long this recession lasts and how deep it is. “The longer it takes to bring the economy back on line, the larger the fraction of recent layoffs that will turn out to be permanent,” the University of Chicago economists wrote.
The Fed’s Powell told 60 Minutes: “It may take a period of time. It could stretch through the end of next year. We really don’t know.”
What Happened After The Great Recession
A look at what happened to those who lost their jobs in The Great Recession of 2008-2009 shows why Collinson is dubious that so many unemployed in the pandemic will retain their positions.
Back then, according to The Urban Institute, people 62 or older who lost their jobs were far less likely than younger workers to get new ones. And unemployed older workers who ultimately got hired found themselves out of work 50% longer than younger people, on average. They also often took significant pay cuts with their new jobs.
“One of the most heart-wrenching lessons learned from The Great Recession is how much more difficult it was for older workers to find work,” said Collinson. “I’m very worried we will see that again.”
Not being able to get hired, Ghilarducci notes, can lead to a downward mobility spiral. You begin to drain your savings, you might start claiming Social Security as early as 61 or 62 (depriving you of the bigger benefits you’d get by waiting until later) and possibly incurring extra debt.
What Boomers and Gen Xers Are Doing — and Not Doing
Although 68% of boomers told Transamerica they expect to work past age 65 (or already are), employment prospects for older workers will depend partly on what they do to make themselves attractive job candidates. Transamerica survey responses, however, aren’t especially promising.
When Transamerica asked: “Have you taken any steps to ensure that you’ll be able to continue working past 65 or in retirement, if needed?” only 37% of boomers said they’ve been keeping their job skills up to date. And that was down from 40% when Transamerica surveyed boomers in 2019. Those percentages were flipped for Gen Xers, who’ve been taking a little more initiative lately.
The Fed’s Powell told 60 Minutes he’s concerned about Americans losing job skills due to unemployment and furloughs in the pandemic.
“There’s a real risk that if people are out of work for long periods of time, that their skills atrophy a little bit. They lose contact with the workforce,” said Powell. “This is something that shows up in the data — that longer and deeper recessions tend to leave behind damage to people’s careers.”
Only 15% of boomers surveyed by Transamerica said they’ve been scoping out the employment market and opportunities available, though that’s up from 11% in 2019.
Perhaps the most concerning response about preparing to work past 65 or in retirement: just 48% of boomers surveyed told Transamerica they’ve been “performing well at my current job” — identical to what they’d said last year.
Said Collinson: “If you are lucky enough to still have a job, now is the time to be a superstar. You want to show you’re flexible, collaborative, helpful and a team player.”
And, she added, “Employers are grappling with extremely difficult issues. So, the more you can pitch in and contribute and add value, the better your prospects.”
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