The UK economic system has an issue with its over 50s: following the COVID pandemic, they’ve been leaving the labour power en masse, inflicting complications for companies and the federal government. Roughly 300,000 extra employees aged between 50 and 65 are actually “economically inactive” than earlier than the pandemic, main a tabloid paper to dub the issue the “silver exodus”.
Being economically inactive implies that these older employees are neither employed nor searching for a job. After all, it might merely be that employees saved extra in the course of the pandemic and might now afford to retire in consolation sooner than deliberate.
But when older employees have been delay work attributable to well being dangers or lack of alternatives, it might imply the economic system is being disadvantaged of doubtless productive employees – which might price the state in varied methods. So what’s happening?
Making sense of the exodus
In our newest analysis, which has simply been made out there on-line as a coverage briefing observe, we have now taken the deepest dive but into rising financial inactivity among the many over-50s and what it means for the economic system utilizing the latest UK Labour Pressure Survey (LFS) knowledge.
Surprisingly, the silver exodus just isn’t concentrated within the richest segments of society – though one may anticipate that they might be essentially the most in a position to retire. As a substitute, it’s primarily a center to lower-middle revenue phenomenon. As proven within the charts under, the most important rise in inactivity post-pandemic is coming from employees within the lower-middle revenue bracket (incomes roughly £18,000 to £25,000 per 12 months of their most up-to-date job). In every chart, the road exhibits the proportion of employed employees aged 50-65 who turned economically inactive one 12 months later.
Staff beccmoing inactive (%) by revenue quartile
There’s additionally different proof to assist the view that the rise in inactivity is concentrated within the lower-middle a part of the revenue distribution. For instance, there was a bigger rise in inactivity amongst individuals who hire, slightly than personal, their very own properties, and amongst these in decrease paid industries and occupations. There has additionally been a smaller rise in inactivity amongst extremely educated employees.
What jobs are older employees leaving, and why?
The industries with the most important proportion rises in inactivity among the many over-50s are wholesale and retail (40% rise), transport and storage (+30%), and manufacturing (+25%). In the meantime, the occupations with the most important proportion rises are course of plant and machine operatives (+50%) and gross sales and customer support occupations (+40%). To place this in context, the comparable proportion rise for over-50s for the entire economic system is 12%.
A number of elements probably clarify these variations. The sectors in query had been in long-term decline earlier than the pandemic, and so they had been additionally hit onerous when COVID arrived. Staff may need thought of it unlikely that they might get their job again in a declining sector, and should have chosen to retire slightly than searching for one other job or retraining.
These are additionally sectors with excessive ranges of social contact the place it’s not doable to do business from home, so maybe some older employees selected to resign out of concern for his or her well being. Taken collectively, the message is that the rise in inactivity has been pushed by older employees perceiving decrease returns from persevering with to work: why preserve working in a low-paid job in a declining and pandemic-afflicted a part of the economic system?
Will they arrive again to work?
It’s not unusual for employees to turn into economically inactive following a recession, as a result of discovering a job is difficult and folks can turn into discouraged. That is what occurred after the worldwide monetary disaster of 2007-09, as an illustration.
It could possibly be that employees in at the moment’s exodus will resume looking for a job when the economic system improves, however there are not any indicators of this taking place. The rise in inactivity amongst over-50s is already 3 times increased than it ever was after the final monetary disaster.
A number of info additionally recommend that these folks actually don’t ever wish to come again to work. The entire rise in inactivity is coming from employees who say they don’t desire a job and suppose they may “undoubtedly” by no means work once more. Their major causes are retirement and illness, though the info reveals that the rise in inactivity attributable to illness began no less than two years pre-pandemic and was not a lot affected by the pandemic itself. In different phrases, a need to retire is de facto the principle cause for the rise in inactivity.
It’s price declaring that earlier than the pandemic, the variety of retirees was falling as employees had been retiring later in life. This was pushed by will increase within the state pension age, which rose from 65 to 66 from 2019-20. The rise in retirements that we have now seen throughout and after the pandemic is partly the emergence of an underlying development that was hidden whereas the state pension age rose.
Implications and coverage challenges
This unprecedented rise in inactivity among the many over-50s poses vital challenges for the economic system. It comes at a time when the federal government is having to take care of rising resignations amongst different age teams, labour shortages, the rising price of residing, and the evolving results of Brexit. Given their comparatively low revenue, these retirees might additionally probably face monetary difficulties later in retirement and add strain to authorities spending. What then could be carried out to halt and even reverse the silver exodus?
The rise in inactivity just isn’t within the lowest-income components of society, the place the federal government concentrates its efforts to incentivise work by way of the advantages system. The federal government may subsequently take into account extending these incentives, equivalent to Working Tax Credit, to achieve lower-middle class folks to try to encourage them to return to work.
Maybe the cost-of-living disaster will power the over-50s again into work, partially fixing the UK’s labour shortages. However fixing one drawback with one other just isn’t more likely to make anybody – employees, companies or the federal government – any happier. Tough days subsequently lie forward.