I’ve written a few times about both the value of older workers and the need for society to change how we perceive older people. This is especially so given the widely documented skills shortages across the economy in recent years.

It should be hugely worrying, therefore, that the Covid pandemic has seen huge numbers of older workers leaving the workforce. In the UK alone around 300,000 extra workers aged between 50 and 65 have been identified as economically inactive since the start of the pandemic.

Economic inactivity

A recent study from the University of Essex explores some of the possible impacts this economic inactivity could have on the economy. The analysis reveals that while it may seem intuitive to think that those leaving the workforce are those with more financial stability, it is actually those with middle to lower-middle incomes that tend to be leaving.

Indeed, the biggest rise in economic inactivity has come from those earning between £18,000 and £25,000 per year. What’s more, this doesn’t appear to be a trend that is going to reverse should economic circumstances improve.

Similarly, there has been a rise in economic inactivity among people who rent their homes rather than own their homes, and indeed among workers in typically lower-paid occupations or industries.

“Most worrying, all of the rise comes from people who say they do not want a job, and think that they are “definitely not” likely to work again in the future,” the authors explain. “That is, they are likely not “discouraged workers” who would like a job but have stopped searching due to lack of success.”

Long-term decline

So why are people leaving the workforce in such large numbers? The reasons are varied. For instance, the fact that so much movement is concentrated in industries such as retail, transport, and manufacturing suggests that workers are not confident that sectors that were struggling before the pandemic and were hit hard during it will ultimately recover. As such, it might be viewed as easier to retire than it is to retrain or look for work in new areas.

These sectors are also typified by high social contact with colleagues and customers, and where remote working has typically not been an option. As a result, there are likely to have been health factors involved in people’s decision to leave the workforce.

“The largest rises in inactivity in the over 50s come from retirement and sickness,” the authors explain. “The rise in inactivity due to sickness may have started rising a couple of years before COVID, therefore reflecting a pre-existing trend rather than the virus itself.”

Diminishing returns

This generally pessimistic viewpoint on the returns from working suggests that while economic inactivity has been reversed in the past, not least after the 2008 financial crisis, it may not be so straightforward after Covid.

Indeed, the data suggest that the increase in economic inactivity among workers over 50 is currently around three times higher than its peak during the financial crisis and shows little sign of abating as economic circumstances improve as there appears to be an overwhelming desire to retire.

This trend marks a clear diversion from trends seen before the pandemic in which people were generally working for longer. This was driven both by improving health, increases in the state pension age, and a general desire to maintain financial independence for longer. It remains to be seen whether this desire for earlier retirement is going to fundamentally change the general move towards working for longer as we enter the “100-year life”.

Sticking around

If companies want to prevent this brain drain, then research from Ohio State University’s Fisher College of Business might have some pointers.

The analysis found that the type of work environment was key, with autonomy, information sharing, a range of developmental opportunities, involvement in decision-making, and good compensation and benefits typifying the kind of environment that appeals to older workers.

The findings emerged after speaking to over 750,000 workers from across the federal government.  It emerged that those with such high-quality work environments were most likely to delay their retirement.

“As people age, research shows that they have a stronger preference for autonomy and control in their jobs, they want to feel respected and listened to,” the researchers explain.  “Jobs like that may be especially appealing to those with less education and who don’t have managerial experience because they may feel the need to keep high-quality jobs more than others.”

Data suggests that high-quality work environments were effective at delaying retirements in the wake of the Great Recession in 2008.  The researchers believe such findings may be illustrative in the face of the so-called Great Resignation, with employers struggling to recruit or retain the talent they so desperately need.

“After the Great Recession, older employees were more interested in continuing to work, especially if they had a high-quality job, probably because they experienced more financial pressure and uncertainty surrounding their retirement plans,” they explain.  “The COVID-19 pandemic may have the same effect on workers.”

In addition to capturing various demographic information, the surveys asked participants to rate their employers for things such as the training opportunities and autonomy in their workplace, which were viewed as evidence that those workplaces were high quality.  The surveys also captured whether each participant was planning to retire within a year, between one and three years, between three and five years, or after five years.