The tight labor market, in combination with waning COVID-19 concerns and high inflation, are leading more people to leave retirement and reenter the workforce.
Amid a hot labor market and high inflation, retired workers are returning to work at a rising rate. ‘Unretirements’ are on the rise as workers who previously said they were retired are now taking jobs again. As of March 2022, 3.2% of workers who were retired a year earlier are now employed.
It may sound strange that retired workers are taking jobs, but these moves are more common than you may expect. Before the pandemic, from 2017 to 2019 roughly 3% of retired workers on average ended up having a job a year later. The initial shock of the pandemic caused these moves back into work to drop, as the unretirement rate fell from 3.2% in February 2020 to 2.1% by June 2020.
A fall and rebound in unretirement flows has precedent. The rate of unretirement dropped during and after the Global Financial Crisis of 2007 – 2009 (although not as much as it did after the initial COVID-19 shock in spring 2020.) Unretirements eventually picked up as employment increased and the labor market heated up. The similarities between that recovery and the current increase in the unretirement rate suggests the tightening labor market is a major force luring many retired workers back into a job.
If many retired workers are enticed by a hot labor market, this would mean these workers are better thought of as akin to workers who gave up their job search due to discouragement rather than our traditional idea of retirees. It is hard to rule out the influence of waning concerns about the pandemic and faster inflation, and they are surely factors. But it’s not clear that they are the main reasons.
The unretirement rate may have returned to its pre-pandemic level, yet there is the possibility that it could go even higher. Further increases in the rate would mean the pool of workers who want a job is higher than many have thought since the pandemic hit. Watching this trend in the months ahead will give us a better sense of how much tighter the labor market could get and how many people can be attracted back to work by higher wages.
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