Retirement fuels US labor shortages: ‘We’re fighting an uphill battle’

The US job market has a staffing problem: There simply aren’t enough workers to fill the positions that employers want to fill. This is partly due to a Trend accelerated by the pandemic this continues even as the economy returns to normal: Americans are retiring in droves.

Retirees made up the largest proportion of Americans who retired in March, according to a new analysis by Morning Consult. This recovery comes after several months in which pension rates have eased somewhat and some older workers have returned to the labor market.

But the recent surge in retirement numbers may suggest some older workers are wondering if they want to cope with changes like the widespread transition hybrid work environments, with more and more companies asking their employees to come into the office a few days a week, noted John Leer, chief economist at Morning Consult. And as the pandemic enters its third year, some may simply age into retirement as part of the longstanding demographic shift of America’s aging baby boomer generation.

Bottom Line: Don’t expect older workers to return to the workforce to bail out the economy from labor shortages, Leer said.

“There are a lot of retirees who have left the workforce and it was an open question as to when they will come back,” Leer told CBS MoneyWatch. But, he added, “That won’t be the case.

Between February and March, the proportion of working-age adults who were either in work or looking for a job fell by almost 1 percentage point, giving up most of the progress made since March 2021, Morning Consult found. About half of this change was due to retirements, with the remainder due to issues such as disability and childcare.

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Certainly, the data reflects only a one-month change, but it underscores the ongoing pressures the job market is facing. The labor force participation rate — the proportion of adults working or looking for a job — has still not returned to pre-pandemic levels, despite predictions at various points over the past year that the country’s missing workforce would eventually return.

But long-term demographic changes are taking a toll on America’s workforce, Leer said. “Structural problems with immigration, pensions and an aging population were already there before the pandemic. We are fighting an uphill battle to get people back into the workforce.”

Why high-income workers quit

In a way, the increase in Americans choosing to retire is surprising given that the highest inflation in 40 years eats up savings and investments. But people who are at or near retirement age may have benefited from the surge in assets like homes and investments over the past two years, experts say.

Higher-income adults — those making more than $100,000 a year — were twice as likely as lower-income workers to say they quit because they were retiring or because their job found them working too many hours Morning Consult out.

“Inflation is a very real risk for higher-income adults, and you’d think it would push them back into the labor market, so that’s one of the surprising things,” said Leer. Some older, higher-income workers may decide the ongoing uncertainties surrounding the pandemic and the changes in the workplace just aren’t worth it, he noted.

Meanwhile, current workers are more concerned about retirement than actual retirees, a recent Allianz Life study found. About 63% of people who work say they are more afraid of not having money in retirement than they are of dying, compared to 46% of retirees. This discrepancy may be due to the rise in wealth over the past two years, which has boosted the fortunes of many older Americans.

“Some people are so well prepared that they retire early,” says Kelly LaVigne, vice president of consumer insights at Allianz Life, about his company’s report.

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