A new report by researchers at The New School suggests that more than a million older workers – aged 55 and up – were forced into early retirement during the pandemic. According to the researchers, twelve months after losing their jobs, senior workers “retired” at ten times the normally observed rate.
Prior to the pandemic, senior workers retired at a rate of about 1.7%-2% per month. At that time, the workforce included 35 million workers aged 55 or older. Immediately after the pandemic began, the retirement rate did not change, although 3.8M workers in this group (11%) lost their jobs. Prior to the pandemic, the unemployment rate among senior workers was about one-half percent. After March 2020, unemployment in this age group reached 10.7%. The researchers found that older workers often retired while unemployed, rather than retiring from a job.
Right now, Washtenaw County has one of the lowest unemployment rates in Michigan. According to the Bureau of Labor Statistics, unemployment among Michigan workers over the age of 55 is currently 2.6%. This is about half of the unemployment rate for this age group in April 2020.
This doesn’t mean these workers are successfully returning to the workforce. The unemployment rate measures only workers actively seeking work. The BLS does not include “discouraged workers” – those who have given up on job-seeking –in the unemployment figures. The drop in the unemployment rate among this age bracket may reflect would-be workers who stopped looking for work.
Typically, some retired workers return to the workforce in some capacity. With the economy near full employment, retired workers may seek to return to work. This could be an opportunity for community colleges to enroll them in short-term retraining programs.
Washtenaw County could benefit from older workforce retraining
This is one circumstance in which short-term training programs could assist both the workers and the community. There’s a major caveat here, though: the resulting jobs need to provide a living wage. At the age of 55, a worker is 12 years away from full Social Security benefits. That’s approximately 25% of a “full” 50-year career. For these workers, time is of the essence when re-entering the workforce. Additionally, due to age and physical condition, these workers can occupy only a limited range of positions.
Premature involuntary retirement can be a financial disaster. At 55, individuals cannot take penalty-free distributions from their retirement savings. According to the Federal Reserve, the average cash savings persons 55 to 64 is $78,000. Unfortunately, the median savings of this group is $8,000. That means 50% these folks have less than $8,000 in cash on hand. They are not prepared for unemployment, much less early retirement.
The rule of thumb is that workers need 10-12 times their current salary to retire comfortably. At 55, a worker making $60,000 will need between $600,000-$720,000 to retire. Unfortunately, the average 401(k) balance of a 55-year-old is $160,000. Most workers are financially unprepared to retire. Eliminating them from the workforce prematurely will harm them and the community. It makes sense for community colleges to develop partnerships with employers to re-train older workers below Social Security retirement age.
Unfortunately, the Washtenaw Community College administration would prefer to use education dollars to build hotels and health clubs. There’s no money for programs to match older displaced workers with roles that pay living wages.
Washtenaw County taxpayers deserve a lot better than what they get from the WCC Administration and the WCC Board of Trustees.
Photo Credit: H. Michael Miley, via Flickr