At a time when many companies are in crisis, the story for business owners has become even bleaker with the retirement of many Baby Boomers who have chosen to leave the workforce. Whether they are worried about the coronavirus, or have realized that it is time to enjoy their Golden Era, the migration of older workers into retirement is having a profound effect on the country’s economy.
Why the Mass Exodus?
In a time when America needs the wisdom and insight of its seasoned workers, Baby Boomers are leaving their jobs for a variety of reasons. According to the Bureau of Labor Statistics, “More than 1 million older workers have exited the workforce since COVID-19 struck the US in February 2020.” Psychologist Anthony Klotz has coined this the Great Resignation.
So why are older workers leaving in a “Great Resignation”? Clearly the risk of the coronavirus itself is a big reason, especially for people in this age group who may have preexisting conditions. Others have retired earlier than they might have because of family, medical, or other personal reasons.
Besides the medical reasons, some Baby Boomers realized it was time to retire when their time at home quarantining became a fast track towards their retirement. At a point where quality of life is important, they re-ignited old hobbies or started enjoying new ones, even as they realized that retirement income goes a lot farther when you don’t have commuting costs, lunch, and business attire to consider. And speaking of money, according to Business Insider, “Soaring stocks also made more people rich enough to retire.”
Despite the pandemic, or perhaps because of it, many people in their late 50s realized that if they retired, they would enjoy their “Golden Era” while they were still healthy. For people who want to travel and enjoy hobbies, the pandemic gave them the impetus to get out of the rat race and focus on their own lives.
Whose Decision is it?
Not every Baby Boomer who is in the retirement boat is there by choice, however. Age discrimination still exists, and for those who lost a job initially, many are finding it difficult to get back into the workforce. “This is a big shock that’s irreversible for a lot of people,” said Patrick Button, an economics professor at Tulane University who has written extensively on age discrimination and the labor market.
As of June, 55% of unemployed workers 55 or older have been jobless for over six months, compared with 36% for all other working age groups combined. And the longer a person is unemployed, the harder it is usually to return to the job market. As of June, half of the workers 65 and over who were out of work had been out of a job for 46.5 weeks. Compare this to all workers, where the median length of unemployment was 17.6 weeks. The longer workers stay out of work, especially for older workers, the harder it is to jump back in the workforce.
How Will Companies React?
The effect of boomers retiring will have far-reaching consequences. “We are now, in this century, in a period of reduced immigration to the U.S. We are also in a period of lower fertility,” said Richard Fry, a senior researcher at the Pew Research Center specializing in the economy and education. “So the fact that boomers were staying in the labor force has been an important contributor to economy-wide growth.”
With fewer older workers, the Federal Reserve’s ability to manage the interest rate and inflation will also be in jeopardy. With fewer workers in the nation, there are also reduced tax revenues, including the all-important payments into Social Security.
“These are older workers. These are people who as a demographic really shaped the labor market as we know it,” says Hannah Grieser, marketing manager at labor market analytics firm Emsi Burning Glass. “They’re people with decades of knowledge, decades of experience, and we’re not seeing the up-and-coming generation that would be replacing them willing to work the same number of hours, willing to take the same job.”
Managers and business owners will be forced to think outside the box in order to solve the problems created by the mass exodus of older workers. They will need an emphasis on training and mentoring younger workers, as well as considering the possibility of AI in order to pick up the slack. Make no mistake: the effect of all these retirements will be far-reaching.
I like to spend my time giving back with organizations that focus on mentoring aspiring entrepreneurs. I have supported after school programs that focus on entrepreneurial and global initiatives in local primary schools. I recently extended my mentoring to include students at Case Western Reserve University.