The question on the minds of American workers in April will be when can we turn the economy back on. The underlying assumption in that question is that there will come a point when we can re-create the economy we had before the coronavirus forced the closing of large parts of the country. Although some things will go back to the way they were, not everything will.
For older workers who have been staying on the job for longer amid the strong labor market over the past few years, bouncing back from being laid off may be difficult or impossible. That might mean a smaller labor pool for the broader economy that will leave a mark for years to come.
Older workers have been one of the reasons job growth has remained so robust during the past few years. From the end of 2016 through February, employment among people between the ages of 25 and 54 increased by 3 million. For workers older than 55 that total was slightly higher, or 3.1 million. This isn't because workers older than 55 had been getting hired at a rapid rate, but rather that lots of workers were turning 55 and weren't retiring as quickly as some forecasts predicted.
Getting older workers to take jobs or stay in the labor force for longer has been a key reason Japan has been able to stave off economic decline as its population ages and shrinks.
The risk is that this temporary phase of economic disruption will turn into permanent disruption for older workers. We saw in last week's jobless claims report that fiscal support from Congress either isn't fast or effective enough at preventing mass layoffs, with American companies firing a record 3.28 million workers in a single week. In all likelihood, we're going to see at least a couple more weeks of historically high levels of jobless claims. Workers older than 55 represent almost a quarter of all employed Americans. If 7 million workers get laid off or furloughed as a result of this crisis and the impact is evenly distributed by age, that's 1.75 million displaced senior workers.
What's unknown is how many of those workers will make it to the other side of this mess. Some 10,000 baby boomers turn 65 every day or 300,000 per month. Whereas during the 2008 financial crisis no Baby Boomer had turned 65 yet, forcing the vast majority of that generation to try to stay in the labor force as that economic recovery was unfolding, that isn't the case today.
There are many ways that older workers might exit the labor force as a result of this crisis. Some may voluntarily decide to fall back on Social Security and Medicare rather than try to navigate a post-crisis labor market. Others, despite the best efforts of policymakers to help companies keep workers on their payrolls, may be involuntarily discharged. Perhaps some industries have will have lower demand for a while and won't need to return to pre-crisis staffing levels. Others may hire younger workers rather than large numbers of displaced older workers. Some companies may use this crisis to offer buyouts to their older employees, figuring that they were likely to lose them to retirement in the not-so-distant future anyway.
This should alarm policymakers for a variety of reasons. First, we should want older workers to retire on their own terms, not be pushed to the exits during a pandemic. The 2008 financial crisis did a lot of damage to the finances of households approaching retirement age. Although years of steady labor market growth and rising investment accounts may have repaired much of that damage, this shock will mean new savings holes that threaten the retirements of those who recently thought they might have a few more years of labor income ahead of them.
Second, we're probably not going to get the strong economic rebound coming out of this economic shutdown that everybody wants if the labor force is missing hundreds of thousands of workers. Companies will need to fill those vacancies and train workers to replace experienced personnel who may have been on the job for decades. For smaller businesses, in particular, missing a few key veteran people may be the difference between survival and failure.
As Congress thinks about what future economic rescue and stabilization legislation should look like, it's worth considering incentives to keep older workers on the job or efforts to rehire them once this crisis passes. Let's hope the public-health crisis we're experiencing will recede during the next few months. But the economic damage from this shock may well endure for years. Countries confronting aging and slow population growth need to keep older workers employed to sustain their economies. If we're not thoughtful about addressing this issue, the shock to the labor supply of boomers exiting the workforce en masse may be a lasting legacy of this crisis.
By Conor Sen