Why are there so many workers missing from the labor force? Researchers at the Federal Reserve Bank of New York say the biggest factor may be simple: Workers are just getting older.
While much attention has been paid to an increase in retirements during the pandemic, the analysis found that there wasn’t necessarily a rise in the share of people who are retired for each age group. Instead, the researchers found that more baby boomers reached retirement age during the pandemic, making age the main contributor behind the increase in retirements.
The researchers focused on the labor force participation rate, or the share of the population that is working or looking for work. After plunging at the start of the recession, that metric has since climbed up to 62.5 percent. However, that’s still down 0.8 percentage point from where it was in February 2020, amounting to gap of about 2.1 million fewer workers, they estimate.
Take people between the ages of 60 and 69, for example. The share of those who are retired averaged 39.7 percent in 2018 and 2019, and 40 percent in the second half of 2022. For people aged 70 to 79, some 77.5 percent were retired before the pandemic, compared to 78.8 percent at the end of last year. And for workers above age 79, the share of those that are retired rose from 88.5 percent to 90.5 percent.
“The increase in disability has virtually no effect on the participation gap because, as discussed above, the increase is entirely accounted for by individuals that remain in the labor force,” the researchers wrote.Labor markets have recovered substantially since the pandemic forced the shutdown of businesses across the country and pushed millions of Americans out of work.
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