The blog of the Urban Institute
May 14, 2020

As Unemployment Surges, Older Workers Need More Help

May 14, 2020

As last week’s jobs report makes clear, the coronavirus pandemic has devastated all sectors of the labor force. More than 20 million nonfarm jobs disappeared in April, and the overall unemployment rate soared to 14.7 percent, more than three times the rate in March. As in past recessions, the unemployment rate was even higher for black workers (16.7 percent), Latinx workers (18.9 percent), and workers ages 16 to 24 (27.4 percent).

One surprise from the April jobs report was the surge in unemployment among older workers. The monthly unemployment rate at ages 65 and older reached 15.6 percent, the highest level since records began in 1948. It exceeded the unemployment rate for workers ages 25 to 54 by 3 percentage points, the biggest gap ever. It’s been more than 50 years since the monthly unemployment rate for workers ages 65 and older surpassed the rate for those younger workers by even 1 full percentage point.

Unlike previous recessions, this pandemic-led downturn has hit older workers especially hard and will likely create long-term employment challenges for them.

What’s different about this recession?

Older workers are usually less likely to lose their jobs because they typically have greater seniority, which protects them when employers trim their payrolls. And when older workers lost their jobs in past recessions, they often retired, dropping out of the labor force instead of trying to find another job.

Chart: unemployment rate by age

Over the past 50 years, unemployment surges following economic downturns hit younger workers harder than older workers. In 1982 and 1983, when the overall annual unemployment rate approached 10 percent, the unemployment rate at ages 65 and older barely increased and remained below 4 percent.

That wasn’t the case last month, when the share of workers ages 65 and older without jobs increased 11.9 percentage points. Unemployment also soared for workers ages 55 to 64, 12.5 percent of whom were out of work last month, leaving them about as likely to be unemployed as workers ages 25 to 54.

Where older adults work doesn’t explain this unemployment surge. The leisure and hospitality industry accounted for more than a third of jobs lost last month and employed 11 percent of the nation’s workforce in March, but it employed only 6 percent of workers ages 65 and older. Older workers are slightly overrepresented in some other hard-hit industries, such as retail trade, education and health, and professional and business services, but not by enough to explain their high unemployment rate.

Older workers may struggle to find work after the recession

We’ll have more data in a few weeks that could shed light on why older people fared worse this time, but it’s clear that older workers’ employment advantages have been eroding recently. Cuts in Social Security and employer pensions and growth in out-of-pocket health care costs now force many laid-off older workers to keep searching for jobs because they can’t afford to retire early. Seniority may now offer older adults less protection, as labor unions have lost much of their power. And there’s mounting evidence that many employers push workers to retire early. In the wake of the Great Recession, the unemployment rate at ages 65 and older doubled between 2007 to 2010, to 6.7 percent, although it remained well below the 8.6 percent rate for workers ages 25 to 54.

History tells us that once the labor market picks up and employers begin rehiring, older workers will find themselves near the back of the line. After the Great Recession, workers ages 62 and older were about half as likely to become reemployed as their counterparts ages 25 to 34. And when unemployed older workers found a new job, they earned barely half as much as they did on their previous job.

Three factors appear to drive employers’ wariness about hiring older workers. Despite little evidence, employers often worry that older workers are expensive to employ (partly because of high health care costs), lack the skills employers need (particularly technological competencies), and will soon retire, not staying long enough to justify the hiring and training cost.

Making matters worse, today’s economic downturn coincides with a global pandemic that poses special health risks to older people. Even when jobs are available, older workers may be reluctant to return to work until workplaces are secure and they can commute safely. And health concerns may make employers even more wary of older workers. Telework isn’t always an option for older workers.

What can policymakers do to help older workers?

Social Security provides a crucial lifeline for unemployed workers ages 62 and older, most of whom can collect retirement benefits, and early Social Security claims surged during the Great Recession. But retiring early often creates financial problems later on, especially once health and long-term care costs swell. Retirees who collect Social Security today at age 62 receive 30 percent less each month than if they had waited until age 67. Retiring early also leaves less time to build up retirement savings and more time to tap those savings.

Potential federal efforts to create jobs, such as subsidizing private-sector employment, reviving the Works Progress Administration, and financing “green” jobs, could boost employment at younger ages, but they won’t be as effective for older people wary of leaving their homes until an effective vaccine or treatment becomes available.

A better way to help unemployed older workers would be to shore up unemployment benefits. Congress could extend the extra $600 per week it provided to workers collecting unemployment benefits, currently set to expire at the end of July. It could also allow unemployed workers to collect benefits for longer than 39 weeks. And it could provide funding to states to help them handle the flood of unemployment insurance claims.

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