Great Layoff, Great Retirement and Post-pandemic Inflation

Guido Ascari, Jakob Grazzini and Domenico Massaro

No 19068, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The Covid-19 shock caused a dramatic spike in the number of retirees -- a phenomenon dubbed the ``Great Retirement" -- and a prolonged contraction in the labor force. This paper investigates the impact of the Great Retirement on the post-pandemic surge of inflation, via the labor market. First, retirement is generally countercyclical, and the peculiarity of the pandemic shock was just in its size: the ``Great Layoff'' in March and April 2020 triggered the Great Retirement. Hence, a transitory labor demand shock generated a persistent labor supply shock. Second, counties more exposed to the Great Layoff exhibit a relatively higher increase in wages. Finally, an estimated model with endogenous labor market participation quantitatively assesses the overall contribution of the Great Retirement to inflation from 2020:Q1 up to 2023:Q2 to be roughly equal to 3.7 percentage (cumulative) points.

Keywords: Wages (search for similar items in EconPapers)
JEL-codes: E30 (search for similar items in EconPapers)
Date: 2024-05
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Working Paper: Great Layoff, Great Retirement and Post-pandemic Inflation (2024)
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