"The Great Retirement Boom": The Pandemic-Era Surge in Retirements and Implications for Future Labor Force Participation

Joshua Montes and Christopher Smith
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Joshua Montes: https://www.federalreserve.gov/econres/joshua-k-montes.htm

No 2022-081, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: As of October 2022, the retired share of the U.S. population was nearly 1-½ percentage points above its pre-pandemic level (after adjusting for updated population controls to the Current Population Survey), accounting for nearly all of the shortfall in the labor force participation rate. In this paper, we analyze the pandemic-era rise in retirements using a model that accounts for pre-pandemic trends in retirement, the cyclicality of retirement, and other factors. We show that: more than half of the increase in the retired share are “excess retirements†that would likely not have occurred in the absence of the pandemic; excess retirements have been concentrated among cohorts age 65 and older at the start of the pandemic; excess retirements have been largest among the college-educated and whites; and excess retirements reflect in part that worker transitions from the labor force to retirement remain elevated. We also show that failing to account for updated population controls to the Current Population Survey leads to an underestimate of the rise in the retired share over the last few years. We use a cohort-based framework to argue that looking forward, unless the pandemic has permanently affected retirement behavior, excess retirements should eventually fade as those who retired early during the pandemic reach ages when they would have normally retired. Even as excess retirements fade, the retired share will remain well above its pre-pandemic level, reflecting population aging.

Keywords: Covid-19; Labor force participation; Retirements; Social security (search for similar items in EconPapers)
JEL-codes: J11 J21 J26 (search for similar items in EconPapers)
Pages: 33 p.
Date: 2022-11-30
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2022-81

DOI: 10.17016/FEDS.2022.081

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