Great Unretirement: How to plan for people working longer

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Aidan Manktelow, Insights Lead, Inclusive Business, World Economic Forum

• Many older people left the workforce during the pandemic, but the waning of COVID-19 and the soaring cost of living are reversing this trend.
• The phenomenon known as the ‘Great Unretirement’ is seeing over-50s return to paid employment across advanced economies.
• Providing greater flexibility; driving diversity, equity and inclusion; and fostering a learning culture will be vital to support them.

The COVID-19 pandemic saw a large number of older people leave the workforce in many economies, reversing a long-term trend towards rising labour force participation among older workers. But many are now returning to work post-pandemic amid a cost-of-living crisis in a phenomenon that has been referred to as the ‘Great Unretirement’.

Previously in the US, for example, research has shown that there were 3.3 million more retirees in October 2021 than in January 2020, considerably more than would have been expected—a trend that was described as the ‘Great Retirement’.

Meanwhile, in the advanced economies of the Organisation for Economic Co-operation and Development (OECD), overall the participation rate for people aged 55-64 rose from 50% in 2000 to 64.4% in 2019, before dropping to 63.7% in 2020 due to the pandemic. For the over-65s, the rate rose from 9.1% in 2000 to 15.8% in 2019, then dropped to 15.3% in 2020.

However, the pandemic-related decline in workforce participation among older people now appears to be reversing.

In the US, a survey by CNBC showed that 68% of people who retired during the pandemic would now consider returning to work.

In advanced economies, the participation rate rebounded to 64.4% in 2021 for the 55-64s, fully reversing the pandemic-related decline. For the over-65s the recovery has been more gradual, with the participation rate picking up to 15.5% in 2021, still slightly below the pre-pandemic peak.

Rising cost of living one factor behind the Great Unretirement

A waning of health-related concerns is partly responsible for the Great Unretirement and there is also evidence that financial difficulties in the context of the cost-of-living crisis are playing a role.

In the US, CNBC’s survey found that 33% of respondents had retired early for health reasons and 27% because of COVID-19 concerns.

Meanwhile in the UK, a survey by over-50s platform Rest Less found that one-third of its retired members had either returned to work or would consider doing so and of those, two-thirds cited financial reasons as playing some role.

The trend in the coming years is likely to be for more older people in the workforce, a result of demographic changes (the proportion of the population aged over 50 in advanced economies is projected to rise from 37% in 2020 to 45% in 2050), increased longevity, countries raising the retirement age (or abolishing it entirely for people who wish to continue working) and underfunded pension schemes forcing people to work for longer.

Over-50s can help address talent shortages

Older workers will also have a critical role to play in helping to address talent shortages in advanced economies.

In the UK, for example, where the retail sector has been suffering from talent shortages, almost one-quarter of the workforce at John Lewis is now aged over 56. The company has improved its attractiveness to older workers by allowing reduced hours around caring responsibilities.

The OECD estimates that building multigenerational workforces and giving older employees greater opportunities to work could raise GDP per capita by 19% over the next three decades.

There are several priorities to ensure that these gains are realised.

1. Governments need to put in place comprehensive policies to prevent age discrimination and ensure that they are enforced.

The US has the Age Discrimination in Employment Act (ADEA), passed in 1967, but there continues to be evidence of age discrimination, especially in hiring. Similarly, the EU has had a directive banning employment discrimination on the basis of age since 2000, but there are various exemptions and issues with enforcement by both national and European courts.

2. Public and private sectors need to collaborate to ensure that older workers have access to reskilling and upskilling so that they remain employable.

This might involve leveraging technology to provide tailored learning opportunities for older workers, as well as ensuring that funding is available to support retraining at any stage of someone’s career.

3. Action is needed to ensure that suitable jobs exist and are accessible to older workers.

This might involve for instance tailored assistance to match older workers with job opportunities, as well as ensuring that jobs are adapted for older workers.

4. Companies must make themselves attractive to older workers—this will be an important component of competition for talent.

Flexibility will be an important element, allowing people to move beyond the traditional ‘cliff-edge’ approach to retirement. Unilever’s U-Work model for example, which seeks to combine flexibility and security, is partly aimed at ‘perennials’ (over-50s).

How to support those working for longer

There are already initiatives under way to encourage job quality across all age groups, which will be vital to support those ‘unretiring’ and going back into the workforce.

The Good Work Framework developed by the Good Work Alliance in collaboration with the World Economic Forum and Mercer, for example, provides a template for promoting job quality across all categories of workers.

Its objectives, which will all be relevant for older workers, include: providing flexibility; driving diversity, equity and inclusion; and fostering employability and learning culture.

Progress by organizations on these objectives will be supported by metrics currently under development to promote measurable outcomes and by a toolkit on how to make good work a reality within companies.

Meanwhile, the Living, Learning, Earning Longer initiative led by AARP, an interest group which focuses on the interests of over-50s, and the OECD is exploring what is needed to build, support and sustain multigenerational workforces.

We need to ensure older people returning to work, as well as those who choose to stay in the workforce for longer, are adequately supported – to the benefit of us all.