The last 18 months have seen a drastic uptick in redundancies, furloughed workers and economic inactivity – and although the labour market is on the mend, not everyone participates in the recovery equally. Many elderly people have dropped out of the labour force which could pose a greater problem to the economic recovery than is currently appreciated. This is even more the case as, unlike for their younger counterparts, there is little government support available.
Before the impacts of Covid-19, the number of older people in the workforce had been rising sharply. There were 781,000 workers over the age of 65 in the workforce at the beginning of 2010, and by the beginning of 2020, this number was up by 81.2% to hit 1.4 million. This drastic growth of elderly workers reflects the increasing retirement age as well as advances in medicine and longevity and will have provided a significant boost to the economy. Despite the increased prevalence of older workers in the labour force, there appears to be little attention paid to the adverse effects that could ensue if the trends the pandemic has triggered continue. To put the severity of the issue into perspective, we can compare employment numbers of elderly workers with the number of migrants since the onset of the pandemic. Labour force survey estimates indicate that around 221,000 migrants have dropped out of employment since Q1 2020. The number of over 65’s that have left employment is 60% of this number, at 132,000. The economic losses that will ensue from less migrants in the UK courtesy of Brexit and Covid-19 are well documented (1), so why is no one talking about the impacts of the significant drop in elderly workers? While one might argue that migrants bring more energy and creativity to the workplace, older workers have plenty of valuable experience that could be crucial for businesses who want to survive in a post-covid world.
Things could get worse still in September upon the termination of the furlough scheme at the end of the month. Figures from HMRC suggest that on 30 June 105,000 people over the age of 65 were still on furlough. This figure hasn’t budged much over the course of the year either. While 685,300 25-34 years olds have returned to work after being furloughed since the start of this year, only 86,100 people over the age of 65 have returned. With the skill requirements of the labour force turning increasingly digital many employers will be looking for younger, more tech-savvy workers. Also, many elderly workers may have no desire to return to the workplace after a lengthy spell on furlough, so many of these 105,000 furloughed workers may be unlikely to ever return to work. Cebr has previously noted older workers difficulties in returning to the workforce after the impacts of Covid-19, citing the IFS’ findings that 6% of 66-70 year-olds who were working before Covid and 11% of those aged 71+ have retired, of whom about half had not intended to do so.
The risk of a large number of older workers leaving the labour force is worrying given the recent fears of labour shortages in the UK. Job vacancies recently climbed above 1 million for the first time ever, as employers were desperate to hire staff amid booming demand post-lockdown. While it is too early to tell whether the Covid-induced reversal in the trend of older workers will be sustained as the economy recovers in the longer term, employers should take care to secure skills and talent now in order to make the most of current period of high growth. We should start focusing on encouraging those who have not retired yet to remain in the workforce, as the value their labour has given to the UK economy over the past decades should not be underestimated.
For more information please contact: Oliver Gatland, Economist Email:forecasting@cebr.com Phone: 020 7324 2841