While the nation’s economy is on the mend after the Great Recession of 2008, many people who lost jobs at age 50 or older are expected to struggle for the rest of their lives.
The average person who loses a job after age 50 is expected to have an income 18 percent lower than people who kept their jobs, according to research by the Center for Retirement Research at Boston College.
In addition, retirement years are expected to be difficult for those who lost jobs because pension wealth will be 20 percent less on average than for people who held onto jobs. And financial assets, like retirement savings, will be about 30 percent smaller, researchers Matthew Rutledge, Natalia Orlova and Anthony Webb found.
That could have implications for the nation’s debate about deficit-cutting in the years ahead. The research was done with a grant from the Social Security Administration.
About 3.2 million people older than 50 were jobless at the peak of the recession and, given their ongoing financial stress, they are not likely to tolerate any proposed cuts in Social Security and Medicare.
Even people who kept jobs in the recession were hit by sharp declines in home values and retirement savings, although those who resisted the urge to bolt from plunging stock funds in 401(k)s and IRAs have probably regained what they initially lost. The stock market has been hitting new highs recently – restoring wealth to people who held onto investments. Those who dumped stock funds in a panic and have left savings in money market funds and savings accounts are unlikely to regain the sum they had in 2007.
For those who lost jobs, catching up with savings will be even more difficult.
In December 2009, the unemployment rate for older workers was 7.2 percent. At the peak of the recession, 3.2 million were out of jobs. Unlike previous recessions, when older workers tended to keep jobs, this recession carried a high toll for people of all ages while the length of joblessness was highest among older people, hitting a record of 40 weeks in mid-2011.
“Workers who spend a long time away from employment, especially those nearing old age, risk skill atrophy and declining health, and may find it difficult to convince employers to hire them,” the researchers said.
To estimate the long-term impact on older workers who were unemployed in the recent recession, the researchers analyzed data on people who lost jobs in previous recessions. They focused on how individuals who went through mass layoffs fared 10 years later, and compared it to people who hadn’t lost jobs. The sample of more than 6,000 people came from the federal government’s Health and Retirement Study.
“Displaced older workers will end up substantially worse off than those who did not lose their jobs,” said the researchers. They noted that the massive job-cutting that took place in the Great Recession meant that “higher quality” workers ended up losing jobs in 2008-10 compared to other recessions when cuts didn’t dip as deeply into the workforce.
Those who were laid off in previous recessions tended to be more vulnerable from the start than other workers prior to the layoff. They had lower earnings and their financial assets, like retirement savings, were smaller than for other workers. The disparities continued over the next 10 years after the layoffs, and those who lost jobs were more likely to be displaced again during that period.
People who lose jobs during mass layoffs are 4.6 percent less likely to be working eight to 10 years later, they found. They are 6.3 percent less likely to escape additional layoffs in the following 10 years. And they work about 11 fewer months in the 10-year period.
With earnings down and employment less stable, their savings and pensions are severely affected. They accumulate 30.2 percent less financial wealth, including pensions.
The researchers said participation in the labor force by older workers will be greatly reduced in the future. About 23.7 percent are predicted to be working in 2018. If the recession had been more like the milder 2001-03 recession, the researchers said, about 27.5 percent would be working. Barring any recessions, the data suggests about 36.4 percent of older workers typically would continue in the labor force.