Increase in Early Retirement Among Elderly in the US... "Due to Health Deterioration, Reduced Pensions and Insurance"

Citizens are passing by a COVID-19 testing site sign in Manhattan, New York, USA.
[Image source=Yonhap News]

As the economy gradually recovers, the employment situation in the United States is improving, but labor supply is still facing difficulties due to the slow return of the elderly to the labor market, according to a recent investigation.

On the 6th, Oh Tae-hee and Lim Sang-eun, managers of the International Economics Department at the Research Bureau of the Bank of Korea, explained in the report titled "Analysis of Major Factors of Early Retirement Phenomenon among Elderly in the U.S." that "the slow recovery of labor supply in the U.S. is largely due to a significant number of elderly who retired due to the pandemic still not re-entering the economically active population."

The elderly population aged 55 and over in the U.S. showed relatively less labor market exit at the early stage of the COVID-19 outbreak compared to the 25-54 age group, but their return to the labor market has been slow since then.

Accordingly, the labor force participation rate of the elderly is declining, unlike the rising trend seen during the 2008-2010 global financial crisis.

The Bank of Korea analyzed that despite strong job demand in the U.S. labor market, the slow return of the elderly is influenced by a significant increase in voluntary retirements due to health reasons and other factors.

Based on an analysis of elderly panel data, the Bank of Korea found that the spread of infectious diseases caused labor market exits and unemployment among elderly workers, with these employment shocks concentrated among the relatively older age groups within the elderly population.

Most of the early retirement phenomenon among the elderly was explained by changes in pension benefits, health insurance, and health status.

The report indicated that the perception of deteriorated health due to COVID-19 significantly increased the likelihood of retirement.

The reduction of health insurance benefits at workplaces due to COVID-19 also negatively affected the elderly's willingness to work.

Following the COVID-19 outbreak, the proportion of workers receiving health insurance benefits decreased due to factors such as worsening corporate profitability and reduced working hours during job exits and re-employment processes.

Factors commonly cited as causes of early retirement, such as asset price increases and increased transfer income from the government, had limited effects.

Some expect that if the impact of asset price increases weakens, the elderly's re-entry into the labor market will significantly increase, but the report explained, "The re-entry of the elderly into the labor market is expected to accelerate only when concerns about infectious diseases are sufficiently alleviated."

It added, "Even in such cases, elderly individuals face relatively higher physical and psychological costs compared to other age groups to re-enter the labor market. Additionally, the loss of human capital over time after entering the non-economically active population weakens their motivation to work, which acts as a constraint on the elderly's labor market re-entry."

This content was produced with the assistance of AI translation services.