The Bank of Korea: "Mass Exit of Elderly Workers in the US Labor Market Due to COVID-19... Changes in Working Conditions"

Last January, nurses held a press conference and protest in front of Jacobi Hospital in New York, USA, demanding improvements in working conditions and treatment worsened by the COVID-19 pandemic. [Image source=Yonhap News]

The Bank of Korea analyzed that the reduction of quality jobs and the surge in asset prices were the main factors for retirement related to the large-scale withdrawal of the elderly population from the U.S. labor market after the COVID-19 pandemic, and predicted that the overall labor supply and demand disruption phenomenon will continue.

On the 30th, the Bank of Korea made this analysis through a report titled "The Impact of COVID-19 on Labor Choices of the Elderly in the U.S."

According to the Bank of Korea, the labor force participation rate of Americans aged 16 to 54 has been steadily recovering since the pandemic, but the elderly population aged 55 and over still remains significantly below pre-crisis levels.

Using the U.S. Health and Retirement Study (HRS) panel data of 17,854 observations of elderly individuals from 2006 to 2020, the Bank of Korea's analysis found that the large-scale withdrawal and delayed reentry of the elderly (aged 55 to 74) into the labor market during the pandemic was mainly due to changes in working conditions rather than changes in labor supply behavior.

The Bank of Korea explained, "The reduction of quality jobs that provide pensions and health insurance benefits had the greatest impact on early retirement of the elderly, and the surge in asset prices during the pandemic mainly affected the retirement of wage workers."

Factors such as government transfer income, education level, and race, which were mentioned as major factors in previous studies, were found to have limited impact on retirement.

In this regard, the Bank of Korea explained, "Previous studies may have overestimated the influence of certain variables because they did not control for information on health insurance, assets, and pensions, which have significant effects on labor supply choices."

The impact of changes in asset prices on retirement varied depending on employment status. When net assets increased by one unit, the probability of wage workers entering the economically inactive population increased by 0.97 percentage points, while that of self-employed individuals decreased by 0.97 percentage points.

The Bank of Korea analyzed that for the reentry of the economically inactive population into the labor market to fully materialize, overall working conditions need to recover.

If quality jobs recover to pre-pandemic levels, employment among the elderly is likely to recover significantly; however, declines in productivity and motivation to work may act as factors delaying the recovery of labor supply in the future.

The Bank of Korea stated, "Considering that it is not easy to create jobs that promote labor market entry for the elderly, the overall labor supply and demand disruption phenomenon is likely to continue and act as an inflationary pressure going forward."

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