Workers Are Rushing To Retire, One Reason It’s Hard To Hire Employees
Buffalo News (NY)
Dec. 5—A wave of retirements is sweeping over the Buffalo Niagara region — and it's one of the big reasons why "Help Wanted" signs are almost as common as holiday light displays.
Those retirements mean experienced workers are leaving the workforce at a time when thousands of other local workers are sidelined because of factors ranging from child care issues and Covid-19 health concerns to a newfound pickiness about what job to take.
And there is new evidence that the race to retire has been one of the more powerful — and potentially enduring — forces behind the labor shortage that has slowed the recovery from last year's deep but brief Covid-19 recession.
Nationwide, a Goldman Sachs report estimated that 5 million people have dropped out of the labor force — half of them because they retired. Some of those retirements — about 1 million of them — were by workers who would have retired anyway, but Goldman estimates that another 1.5 million — 30% of the people who left the workforce — retired early.
There isn't local data available that tracks early retirements. But local economists think early retirements are an even bigger factor here, simply because we have more people who are within a few years of retiring anyway.
"Early retirements, or accelerated retirements, are definitely more of a problem here," said Timothy Glass, the state Labor Department's regional economist in Buffalo.
"Our population is older," Glass said. "It's just logical if people are accelerating the retirements — and it seems to be — then it's going to affect us more."
In fact, the portion of the population locally that is of prime age for early retirement — people between the ages of 55 and 65 — is about 10% bigger here than it is nationwide.
In Erie County, 14.4% of the population is between the ages of 55 and 65. In comparison, a little less than 13% of the U.S. population is in that early retirement sweet spot.
Economists don't expect the newly retired to change their minds and start looking for jobs again anytime soon.
And that means that the worker shortage may go on for a while.
"I think it will be lasting," said Julie Anna Golebiewski, a Canisius College economist.
For starters, this downturn and the plodding recovery now underway have been very different from other recessions.
In most recessions, workers take a financial hit. They lose their jobs or endure temporary layoffs that cut into their incomes. The stock market tumbles, reducing the value of their retirement accounts. (Remember all the morbid jokes about 201(k) accounts during the Great Recession?) Home prices drop because financially strapped workers can't afford a mortgage payment.
This time, many of the job losses were temporary and the federal government immediately made up for much of that lost income through supplemental unemployment payments.
With not much to do and little to buy during the early days of the pandemic, people socked money away at an accelerated pace, boosting their savings. The stock market plunged briefly, but quickly rallied to record highs, the recent drop notwithstanding.
"The Covid-19 recession was abnormal in the sense that it featured a sharp downturn in real economic activity, but also rising asset values, such as for housing and stocks," economists at the Federal Reserve Bank of St. Louis said in a recent report.
That means bigger balances in 401(k)s and individual retirement accounts, along with heftier savings accounts.
So older workers are more comfortable — and financially able — to leave their jobs. And that's exactly what they are doing.
"They're in a better position to live off their retirement accounts," Golebiewski said.
Before the pandemic, about 18.3% of the population was retired. By August, the percentage had jumped to 19.3% — in just 18 months, according to the St. Louis Fed analysis.
There are other factors in play, too.
Covid-19 worries, especially with older workers who have health conditions that make them more at risk for a severe case, are pushing some toward early retirement.
"They're saying, 'Why go back in if I'm not feeling comfortable?' " Golebiewski said.
The cost of living here also plays a role. Living costs across Buffalo Niagara are lower than in some bigger and faster-growing markets, so retirement nest eggs can stretch further here than they could in expensive places, like New York City or San Francisco.
Others simply decided that going back to the office had lost its appeal, or the opposite — that working remotely soured them on jobs.
"Individuals had been used to traveling for work or sitting down with others for meetings," she said. "Now we're depending a lot more on technology to connect us — a lot more Zoom meetings — and some people don't like that."
Combine those retirements with other factors keeping workers from the labor pool — like child care shortages and health concerns and the widening gap between what workers expect to be paid and what employers are willing to pay — and it is having a deep impact on the Buffalo Niagara labor force.
The local labor force — everyone who is working or actively looking for a job — is almost 1.5% smaller now than it was before the pandemic. That's about 8,400 fewer workers to fill all of the region's job openings.
That may not seem like a big deal, but it is. Our labor force has shrunk almost twice as much as the pool of workers nationwide since the pandemic began, according to October employment data.
But that understates the weakness of the local labor market because so many of the region's workers bowed out even before the pandemic started. The Buffalo Niagara region is down almost 38,000 workers from 10 years ago.
That means almost 1 of every 15 people who were in the workforce a decade ago has dropped out — a reflection of our slowly growing population and older demographics. In contrast, the national labor pool has grown by almost 5% over the past decade, mostly because of the much faster population growth elsewhere.
That has huge implications for the region's economy, because you can't add jobs if there aren't enough people qualified to fill them. A shrinking labor force makes it harder to hire here than other places, and that means businesses may be inclined to look elsewhere when they need more employees.
For now, the labor shortage is national, so Buffalo Niagara isn't alone in being a hard place to hire. But that could change as the recovery evolves. And that means the region needs to build on its encouraging — but modest — population growth over the past decade and bring in more people of working age.
That could happen by creating the kind of jobs that convince the region's young people — and college students — to stay here, rather than moving away. It could be by making the region a magnet for legal immigrants.
But the long-term answer is people. More of them.
"This isn't going to be remedied without attracting new labor force participants into the area," Golebiewski said.
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