Ask the grumpies: How do retirees affect the economy

‘Snough asks:

News reports talk about employment/unemployment, but not much about the effect of the number or style of retirees. Are there economic theories about how retirement and retirees affect the economy?

There’s a lot of research on retirement!

Overall, government providing incentives for people to retire is bad for the economy.  People who aren’t working just aren’t as productive as people who are.  Most world social security systems aren’t fully funded and thus rely on current taxes and current debt, and that’s not great for people who are working.  We don’t know if retiring has positive or negative effects on health– there are studies that show both so either it’s complicated or we haven’t nailed causality yet.

As for the economy:  In general, recessions cause older people who are unemployed to stay unemployed or to drop out of the labor force prematurely, that is, to prematurely retire.  However, most recessions also cause older people to hold onto jobs longer than they would have otherwise and in most recessions they’re less likely to be laid off because of age discrimination in employment laws or because they have more experience and are thus more necessary to the firm.  In the great recession some of these protections were eroded.

Retirees do do volunteer work and that’s great, but they don’t volunteer as much as they worked for pay before retirement.

Some retirees work part-time, which is useful for the economy.

That’s just a general snippet, but there’s huge amounts of research on these topics and even a specific dataset (the Health and Retirement Study) just for answering these kinds of questions.



13 Responses to “Ask the grumpies: How do retirees affect the economy”

  1. First Gen American Says:

    There aren’t many early career people in my type of job. If I retired it wouldn’t be a net positive. It would require most of the genxers and boomers to retire before companies in my specialty to create a more robust pipeline for development of younger people. Right now they mostly steal from each other and I know I’d spend less if I had more time to be economical about stuff.

    Somewhat related, I often wonder if having basic universal healthcare would help encourage more entrepreneurship.

  2. loribeth61 Says:

    Retiree here. ;) A lot of people would LIKE to work longer, but get pinkslipped in their 50s — and then find it very difficult to get someone else to hire them at this stage of their life — certainly in a similar position & salary level as their previous job. Ageism is very much alive and well in the corporate world.

    I was hoping for early retirement at 55, maybe 56 and certainly by 60. Instead, I was let go 9 years ago, when I was 53, along with four others from my department on the same day. Several more followed — more than 10% of our department headcount. It was part of a major housecleaning/”reorganization” by a new CEO, and it was happening right across the organization.

    Of the five of us that day, three of us were in our 50s, one was 60, and one was in her late 20s. The 20-something employee was simultaneously offered a contract position with another department. All the rest of us were longtime employees with 15, 25+, 30+ years of service to the company (perhaps not coincidentally with major defined benefit pension payouts to come, had we been allowed to work into our 60s). I’d been there for just short of 28 years. We all did get fairly generous severance packages, including outplacement counselling.

    My husband had been laid off from HIS job less than two years earlier, at age 56. Part of his package included a session with a financial planner. We asked him if he thought we’d still be able to manage if my husband took early retirement once his package ran out, and if I retired at 55 (with a reduced pension). With no children to put through college and a paid-off mortgage, he assured us we’d be fine. Even though I wasn’t quite 55 when I was let go, I looked at my job prospects and decided to go for it. My package lasted until just before my 55th birthday, when my (reduced) pension started. Several of my former colleagues hoped to find other work, but found job hunting very difficult and eventually took early retirement as well.

    (I later learned that my old job had been reconfigured and was now being done by a much younger employee, presumably at a much lower salary. Defined benefit pensions were phased out by the company shortly after we were all let go.)

    I’d been hearing HR talking for YEARS about impending labour shortages as the baby boomers began retiring, and “the coming war for talent,” and of course that’s exactly what’s happening now. I can’t feel too sorry for these companies. There are a lot of older people out there who would like to keep working longer (and some NEED to keep working longer), but they’re not being given the chance.

    I think some retirees might like to keep working at their current jobs or companies, if they could do it part-time without losing their retirement benefits, but not many companies are offering that option.

  3. nicoleandmaggie Says:

    One day left, $203 still needed as of now. The lower that number gets, the more donors choose will show it to people on the site and the more likely someone will finish funding it:

    Even $25 will help it get that visibility before it expires!

  4. Debbie M Says:

    I’ve always felt there was a significant part of the economy, low-paying part-time and/or temporary jobs, traditionally done by pensioners, that will be in big trouble as pensions disappear. Pensioners can afford to take those kinds of jobs in a way most people can’t. Examples of these kinds of jobs that I know about: elections workers, seasonal workers in retail, census workers, IRS seasonal employees, people who score essay questions on standardized tests, and, in the olden days, people who delivered phone books.

  5. Matthew D Healy Says:

    I’ve thought for many years the US should:

    1. Start gradually lowering the age of Medicare eligibility as a gradual transition to single payer

    2. Gradually increase the age of Social Security eligibility.

    3. ENFORCE laws against age discrimination. Most of the people I know who retired early did so because of age discrimination, not because they wanted to retire.

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