News: How Unexpected Early Retirements Could Shape the Economy and Workforce
Unexpected early retirements are compounding worker shortages. How will this reshape the workforce?
Contributing Writer at Tally
September 24, 2021
During the pandemic, we learned to expect the unexpected, especially when it comes to finances. Over the past year, the unthinkable happened. The stock market surged, leaving many peoples’ retirement accounts in better shape than expected.
This unexpected windfall combined with uncertain job outlooks, wage cuts, layoffs and the anxiety of working in an office amid the pandemic led to high-than-expected baby boomer retirements. All told, about 2 million more people entered retirement during the COVID-19 pandemic, according to The New School's Schwartz Center for Economic Policy Analysis.
These mass retirements are bound to impact the economy and workforce for some time. Let’s explore how this sudden uptick in retirements may impact the country as a whole.
Companies may be forced to change their ways
Not all baby boomers plan to retire early, but a Gallup study says only 16% of people aged 68 or older are full-time workers.
That’s not going to cut it for most industries, so hiring managers must look elsewhere. The initial thought is the workforce must get younger and tap into the established Generation X. However, there are some issues to consider.
The Generation X workforce is in the stage of their lives where many are caring for young children and aging parents. Often referred to as “The Sandwich Generation” for their dual care roles, this means workplace flexibility is a must. Benefits such as remote working, unlimited vacation, extended parental leave and other similar perks are at the top of their needs list.
For many companies with older workforces that were traditional 9-to-5 workers, this dramatic shift to more flexible arrangements likely won’t be easy. The demand for these established workers may force some companies to change their ways to fit the modern worker.
Training and open-door policies may become more critical
The other potential replacement for the outgoing baby boomer generation is the developing millennial generation. These young workers are the up-and-comers in the corporate world, but many are still in their mid-20s to early-30s and still establishing themselves.
Some lack the training, on-the-job experience and soft skills to jump straight into the roles baby boomers are vacating. However, this could push some companies to build more robust training systems that include soft skills training, mentoring and early management training to better prepare them for the sudden boost in responsibility.
Millennials are attracted to open organizations, meaning those with open conversations about finances and open-door policies within management. Again, this isn’t something the outgoing baby boomer generation gravitated toward. Still, we could see a shift in that direction in an attempt to recruit skilled millenials to replace retiring baby boomers.
Skills shortage could force immigration reform
Foreign workers play a huge role in the service, production, transportation, construction and maintenance industries. They also have a heavy hand in the science, technology, engineering and mathematics (STEM) fields.
Recent struggles to reform immigration and obstacles blocking legal immigration compounded the labor shortage amid the pandemic. The Chamber of Commerce believes opening the borders to more foreign workers will help fill the skills gaps and the benefit gaps lingering in the millennial generation and Gen X.
The Biden administration has already opened an additional 22,000 H-2B temporary visas for non-agricultural workers. Still, it needs an act of Congress to truly address the worker shortage that will only worsen as more baby boomers choose retirement.
According to Neil Bradley, chief policy officer at the Chamber of Commerce, it is possible to get some effective piecemeal immigration reform in place through Congress.
Regardless, change is coming
As with any dramatic shift in the employment base, change will have to come to accommodate the mass exodus of older baby boomer workers. What remains to be seen is whether there will be a shift toward younger workers through workplace flexibility, modern benefits and training or through immigrant workers via immigration reform to open the borders to more skilled workers.