According to a study conducted by the Institute for Fiscal Studies (IFS), half of the older adults who left their jobs in the UK due to mass redundancies during the first year of the Covid pandemic fell into relative poverty. The IFS, Britain’s leading economics thinktank, suggests that job losses during the initial stages of the crisis, combined with the heightened health risks faced by older employees, likely led to many individuals opting for early retirement.
Contrary to popular belief that wealthier individuals were driving the increase in early retirement, the IFS reveals that approximately 48% of individuals aged 50 to 70 who left their jobs in 2020-21 experienced relative poverty. Relative poverty is defined as living in households with income below 60% of the median.
This study emerges as concerns regarding workforce shortages grow. The Covid pandemic has triggered an exodus from the workforce, with many individuals opting for early retirement and others experiencing record levels of long-term sickness among working-age adults. Economists have identified the UK as an international outlier in terms of weak employment recovery, contributing to sustained inflationary pressures as employers raise starting pay to address the high number of job vacancies.
Even those without significant state or private pension income were forced into early retirement, exacerbating their living standards and overall well-being, according to the IFS. The study found that individuals who stopped working reduced their weekly food expenditure by an average of £60, significantly more than those who had stopped working in previous years and did not experience substantial changes in their spending habits.
It is worth noting that older individuals who left the workforce were less likely to receive pension incomes compared to those who stopped working in previous years. In 2020-21, approximately half of those who stopped working had no access to private or state pensions, compared to 43% the previous year.
Xiaowei Xu, a senior research economist at the IFS, suggests that some older workers who left their jobs during the pandemic may return to the workforce if suitable job opportunities become available. There are already signs of some older individuals reentering the workforce. Xu emphasizes the importance of government policies aimed at supporting older workers, such as the Department for Work and Pensions’ “mid life MOT,” stating that these policies are critical if ministers want to encourage more older workers to return.
In conclusion, it is crucial to note that the assumption that older individuals who left the workforce during the pandemic were prosperous and retiring comfortably is incorrect. The IFS analysis demonstrates that those who left their jobs in the first year of the pandemic experienced a significant increase in poverty, despite an overall decline in poverty rates during that year. Additionally, these individuals suffered substantial declines in well-being.
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