Yahoo Finance The Great Unretirement is accelerating as pensioners feel the squeeze
Thousands of early retirees who gave up work during the pandemic are returning to the labour market as inflation eats into their savings.
New figures show tens of thousands of 50- to 64-year olds “unretired” in recent months, in a much-needed boost to Britain’s workforce.
The share of working-age people classed as economically inactive – meaning they’re neither employed nor job-hunting – fell by 0.2 percentage points between August to October, according to the Office for National Statistics (ONS).
The decrease was driven by 84,000 fewer working age people classing themselves as retired. Soaring living costs – as inflation runs at a 41-year-high – are likely a key reason for the return to work.
“This tallies with other data which suggest more people in their 50s are thinking of going back to work, at a time when the cost of living is rising rapidly,” said Sam Beckett, head of economic statistics at the ONS.
While the quarterly drop in inactivity is small, it could be the start of a large-scale “unretirement” as rising costs prompt people to reverse earlier decisions to give up work.
If this plays out, it would be good news for the economy. Britain’s shrinking labour force has become a cause of great concern in the aftermath of Covid. Employment remains one percentage point below its pre-pandemic level, making the UK an outlier among rich advanced economies.
Many economists believe this partially explains why inflation is higher in the UK than in similar countries and why the recession is predicted to be deeper. The wave of early retirement has contributed to labour shortages that are hampering the economy and leaving many employers with no choice but to pay higher wages to attract staff.
The fall in working age retirees is “an interesting and positive first sign” that the problem could be fixing itself, according to Beatrice Boileau from the Institute of Fiscal Studies.
However, she believes it’s too early to call whether we’re witnessing a full-scale reversal of the wave of early retirement seen during the pandemic.
“There are still over 300,000 more of this age group [50-to-64] who are inactive compared to the pre-pandemic labour market,” Boileau points out.
However, polling for the ONS suggests that the cost of living pressures are making the return to work seem increasingly attractive for many retirees.
Close to 75pc of inactive people aged 50 to 59 said they would consider returning to work in August, up from 58pc in February. Two thirds also said they would consider returning because of the money, up from 56pc in February.
“In general, very few people aged 50 to 64 can afford to retire given life expectancy and the state pension so I'm not surprised to see this unwinding,” says economics professor Andrew J. Scott.
“I think some people thought that actually having gone through lockdown they could see the disadvantages and the costs of having to go to work and perhaps they might be able to afford not to work so much.
“Clearly, the cost of living crisis is going to change a lot of those calculations.”
Ricky Kanabar, a professor of social policy at the University of Bath, says: “It's not unreasonable to think that the longer this crisis goes on, the more a large portion of this group will need to return to work, for example, due to cost and cost of living related issues. That would be welcome for the economy.”
Like Boileau, though, he believes it is too early to say whether we’re seeing the “Great Unretirement” that many have predicted.
Overall, 27pc of 50- to 64-year-olds were inactive in the three months ending in October, down from 27.7pc in the previous period. However, the proportion is still much higher than the last pre-pandemic quarter when it stood at 25.3pc.
The chances of luring more early retirees back to work will depend on how long they’ve been out of work, experts say, as well as whether their skills are needed.
“People who are recently employed who then go to retirement are more likely to unretire if they've recently left the labour market,” Kanabar says. “Someone who's been out of the labour market for a long time might find it quite a bit more difficult [because of], for example, skills depreciation.”
Scott says older workers tend to put greater emphasis on flexibility and being in charge – often more so than money.
He adds: “The challenge is: are people healthy enough to work? Can they get jobs? Because there's a lot of ageism in hiring. There is all sorts of evidence that the labour market is biassed against older people. And then there's also the issue of: are there enough age-friendly jobs.”
For now, we have to wait and see whether this is just a blip. But much suggests that the “Great Unretirement” could now be under way, bringing good news for the UK economy with it.
