The mass exit of workers over the coming decade will put pressure to raise taxes to pay for state pensions but a rising number of millennials entering the job market offers opportunity, a think tank has said.
The number of people ending their working lives by reaching the State Pension Age (SPA) is set to reach a record high over the coming decade, according to the Resolution Foundation.
This is adding pressure to push taxes up as it is estimated that State Pension spending will increase by £24bn and health costs are predicted to surge by £52bn by 2030-31 compared to 2022-23 levels.
The think tank said this decade will be marked baby boomer cohort retiring, with the number of people reaching this milestone is on course to surpass 800,000 a year for the time ever in 2028, and to continue rising after that.
However, this mass exit of workers will be than matched by a rising number of job entrants, a product of the 2000-2010 millennial baby boom.
The number of people hitting 22 – an age at which most people enter the labour market – will start rising again from the middle of the decade, and is on course to surpass 900,000 a year for the first time in decades in 2032.
As a result, the UK workforce will actually get marginally younger by the early 2030s, even as the population as a whole ages.
The Foundation said the surge in young workers at the end of the decade could also make the labour market more dynamic, as young people are more than twice as likely to voluntarily move jobs as older cohorts.
“The coming decade will be marked by mass exits from the labour market as the original baby boomer generation retires. But there’ll be an even bigger mass entry in the labour market, as those born in the millennial baby boom start to come of age. These two trends will spark big changes in our jobs market.
“The retirement of baby boomers will cause a huge boom in healthcare spending – and create over a million extra jobs by the end of the decade. But it will also spark a boom in the hospitality sector, as this generation are the real spenders when it comes to eating out and socialising,” Molly Broome, economist at the Resolution Foundation, said.
The think tank predicts that a bigger share of recent retirees will spend more, increasing the overall non-housing spending by 3.8% between 2019-20 and 2030. The amount spent on private healthcare could rise by 6.7%.
Alongside changes in spending on private health, age-related shifts in the population will in turn drive a labour market boom in the sector.
The Health Foundation estimates that an extra 488,000 healthcare workers, and an additional 627,000 social care workers, will be needed to keep up with demand.
The think tank is also expecting a consumption boom in recreation and leisure, where population changes could increase spending by 4.5%t over the course of the decade. “That’s because – contrary to popular perception – older people now spend a greater share of their income on recreation and leisure than younger cohorts do,” it said.
Having started the 2020s with a pandemic-driven crash, the hospitality sector could end the decade with a retiree-driven boom, the think tank added.
Watch: Is a UK state pension enough to survive on in retirement?