The 416,000 Idahoans who are in their 50s and 60s face many challenges because of the coronavirus economic impact.
Loss of business income. The COVID-19 pandemic has greatly reduced revenues of many Idaho businesses. It also is likely to lead to the permanent closure of some businesses, especially restaurants, entertainment operations, lodging and retail stores. Since older adults are more likely to run their own businesses, they are disproportionately impacted. According to the Bureau of Labor Statistics, about 24 percent of American workers 65 years and older are self-employed, while 15 percent of workers 55 to 64 years are self-employed. In comparison, 8 percent of workers under 55 are self-employed.
Joblessness. About 16 percent of Idaho’s 162,000 payroll workers 55 years and over filed new unemployment insurance claims between March 15 and June 13. Some returned to work within a month, but others experienced two or three months of joblessness.
Idaho women 55 years and over experienced particularly sharp increases in joblessness between March and April, as the pandemic entered its highest time of job loss, according to the Current Population Survey. An estimated 16.8 percent were unemployed in April. Many older women work in the service industries that were hit the hardest by the shutdowns.
Job loss tends to have more impacts on older workers as they often find it much harder to find new jobs. An Urban Institute study of workers who lost their jobs in the Great Recession that began in December 2007, nearly half of unemployed workers 35 to 49 years old were reemployed within seven months, while half of unemployed workers 50 to 61 took more than nine months to find jobs. Only about a third of workers 62 years and over found jobs within 12 months of becoming unemployed, and only about two-fifths became reemployed within 18 months.
The Urban Institute also found that older workers who lost their jobs in the Great Recession experienced larger pay cuts than younger workers. For workers age 25 to 34, median monthly earnings at their new jobs were 11 percent lower than at the jobs they lost. For workers age 50 to 61, wages were 23 percent lower, and for the older workers, they were nearly 50 percent lower.
Tough choices about early retirement. Workers 62 years and over who lose their jobs have the option of early retirement. In 2009, the Great Recession caused a surge in Social Security retirement claims, as older workers found it difficult to become reemployed. In 2009 and 2010, the number of Social Security retirement beneficiaries in Idaho grew by 16,198 — more than double the 7,558 added in 2007 and 2008.
Retiring earlier than planned leads to long-term income losses. It means fewer years of work when an individual could save rather than drawing upon savings. In addition, retiring early can result in considerably lower Social Security benefits. In 2020, beneficiaries who begin collecting when they turn 62 will receive 28 percent less each month than if they instead had begun collecting at age 66 and 8 months, their full retirement age.
Erosions of retirement plans. The pandemic is reducing the retirement nest eggs of many households. It caused turmoil in financial markets and imposed financial hardships upon half of all households. Seven in 10 Americans say the COVID-19 pandemic will affect their retirement, forcing many to dip into their nest eggs, scale back contributions and work months or years longer, according to a TD Ameritrade published in early June.
The economic hard times are likely to cause both employees and employers to reduce contributions to 401(k) plans. During the Great Recession, about four in 10 employees reduced their 401(k) plan contributions by at least 39 percent. Since the coronavirus pandemic began, some employers have ended or reduced their matching contributions for 401(k) plans, and more employers are likely to do so in coming months, according to the Urban Institute. In a recent report, it said, “Withdrawals from 401(k) plans spiked during the Great Recession, and the recently signed Coronavirus Aid, Relief and Economic Security Act eases withdrawals this year. Unless funds are paid back, however, these withdrawals leave workers less prepared for retirement.”
Risks involved with returning to work. Since age increases a person’s chances of becoming severely ill from COVID-19, seniors — especially those with pre-existing medical conditions — may be uncertain about whether they should return to the workplace.
Kathryn.Tacke@labor.idaho.gov, regional economist
Idaho Department of Labor
(208) 799-5000 ext. 3984