Economic inactivity in older people has risen since onset of Covid-19

The rate of economic inactivity among people in their 50s and 60s has risen since the Covid-19 pandemic started, with 35.4 per cent of older people being economically inactive in Q1 2020 compared to 36.5 per cent in Q1 2022, the Institute for Fiscal Studies (IFS) has revealed.

The IFS pointed out that this rise represented a reversal of earlier trends, as the proportion of people aged over 50 who are economically inactive – neither in work nor actively searching for work – had steadily fallen in the decade prior to the pandemic.

This change of employment patterns for older people comes despite very little change in unemployment, which early in the pandemic was widely expected increase.

The report also discovered that the rise in economic inactivity had been larger for people in their 50s and 60s than for people younger or older than them and, while those aged over 70 had also seen an increase in economic inactivity, it had been much smaller than for 50- to 69-year-olds, and 35- to 49-year-olds saw no change at all.

The institute also found that more than half of the growth in 50- to 69-years-olds leaving work for economic inactivity was due to retirement.

There was relatively little difference in the trends of 50- to 69-year-olds leaving employment for inactivity between men and women, between those with and without degrees, between those in professional and non-professional occupations, and between public and private sector employees, the report also found.

The institute offered several potential reasons for the rise in economic inactivity, such as lower levels of labour demand, shown by higher levels of redundancies, and that older people responded by no longer looking for work rather than being officially unemployed.

Another reason offered by the IFS as explanation was an increased number of people unable to work for health reasons, perhaps as a result of Covid-19 or long Covid, or people may want to avoid the potential exposure to Covid-19 that comes through greater contact with other people in the workplace.

The IFS also suggested that a trend towards remote working might have prompted some workers to take early retirement, if opportunities for socialisation are a factor keeping people in work at older ages, or if people who worked from home appreciated the extra time at home and did not want to return to the workplace.

The last reason the institute suggested was that people could have chosen to take early retirement, for a variety of reasons, including having increased their wealth during the pandemic when consumption opportunities were minimal, and when asset prices (particularly housing) increased.

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