Older Workers Face an Unemployment Gap not Seen in Nearly 50 Years

Every recession since the 1970s had one thing in common: Older workers experienced lower unemployment than everyone else. The Covid-19 recession flipped this pattern for older workers (ages 55 and older) relative to mid-career workers (ages 35 to 54). Older workers have faced higher unemployment rates than mid-career workers for the length of the pandemic—the first time since 1973 such an unemployment gap has persisted for so long.

The historic reversal of the older worker unemployment gap highlights the unique challenges the pandemic recession poses for older workers, with significant ramifications for retirement security—as documented in the latest report from the Schwartz Center for Economic Policy Analysis, coauthored by me, Bridget Fisher, Teresa Ghilarducci and Siavash Radpour. Unemployment and a sluggish recovery for older workers raise the risk of early and involuntary retirement. These factors lead to higher rates of downward mobility in retirement: households falling from the middle class (during their careers) to poverty or near-poverty in retirement.

To better understand the unemployment gap, we used Current Population Survey data to track workers’ monthly transitions between employment and unemployment. The unemployment gap can be broken down into three related factors: higher initial job loss for older workers, disproportionate levels of continuing job loss and slower recovery from unemployment.

First, the unprecedented burst of job loss in March and April hit older workers harder. The single-month rate of job loss in this period was 10.9 percent for older workers, compared to 8.9 percent for mid-career workers (see the report for technical details of this measure). Disparate job loss at the very outset of the recession created the unemployment gap.

The second contributor to the unemployment gap is ongoing job loss. Even six months after the initial burst of layoffs and furloughs, older workers continue to lose jobs at higher rates. Between April and September, older workers have been 16 percent more likely on average to fall into unemployment than mid-career workers. If older workers faced the same rate of job loss as mid-career workers, they would have lost 1 million fewer jobs over the entire pandemic period.

Although rates of job loss have fallen from their historic peak in March and April, the numbers suggest we are still in a recession economy. In September, older workers fell into unemployment at a rate roughly double that of 2019.

The final factor prolonging the unemployment gap is older workers’ slower recovery from unemployment. The unemployment gap might have disappeared if, after losing jobs at a higher rate in the initial phase of the downturn, older workers recovered jobs more quickly in subsequent months. This was the pattern for other groups of workers, including Latinx workers and those without a college degree. By contrast, older workers did not bounce back quickly. Between April and September, they were on average 12 percent less likely than mid-career workers to return to work from unemployment.

Older workers’ slower recovery out of unemployment is not novel to the pandemic recession. Unemployed older workers typically spend longer durations out of work, due in part to age discrimination. The difference today is that this job-finding disadvantage is layered on top of an existing unemployment gap.

The numbers outlined above tell part of the story, but they do not explain the precise sources of older workers’ disadvantage. Among the factors that are known to us are the pandemic’s unique health effects, which pose disproportionate and unequal risks for older workers. As businesses perceive increased liability concerns stemming from the virus, older workers may encounter greater age discrimination. Older job seekers may also feel that employers have put insufficient effort into ensuring safety protections.

To date, federal response to the Covid-19 pandemic and recession has paid too little attention to the particular vulnerabilities of older workers. One of the few retirement-related provisions in the CARES Act, the suspension of penalties associated with early 401(k) withdrawal, was actually a step backward. A revived federal response to the economic and health effects of the pandemic should renew enhanced unemployment benefits first and foremost. Because older workers tend to experience longer spells of unemployment, they would benefit additionally from such assistance.

Older workers would also benefit from an empowered and engaged Occupational Safety and Health Administration, the regulatory body responsible for ensuring workplace safety—and criticized recently for doing too little for at-risk workers. It would be especially harmful to older workers if Congress went through with proposed liability waivers for businesses that are unwilling to protect workers from Covid-19.

Likewise, age discrimination statutes should be enhanced to meet the needs of older workers in the pandemic economy. Federal disability law requires workers to provide “reasonable accommodations” to workers with disabilities, but a similar requirement does not hold for older workers. Extending reasonable accommodation protections to older workers would be a direct way to keep more older workers safely employed.

Owen Davis is a doctoral student in economics at the New School for Social Research and a research associate at the Schwartz Center for Economic Policy Analysis, in New York City.