Half of older adults who left the UK workforce amid mass redundancies in the first year of the Covid pandemic ended up falling into relative poverty, according to the Institute for Fiscal Studies (IFS).
Britain’s foremost economics thinktank said job losses during the early stages of the crisis, coupled with the additional health risks faced by older workers, were likely to have forced many people into early retirement.
Contradicting the assumption that rising numbers taking early retirement were being driven by wealthier individuals who no longer needed to work, it said that as many as 48% of 50- to 70-year-olds who left their jobs in 2020-21 had since experienced relative poverty.
Relative poverty is defined as living in households with income below 60% of the median.
The study comes amid growing concern over worker shortages, after an exodus from the workforce since the Covid pandemic driven by early retirement and record levels of long-term sickness among working-age adults.
Economists have identified the UK as an international outlier for a weak employment recovery, contributing to persistent inflationary pressures as employers respond to near-record numbers of vacancies by pushing up starting pay.
According to the IFS, many workers were likely to have been forced into early retirement even if they did not have significant sums of state or private pension income to support them, worsening their living standards and wellbeing.
It found those who stopped working cut their food expenditure by about £60 a week on average – much more than those who had stopped working in previous years, who on average did not substantially change their spending habits after leaving the workforce.
Older people who stopped working were less likely to receive pension incomes compared with those who stopped working in previous years, with about half having no access to either private or state pensions in 2020-21, compared with 43% a year earlier.
Xiaowei Xu, a senior research economist at the IFS, said some of the older workers who had left their jobs in the pandemic could return to the workforce with the right job opportunities, and there were signs some were returning already.
However, she said government policies to support older workers – such as the Department for Work and Pensions “mid life MOT” – would be “critical” if ministers wanted more older workers to return.
“It is often assumed that older people who left the workforce during the pandemic were wealthy individuals retiring in comfort. Our analysis shows that those who left in the first year of the pandemic experienced a sharp rise in poverty, despite overall poverty rates falling that year, and also suffered large falls in wellbeing,” she said.