Covid-19 and early retirement
A new working paper by Olivier Coibion, Yuriy Gorodnichenko and Michael Weber use a repeated large-scale survey of (representative) households in the Nielsen Homescan panel to characterize how labor markets are being affected by the covid-19 pandemic. There is some evidence of an effect on early retirement choices.
The authors use data from a survey run between January 6th and January 27th 2020 and between April 2nd and April 6th, 2020. They find labor market changes that differ markedly from those of a typical recession. First, the employment-to-population ratio has declined by about 7.5 percentage points. When they construct an unemployment rate in an analogous manner as the BLS, they find an increase in the unemployment rate of only 2 percentage points. This reflects the fact that most of the newly unemployed surveyed are not looking for new work at this time, so they are defined as out of the labor force rather than unemployed. Correspondingly, they document an extraordinary decline in the labor force participation rate of nearly 8 percentage points. Early retirement turns out to be a major force in accounting for the decline in the labor-force participation. With the high sensitivity of seniors to the covid-19 virus, this may reflect in part a decision to either leave employment earlier than planned due to higher risks of working or a choice to not look for new employment and retire after losing their work in the crisis. This would make the change in labor force participation long-lasting.
Paola Di Casola*
*The opinions expressed in this post are the sole responsibility of the author and should not be interpreted as reflecting the views of Sveriges Riksbank.
Posted by: Maria Perrotta Berlin