The last article defined who are the Baby Boomers and why many of them are retiring now. Their mass retirement is having a profound impact because this generation really drove the high level and quality of productivity in America. Having grown up in post-WWII America, this generation entered the workforce at a time of growth and prosperity, experiencing only a couple of notable economic dips, such as the 2008 recession (Investopedia). Now they are retiring at a rate of nearly 1.75 million a year. What effect will their withdrawal have on our economy?
Two “Greats” Make a Not-So-Great
The “Great Retirement” is affecting a number of things, economically speaking. First, it is creating a hiring challenge. This mass retirement is happening alongside “The Great Resignation”. During COVID, many people saw life from a work-from-home perspective and decided they weren’t happy in their office jobs. This created a wave of people resigning from their jobs to pursue more fulfilling work. They want more say regarding working remotely, hours and pay (We Forum). When we add these two phenomena together, we get a company environment that is struggling to find people willing and capable to fulfill open positions.
Don Lee of the LA Times suggests that such a huge wave of Baby Boomers leaving the workforce will contribute to slow economic growth and will potentially have a negative effect on the economy’s overall productivity. The reduced availability of older workers will complicate the Federal Reserve’s ability to steer interest rate policy and manage inflation.
Lee says, “There are also huge implications for public finances: Having fewer workers is likely to mean reduced tax revenues, including payments into Social Security.” While they haven’t yet seen a jump in Social Security claims, experts suspect that this is because many people have simply been making do with their savings and regular government aid during the pandemic. While the Baby Boomers earned record levels of income and generated great wealth, they also spent money at record levels. Many failed to save and accumulated unprecedented amounts of debt. This means they will need to sign up for Social Security (McKinsey) in order to live somewhat comfortably. Because Baby Boomers are living longer than other generations, they will need to draw Social Security money longer. This means, while Social Security is not predicted to go bankrupt, we can expect to see changes (SmartAsset) in the overall program.
With the Baby Boomer generation heading out of the workforce, a major skills gap is developing. Employers searching for employees to fill the now empty positions is one of the newest challenges companies face. It is an employee market vs what has traditionally been an employer market. This means qualified individuals can basically “write their own ticket”. Compensation packages, work environment and work schedules are being driven by the shortage in qualified and competent professionals, and companies are having to offer packages that were not even considered two years ago.