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About that labor “shortage” – Look to wave of retirements, not government aid to understand

Photo by Joe Raedle/Getty Images

For all the discussion about what’s making it hard for people to return to the labor force – lack of child care, transportation, housing, training, etc. – a major story that hasn’t received nearly enough attention is how the COVID-19 pandemic has pushed a huge number of North Carolinians into retirement. 

A lot of politicians and special interests want to blame any difficulties businesses are having in hiring workers on unemployment insurance, government benefits, lazy millennials, the vague specter of “socialism, and a supposed general decline in the American work ethic. Hold for a moment the fact that the whole “shortage” story is a bit of a misnomer (there were more people looking for work in June than before COVID-19 in 97 of North Carolina’s 100 counties and every big city) , but actual labor market data and government surveys tell a decidedly different story.  

The U.S. census has been surveying North Carolinians throughout COVID-19 about how the pandemic is impacting their lives, and the responses point to a big increase in the number of people who consider themselves retired. Between July and October of last year, roughly 1,320,000 people in North Carolina reported that they were not working because they were retired. More recently between April and July of this year, the average had shot up to over 1,485,000. That’s an increase of around 165,000 people, or a 12 percent jump, in just a few months. Understandably, a lot of people who were already contemplating retirement decided that putting their well-being at risk by continuing to work during a global pandemic just wasn’t worth it. 

Compare that shift to unemployment insurance (UI), which conservative leaders and the media have blamed for businesses struggles with finding workers. In the week before the 4th of July holiday, fewer than 110,000 North Carolinians were receiving either state or federal supplementary unemployment insurance, a number has been steadily declining throughout 2021. While leaders in the General Assembly were trying to cut off federal benefits, and blaming UI for businesses inability to find workers, they failed to note or acknowledge that a far larger number of North Carolinians appear to have exited the labor market into retirement in the past several months. So, while ignoring a major driving force of declining labor force participation, leaders sought to cut off vital benefits, which have not been shown to decrease peoples’ availability for work. 

To be clear, this isn’t about blaming retirees instead of people receiving UI benefits. We should never have been pointing the finger at people forced to rely on UI benefits for our collective failure to fix our economy, any more than we should tut-tut at older people going into retirement now. 

Even before COVID-19 arrived, the retirement of the baby boomers represented one of the most consequential transitions rippling through the fabric of the U.S. economy. Businesses in many industries already fretted about how they were going to replace seasoned workers, particularly in trades that have long struggled to attract younger workers, such as specialized sectors of manufacturing and construction. Years of underinvestment in workforce training have made it difficult for people to gain the skills needed for many of the jobs baby boomers are leaving behind. That was a pre-existing condition before COVID-19 that has only become more pronounced as our state wobbles through the uneven path to recovery. 

There’s also a flip-side silver lining in all of this, and likely part of why you hear so many businesses that pay the worst wages complaining about unemployment insurance the loudest. The retirement of the baby boomer generation can create opportunities for some younger workers to move up into positions that had previously been occupied, providing paths to career advancement that were previously closed.  One of the most pernicious aspects of our pre-COVID economy was how many people were trapped for years or decades in extremely low-paying jobs with little prospect for upward mobility. Now, as companies compete more for workers, we should see wages increase and more people get a shot at living incomes that had previously been denied to them. But this silver lining won’t weave itself. We desperately need to fund workforce training so workers can move into many of the good-paying jobs that retirees are leaving behind. The budgets released thus far by the North Carolina House and Senate fall well short of the kind of investment needed to realize that potential, but it is still an important part of this generational story. 

The uptick in retirements means we’re essentially confronting overlapping challenges — recovering from the immediate shock of COVID-19 and coping with a whole generation of working people leaving the labor force. Blaming UI, rental assistance, and other kinds of aid was always a distraction from the real challenges we face as a state in rebuilding stronger after COVID-19. The best way to help businesses looking for workers, and to address the generational transition already underway, is to support people in reconnecting to jobs and careers.  

Patrick McHugh is the Research Manager for the North Carolina Budget and Tax Center.

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