17 November 2022

What’s driving the great retirement?

By Scott Corfe

The ‘Great Retirement’ has been one of the most talked about social phenomena of 2022. Since the pandemic, a staggering number of older workers seem to have disappeared from the labour force. According to the latest official statistics released this week, the number of ‘economically inactive’ 50-64 year-olds – that is those neither in nor looking for work – is over 300,000 higher than at the start of 2020. The UK also seems to be at odds with most of Europe, where older worker participation in the labour market has gone up recently, rather than declined. 

This exodus of older workers has become a real concern for a government facing an already unenviable fiscal situation. In the current circumstances, the last thing it needs is hundreds of thousands of former workers no longer paying as much income tax or national insurance.

There is now a lot of head-scratching around the best way of getting the over-50s back into work. But, to establish this, we need a clear picture of the causes of the Great Retirement. 

For a while, we at Public First have been intrigued by a lot of commentators jumping to poor health as the overwhelming reason for older people no longer working. Long Covid, a crumbling NHS and deteriorating mental health since the pandemic have pushed more of us out of work. Or so the argument goes.

But this never felt like the whole story to us. Perhaps a sizable share of older workers simply chose to retire early, benefitting from savings accumulated during lockdowns and soaring house prices? And why is the UK faring so differently to the rest of Europe?

To get to the bottom of this, we have spent the last few months working with Phoenix Insights – a new think tank helping to tackle policy issues resulting from increased longevity. To shed light on why older workers have left the workforce, and why the UK is an outlier, we undertook an international survey of 3,000 over-50s spanning Britain, Germany and the US, plus a booster sample of 1,500 50-64 year- olds not in the workforce. We also interrogated official statistics in detail. Critically, we looked at longitudinal data which tracks the same individuals over time, allowing us to understand better the reasons for people leaving and returning to work. 

What have we concluded from this analysis?

Firstly, contrary to much of the media narrative, poor health is not the main reason for older workers leaving the labour market. Just 16% of 50-64 year olds in the UK that have left work since 2019 give long-term sickness or disability as their main reason for being economically inactive, with most instead citing early retirement or family responsibilities. 

Gains from rocketing house prices in the UK seem part of the story, with our survey showing more economically inactive 50-64 year olds in Britain feel the pandemic left them better off (18%), compared with those in the US (8%) and Germany (4%).Homeownership and housing wealth appear to be key drivers of perceived financial comfort and an enabler of early retirement.

Just as importantly, the overwhelming majority of economically inactive over-50s in Britain – 70% of those in their early 50s and 80% in their late 50s/early 60s – do not want to return to work. 

This matches our polling, which suggests the pandemic had a bigger impact among Brits, causing more over-50s to reflect on their lives and how much time they are spending at work. In the UK, we seem to be particularly down about our jobs, with just 58% of over-50s enjoying their work, compared to 74% in the USA and 73% in Germany.

Our data suggests a more complex policy problem than if health were the prime issue, given that so many seem to have just chosen to retire early. Here are some suggestions for what that could mean going forwards:

Firstly, while health does not seem to be the main story here, it is part of it. Our longitudinal data analysis shows fewer sick and disabled older people in Britain are returning to work than was the case prior to the pandemic. And the NHS may be to blame, with our survey showing that Brits are much more likely than Germans and Americans to believe access to healthcare has deteriorated since the pandemic. Our healthcare system needs fixing urgently. 

Secondly, employers: a lot of older folk do not like working for you. Long commutes, difficulties balancing work with caring responsibilities, lack of career progression and ageism in the workplace may all be pushing some over the edge and encouraging early retirement. Better remote and hybrid working opportunities, part-time jobs and support for carers could all go a long way to making over-50s more content with their jobs. In our UK survey, 16% of 50-64 year olds that do not want to return to work said that they would reconsider working if they could work from home most or all of the time. Meanwhile, 14% said that more flexible hours, enabling them to fit work around other responsibilities, would make them reconsider.

Finally, perhaps the Government just needs to wait. With soaring energy and grocery bills, many might soon find they have retired prematurely. As bank balances start to run down, do not be surprised if the Great Retirement becomes the Great Unretirement in 2023 – albeit for more negative than positive reasons.

Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.

CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.

Scott Corfe is Director of Data and Modelling at Public First.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.