The Institute for Fiscal Studies has highlighted a growing trend among people aged 50 to 64 who are reconsidering their decision to retire early and looking for work due to the rising cost of living in Britain. The high inflation rate that the country is currently facing has led to a squeeze on living standards, making it harder for people to make ends meet, particularly for those who are retired or planning to retire.
While it is not clear if this increase in economic activity among older workers is a trend, the IFS is urging the government to take action in the upcoming budget to encourage more over 50s to return to the labour market. The think tank has recommended a range of measures to support this, including changes to pension rules and incentives for businesses to hire and retain older workers.
The Chancellor is reportedly considering various options to address the issue of early retirement, which has been a key factor behind the current labour shortages. Changes to pension rules are among the options under consideration, with a view to encouraging more people to continue working beyond retirement age. The IFS believes that if this trend continues, it could help ease the pressure on the labour market, but cautions that it may also reflect people becoming poorer due to the cost of living crisis.
The think tank has also noted that new data from the end of 2022 shows that some people who had given up work since the start of the pandemic are returning to the workforce. In particular, those who had been out of work for less than three years accounted for over half of the 197,000 50 to 64 year olds who moved out of inactivity in the final three months of the year.
A senior research economist at IFS has said that if ‘un-retirements’ continue, it could be good news for the labour market. However, the more important question beyond the immediate term is whether future cohorts will follow recent cohorts in retiring early. The forthcoming budget should therefore take a broad view of labour force participation rather than just undoing what has happened since 2020.
It is crucial to ensure that future generations are not forced into early retirement due to economic factors such as the rising cost of living.
We believe that businesses should also do their part to support older workers and create age-inclusive work environments. This can include offering flexible working arrangements and training opportunities to help older workers adapt to new technologies and job roles. By working together, the government, businesses, and recruitment agencies can help to create a more age-diverse and sustainable workforce for the future.