One of the many lessons from the pandemic has been that paying people not to work causes people to avoid work. Most of those receiving Covid-related expanded unemployment benefits also received multiple rounds of stimulus funds. The vast amounts of cash doled out caused about 1.84 million people to turn down a job offer and contributed to the present state of the labor market with 9.2 million open jobs.
As these benefits expire, more workers will seek jobs, but some changes caused by the pandemic may not be reversed for decades, if ever. The overall impact on the labor market may be declining rates of labor-force participation that persist for decades.
Rethinking Life Choices
Times of stress and hardship typically result in soul-searching among those affected. The pandemic has had the same effect, with daily news of deaths and suffering suggesting that life is fleeting and transient.
The pandemic also brought to the forefront that there is a huge gulf between professionals and hourly workers, or more accurately those who can work from home and those who must show up for work — hairdressers, retail workers, truck drivers. Almost half of all employees with advanced degrees were able to work remotely, while over 90% of those with a high-school diploma or less had to show up in person.
One survey reports that about half of all workers say that they are rethinking the type of job they want moving forward. About the same proportion say they would retrain for a career in a different field or industry if they had the opportunity. In normal times the unemployed spend much of their time watching TV, but now a third of those surveyed have started taking courses or job retraining.
That thinking about life and work is the same among people at all income levels, not just those in higher-earning jobs. The top motivations include higher compensation, better work-life balance, and boredom in their current jobs. For many there’s a dawning realization that their earlier ways of working make no sense any more.
For many, this has become a moment to redefine what is work.
Early Retirement Accelerates
The biggest factor that portends against large numbers of people returning to work is the acceleration of retirement. Working from home for an extended period and spending more time with a family gave many people an opportunity to reexamine their lives and, in many cases, decide in favor of taking early retirement. What was once considered by people in their early 60s has now become more common among people in their 50s as they face shorter life spans.
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The pandemic has caused life expectancy to drop by 1.5 years because of Covid-related deaths and surges in drug overdoses and suicides. And Americans are better prepared for retirement than ever before — the average retirement savings of people over age 55 were almost $450K. By the time people become eligible for Social Security benefits, over 90% can expect to receive an income that was more than half of what they made before retiring.
The Great Wealth Transfer
The Baby Boom generation is dying at the rate of about 2 million annually — about a quarter of the 85 million members of that generation have passed on. They leave behind a massive pile of money that has been labeled “the greatest wealth transfer” in modern history. Their collective net worth is estimated at $35 trillion, most of which will be passed down to their children. That money has made it easier for the beneficiaries to make choices for their lives, including delaying or stopping work.
But it doesn’t stop there. Older generations will hand down about $61 trillion between 2018 and 2042 to millennials and Gen Xers. The average inheritance now exceeds $200K. With the gift-tax limit having been raised in recent years, people are increasingly giving their money away before they die. Inheritances and gifts provide a cushion of support not available to earlier generations, allowing for more risk-taking and supporting activities unrelated to work.
How long this period of transition will last is impossible to predict. And what the new normal will be is completely unknown. There’ll be plenty of work for recruiters — the profession has survived for millennia — but expect a bumpy ride with no end in sight.