What implications do employment trends have for retirement benefits and retirement security? Recent research and analysis offer a look at those trends and their effects on retirement and related benefits.
Employment Trends
The pandemic, the Great Resignation, and a variety of economic factors have affected employment — and studies and analysts take a range of stances regarding the effects and their severity.
“Employees are leaving the workforce and changing jobs at record rates,” says Fidelity, which adds that there are millions of unfilled jobs across the United States. “The COVID-19 pandemic’s disruption of labor markets was massive,” says the U.S. Census Bureau.
Employee benefits firm Bolton expresses a similar sentiment, calling the increase in employee turnover “staggering.” They report that approximately 3% of the workforce has quit their jobs every month since the start of 2021 — which they say are “the highest levels we have seen in decades” — and that high turnover has continued this year, with more than 4 million employees per month doing so. The University of Pennsylvania’s Wharton School in “How Gloomy is the Retirement Outlook for Millennials?” notes that male labor force participation pre-age 55 slumped.
But the view that recent trends are severe is not universal. Forbes in a recent analysis said that in its view, the Great Resignation “turned out to be more of a ‘Great Realization’” and that the focus was more on changing lifestyles than leaving the workforce.
Similarly, the Wharton School, while it warns about the falling employment among men younger than age 55, also reports higher labor-force participation by older people.
Implications of Employment Trends
The Wharton School says, “Many recent trends threaten financial security for future generations of retirees.” At the same time, it says there also are some encouraging trends, such as higher earnings among female employees.
The Wharton School shows similarly contradictory findings in their research. They used a dynamic microsimulation model to project retirement security for the next 30 years based on a variety of factors. They found that median income for those at age 70 will be higher for Millennials than previous generations; however, they add the caveat that they also found that group also faces a higher risk of having their living standards fall while they are retired.
The analysis of the Census Bureau, too, at least partially mitigates its negative assessments. While the Census Bureau calls the pandemic’s effect on labor markets “massive,” at the same time it said that the pandemic “had only a modest impact on peoples’ retirement timing.”
They said that it was more common for employees in the education sector to retire or plan to retire earlier than they had planned than it was for them to delay retirement or plan to delay it, while those in the service sector were more likely to accelerate rather than delay their retirement. The Census Bureau said that differences in retirement timing among members of other industry groups was “not statistically significant.” And even among those two sectors, they noted, the percentage of employees who reported changes in their retirement timing were very small.
Next Steps
So what should an employer do in response to recent employment trends?
Fidelity says that employers should seek to enhance their benefits to better attract and retain talent. They suggest that an employer consider modifying its retirement plan design to better align it with the needs of current and future employees.
Bolton advocates using pension plans as a tool to keep employees; it argues that among the advantages this offers is that the funds can be tax-deferred. Further, the firm points out doing so can have a benefit for an employer, since by retaining employees, it is more possible for an employer to transfer workforce knowledge among employees in an orderly way.
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