Welcome to the ‘great unretirement’ – why are more and more over-60s returning to work?

It has been dubbed the great unretirement – older people who left the workforce, many during the pandemic, returning to employment. And in a wider sense it is a continuation of a long-term trend of more over-60s going to work, which, it now seems, was only temporarily interrupted by Covid -19.

The question is how much of this is driven by financial necessity and how much by a desire to stay involved in the workforce for longer?

During the pandemic, we heard talk of the great resignation – people reconsidering their lives and stepping off the treadmill. In the Republic, at least, while there was a clear drop in participation in the jobs market during Covid-19, it seems much of this was forced and temporary, as opposed to people reconsidering their life direction.

Work patterns may have changed, but the participation of Irish people in the workforce has risen above pre-pandemic levels.

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And one group in particular continues to show increased participation in the jobs market: older people. In common with many other countries, more over-60s are staying in work and increasing numbers are delaying retirement beyond the normal mid-60s mark.

And there is tentative evidence that within this there is an “unretirement” – of people who had retired going back to work.

A major international survey by Randstad, a big international HR company, shows that insecurity and financial factors are key drivers. Slightly more than half of those surveyed believed they could retire before 65, compared with 61 per cent the previous year. But how does it look for the State?

1. The long-term trends

Looking back to the late 1990s, the period covered by the latest Labour Force figures from the Central Statistics Office, the rise in the number of over-60s in the workforce is striking.

There is clearly a lot at play here – longer and healthier lifespans, for example, and the age profile of the Irish population, with more people moving into the older age groups, notably from the “64-year-old baby boomer” generation born in the 1950s and early 1960s.

The top-line levels are striking. The number of 60-64 year-olds in employment has risen from 48,000 in 1998 to 176,000 in the latest figures for the final quarter of 2023. For those aged 65 plus, the total has risen from 34,000 to 117,000 over the same period.

We need to peel a few layers off the onion to try to understand this. First, it is partly due to the increased numbers in this age group in the general population. But this does not go close to explaining all of the rise. The over-60s are now more likely to participate in the jobs market, too.

In Ireland, the participation rate pre-pandemic of 60 to 64 year old in the workforce was 54 per cent - it dropped to just below 51 per cent in 2020 but has now jumped to 61 per cent.

Back in 1998, just over three in 10 60-64 year-olds were in the jobs market. Now more than six in 10 are. For over 65 year-olds, participation has risen from 8 per cent in 1998 to 14.4 per cent today and when we consider that this cohort also includes large numbers of over 70s and over 80s, this is a significant figure, suggesting that significant numbers of 65-70 year-olds are at work. For many, retirement is being delayed.

And finally, while both male and female employment among over-60s has risen, the biggest jump in percentage terms over the long term has been among women, in common with trends across the workforce.

Among 60-64 year-olds, for example, 70 per cent of men are in employment, compared with 50 per cent in 1998. But for women the total has jumped from 17 per cent to 50 per cent.

So, the movement into the workforce of women has gone well beyond younger families and also includes many older women who have either prolonged their working lives or chosen to return to the workforce

But a lot of men are choosing to work later in life too, most probably for a variety of reasons ranging from the financial to lifestyle to wanting to remain involved.

Earnings data backs up this increased involvement of older people in the workforce. The average annual earnings of over-60s is more than 85 per cent of the average, compared with about 78 per cent a decade ago.

2. Post-pandemic surge

Talk of the “great unretirement” internationally has been sparked by a rise after the lockdowns in the involvement of older people in the workforce.

This was picked up in the Randstad survey in terms of responses from people in the workforce. Increased numbers of older people at work has been attributed internationally to those who previously retired returning to jobs due to the cost-of-living crisis.

While we can never be 100 per cent sure about the mix between those who gave up during Covid returning to work and other older people staying in work longer, or returning after a more extended break, the jump in participation in the workforce over the past couple of years has been striking.

On the supply side, people are squeezed by the cost-of-living crisis and 2022 in particular saw a big hit to defined contribution pension pots.

In the State, the participation rate pre-pandemic of 60-64 year-olds in the workforce was 54 per cent. It dropped to just below 51 per cent in 2020 but has now jumped to 61 per cent.

That is a significant change in a few years. Looking at the actual numbers at work, there were 141,000 60-64 year-olds in employment just before the pandemic hit. This fell to 132,000 during lockdown and is now up to 176,000.

In trying to answer why this has happened, we are in the realm of speculation. Clearly, there has been the longer-term underlying trend reasserting itself and a bit of “catch-up” after the pandemic fall. However, the sharp rise suggests changes to both the supply and demand of labour.

On the supply side, people are squeezed by the cost-of-living crisis and 2022 in particular saw a big hit to defined contribution pension pots.

The baby-boomer generation – those approaching retirement age or just above it – already suffered through the financial crash, when some, at least, suffered heavy losses in terms of assets, though house prices have recovered in the meantime.

Sources also suggest there has been a return of more women to the workforce, perhaps after they have finished caring duties, so that they can qualify for a higher level of State contributory pension. Perhaps the pandemic also reinforced people’s desire for social and work interaction.

Meanwhile, on the demand side there has been a labour shortage across many areas of the economy – and companies have been forced to be innovative in filling roles. Among the groups they have turned to are older employees, either for full-time or part-time roles.

A significant part of the rise in total employment over the past year has been in part-time work. For companies with mandatory retirement ages – typically 66, though some remain at 65 – this generally involves retaining or employing people on fixed-term contracts.

Longer working ages also raise the question of the age at which people qualify for State pensions, though there is no political appetite to reopen that argument, bar the Sinn Féin promises to roll it back from 66 to 65 years of age.

The possibility of extending the State pension age to 70 is also being taken up by some employees, though the interplay of PRSI – charged on the income of those who do extend – and the pension calculation can cause odd effects to incentives here. In many cases it makes more financial sense to take up the pension, even if remaining at work, though this all depends on individual circumstances.

[ Fintan O'Toole: I’m about to turn 66 and the pension policies for people like me are bizarre ]

The era of “unretirement” – or delayed retirement – points to some more far-reaching policy impacts, too. It raises questions about the robustness of the pensions system. It is remarkably generous in some cases, for example longer-established public servants.

For others, on defined contribution pots, it is unpredictable and can require or encourage people to work for longer. And then there is a large section of the population who end up reliant in whole or in large part on the State pension.

Longer working ages also raise the question of the age at which people qualify for State pensions, though there is no political appetite to reopen that argument, bar the Sinn Féin promises to roll it back from 66 to 65 years of age.

Either way, the huge bill the State faces raises wider questions, too, not only relating to funding pensions but also the wider costs of an ageing population.

The inevitable question is who will pay. Taxes will have to rise – the gentle rise in PRSI in the latest budget is only a start. The Fiscal Advisory Council has pointed out that doing this soon will ensure that the older, often better-off members of the workforce pay a bit more, rather than leaving all the bills to those who are currently younger.

Meanwhile, the Commission on Tax and Welfare has proposed a range of measures to increase the tax base and some of these, by tackling wealth, would affect older people too. Don’t expect to hear much about this in the next general election debate. But it is coming.