Older Workers, Retirement, and Macroeconomic Shocks

Older workers are an increasing share of the US labor force, yet we know relatively little how their participation is impacted by macroeconomic conditions. In this paper, I use US administrative data to identify how recessions impact transitions between career employment, partial-retirement, and retirement. I find that transitions to either full or partial retirement increase during economic contractions. Retired workers are also less likely to return to the labor market in recessions, magnifying the impact on labor force participation of older workers. Flows into retirement were especially high at the start of the COVID-19 pandemic, with an excess flow into retirement of five percent of older workers. I find flows into retirement are generally more cyclically sensitive than returns to the labor market, suggesting many excess retirements are permanent.