Older Americans at greater risk as potential of recession looms
Older Americans may face greater risks than their younger counterparts if the U.S. economy slips into a recession.
The combination of high inflation, rising Federal Reserve interest rates, a slowing economy and global headwinds is raising the chance of an economic downturn.
While job growth and consumer spending have remained strong throughout the year, many economists believe it will be difficult to avoid a recession by the start of next year. Fed officials also expect their actions to boost the unemployment rate and have warned of the “painful” costs of fighting inflation.
A potential recession in 2023 would likely be less severe than the ones that followed the emergence of the COVID-19 pandemic in 2020 and the financial crisis of 2008. But any recession will likely include job losses, lost income and falling wealth — all of which could have a greater impact on older Americans.
“I am sorry to say the only thing that Americans close to retirement age should do to prepare for a downturn is work more and consume less,” wrote Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis. “This is a good time to cut extra expenses, sell an extra car and save the proceeds for an emergency fund.”
As the economy slows and consumer spending falls, businesses may soon face tough choices about how many employees they can afford to keep. Older workers tend to avoid the first rounds of layoffs at firms under a “last in, first out” strategy: hold on to loyal, tenured employees with experience and cut costs in entry-level positions that are easier to replace when the economy turns.
But mid- to late-career workers who lose their jobs — in good times or bad — often have a much harder time finding new gigs than their younger counterparts. While the current job market may be strong enough to incite some older workers to look for a better job, experts say those close to retirement age should hold onto their current employment until they land elsewhere.
“The data is really clear: Keep your current job while you’re looking,” said Jane Oates, a former Labor Department official and president of WorkingNation, a research and advocacy nonprofit.
“For workers 50 and older, if they’re applying for work and they’re unemployed, they’re really having a really difficult time,” Oates continued. “They’re much more likely to be long-term unemployed. They’re much more likely to have to take a job beneath the level that they’re leaving.”
Older workers also face several unique obstacles when thrust back into the job market, particularly when the economy is in retreat.
Workers closer to retirement often get and ask for higher salaries than early-career candidates, both because of their experience and their greater financial obligations. Oates, however, said businesses shouldn’t consider that a liability when assessing candidates.
“It’s common sense that when you get older, you have things that you have to pay, you’re not as frivolous with leaving a job, picking up and leaving,” she said. “But when employers use that excuse that they’re too expensive. Isn’t it more expensive to pay for the churn of younger workers than it would be to hire an older worker who’s going to stay there until the end of their career?”
Jobseekers close to retirement age may also face age discrimination, a widespread issue that is often difficult to prove.
Beth Truesdale, an expert on work and aging at the Upjohn Institute for Employment Research, said only one of 10 workers older than 50 who are laid off will ever find a job that pays them as much again.
“Older workers are just as capable as younger workers, typically. But that doesn’t stop employers from feeling that they would prefer younger workers,” she said.
Truesdale said age discrimination is particularly common in public-facing jobs, where a candidate’s looks may play a bigger role in hiring.
“If you’re a server in front of a restaurant, employers want you to look the part and this is especially acute for women,” she said. “Those are things that hit hard for older workers.”
Beyond the labor market, older Americans are also facing the squeeze of higher inflation while leaning on fixed incomes or savings. While higher interest rates may help some households build up their savings accounts, the steady decline of stock values likely to accelerate during a recession will also hit retirement investment accounts hard.
But those who receive Social Security retirement benefits can count on a cost-of-living adjustment tied to the annual inflation rate, which will help buffet some of the losses.
“Social Security is the hero of the story. Social Security is the absolute backbone of American retirement. And it’s hugely important because so many people rely on it for most or all of their retirement income,” Truesdale said.