The Great Recession Was Especially Bad for Older Workers. The Pandemic Could Be Even Worse

Brookings Institute Fellow Martin Neil Baily and Benjamin H. Harris with the Kellogg School of Management write in CNN Business that the COVID-19 pandemic could have a worse impact on retirement for older American workers than the Great Recession. "The sheer magnitude of the current layoffs will mean that many older workers will lose their jobs and may never find another one," say the authors. "According to a late-May Census Bureau survey, approximately 40 percent of households with people in their 60s reported losing wages during the pandemic. And if prior experience is any guide, older workers will have a disproportionately hard time regaining their lost income." Baily and Harris add that the Federal Reserve's decision to lock in ultra-low interest rates for the foreseeable future, while necessary, will exacerbate matters for retirement savers, who "will see lower returns on their savings — and some workers will be less inclined to contribute to a retirement account." The authors say policymakers can aid older workers, by first renewing a push to make the labor market more welcoming by bolstering anti-discrimination laws. Expanding Earned Income Tax Credit eligibility, which is currently barred from people 65 and older, will help boost salaries for older workers with low earnings by up to 8 percent. Baily and Harris also suggest that states offer near-universal retirement saving accounts, and that Congress restructure retirement tax incentives so middle-class workers get more for each dollar saved in an IRA or 401(k).