First it was the Great Resignation, now it’s the Great Retirement – so why are people choosing to quit work?

Do I really want to go on doing this? It is a question that many people on both sides of the Atlantic seem to have asked themselves in the two years since the pandemic struck, and for a significant number the answer seems to be no. They have fallen out of the job market. So what happens then?

The UK unemployment rate, at 3.7 per cent, is now the lowest since 1947. For the first time since the numbers were recorded, there are more unfilled vacancies than there are registered unemployed. So for almost everyone this is the tightest job market that has existed during their working lives – and that affects employers, which are struggling to find ways of attracting people to work for them.

A similar thing is happening in America, where unemployment is at 3.6 per cent, which aside from a dip to 3.5 per cent in February 2020, is the lowest since the late 1960s. In Europe the pattern is somewhat different for unemployment which is much higher, at 6.8 per cent in the Eurozone. But by historical standards, this is the lowest since the euro was introduced in 1999, lower even than just before the pandemic hit. So just about everywhere there seems to be a huge demand for labour but apparently not enough people to do the jobs. Why?

Part of the problem must be the disruption in the labour market caused by the pandemic. The new jobs that have been created are different from the old ones that have gone. At its simplest, jobs in high street stores have been replaced by ones in courier services. If your old job was working in a shop, you probably don’t want to work in a warehouse or drive a delivery van. But I think something else is happening too.

For many of us, not all of course, the experience of lockdown, and all the restrictions that were imposed on us, has led to a rethink of our priorities. There has been a well-documented push-back against the drive to get people back into the office, as my colleague Hannah Fearn noted here last month.

But this is not simply a matter of people wanting more flexible working conditions, and let’s always remember it is only a quite privileged part of the workforce that can work from home. You can’t drive a bus or staff a hospital ward from your home office. What is happening is that many people have dropped out of the workforce altogether.

That shows in the stats. The UK employment rate at 75.7 per cent of the population of working age (defined as aged 16-64), is still nearly one percentage point lower than it was before the pandemic. That may not sound much, but it is 300,000 people who have dropped out of the labour market. Hours worked are lower too.

In the US they calculate the levels slightly differently from in the UK, but the message is the same. Their employment rate at 60 per cent is still below the 61.6 per cent it was when the pandemic struck. It is true that in Europe things are different, with the overall employment rate at 73.1 per cent, slightly higher than before the pandemic, but given the higher levels of unemployment overall that probably reflects the improved job opportunities rather than a shift in preferences.

Dig a bit deeper into the UK stats and the biggest group of people dropping out of the labour market are the 50- to 64-year-olds. It is not the young deciding to take an extra gap year or whatever. A lot of young people did lose their jobs when the pandemic hit, but they have gone back to work as the opportunities returned – so no stuff about workshy 20-somethings please. So the puzzle is why should these older workers have decided to call it quits?

Well, we have some answers to this phenomenon, dubbed the Great Retirement, in contrast to younger people quitting their jobs, called the Great Resignation. These include ageism among employers and the difficulty of training older people to use the new communications technologies.

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But the simple answer comes from some work by the Office for National Statistics a few weeks ago, which reports that nearly all the people who were retiring early did so because they wanted to. Three-quarters said it was their choice to leave their job, and only 6 per cent said that were retiring because they has lost their job, suggesting that this was involuntary.

But why do people make this choice? Here I think the answer is very clear: they can. Thanks largely to the rise in property prices, many older people can afford to retire earlier than they had previously planned. Whether this is good or bad for society for able-bodied people to choose to retire early is a fraught question. But let’s be clear about three things.

First, all employers will have to work harder to make jobs more fulfilling. Second, there is an opportunity here for them to lure older people back into work. And third, don’t blame the young for not taking the jobs on offer. The labour shortage is not their fault.