By Dr. Patrick Jones
Some strong winds buffeted Americans over 65 years during the pandemic. By the end of the pandemic (mid-2023), about three quarters of all deaths in the U.S. attributable to covid-19 were claimed by people over the age of 65. (Statista) The share of covid-19 deaths by this age group in the two counties was likely no different.
Economically, older adults in the greater Tri Cities found themselves in poverty at much higher rates than before the pandemic, as seen in Trends 3.5.2. For pandemic years 2021 and 2022, the shares were 12% and 11%, respectively. Compare that to the five-year average up to the pandemic of 7.1%. These results reverse a long-standing relationship of poverty rates between the 65+ population and the general population: The senior rate is now higher than that of the general population in the two counties.
In count terms, the number of older adults in 2022 was, at 4,742, more than twice the level in 2019.
An article in this issue refers to the large jump in median household income during the pandemic. In other words, the prototypical household in the greater Tri Cities fared relatively well during the pandemic. While we don’t know median household incomes for the 65+ population, the rise in the poverty rate among this group signals that the median older adult did not enjoy the same boost to income levels experienced by the general population.
What are Federal Poverty Levels?
Before we attempt to unravel this apparent puzzle, a primer on the federal poverty rate is helpful. Federal poverty thresholds have their origins in President Lyndon B. Johnson’s “war on poverty,” starting in the mid-1960s. At that time, a quick rule was developed that adopted a basic food budget and assumed that food should take no more than one third of a household budget. That allowed the calculation of a poverty threshold. Any American below the threshold was said to be in poverty.
The threshold doesn’t change by geography, with the exception of Alaska and Hawaii. That is, it is the same for residents of Manhattan as for the Tri Cities. Thresholds do, however, increase by year, according to the CPI. And they vary by the size of the family. For example, in 2022, the threshold for a family of four was $27,750; for single person, it was $13,590.
Importantly, federal poverty thresholds do not consider typical costs (other than the implied food budget), such as healthcare or childcare. On the other hand, Census calculations of income cover only “money” income and not the value of benefits such as housing vouchers and food stamps.
So how to square the finding of rising overall incomes and rising poverty rates for older adults? While local data aren’t available to examine the puzzle, a recent study at the national level does.
Recent research from the Federal Reserve about Old Adults in the Workforce
The general finding from recent research by economists at the St. Louis Federal Reserve Bank: the pandemic pushed older people to retire earlier than they had planned. of Formally, the measure is the labor force participation rate, a ratio of those in the labor force (employed or not) to the relevant population. One typically sees references to the rate defined by the general population, 16 and over. But one can also estimate rate for sub-populations, such as for older adults.
The Bureau of Labor Statistics (BLS) calculates a participation rate for a slightly larger group of older adults, those 55+, than those considered by Census. As seen here, that (national) rate dropped from 40.3% immediately preceding the pandemic to 38.8% in December, 2022. These are small percentage changes but applied to a large population, significantly sized numbers. The research by the St. Louis Fed authors calculates a national “excess retirement” number of 3.3 million older (55+) during the pandemic through 2022.
The St. Louis Fed authors list several reasons why this may have occurred. First and foremost, covid-19 disproportionately hit older adults, and the impulse to get out of harm’s way was likely strong. Second, care for loved ones, old and young, likely fell to a greater extent on older adults, as commercial sources shuttered and family bread-winners needed to keep working. Third, the authors point out that the participation rate typically declines as economic activity falls. And fourth, they show that some older adults felt secure enough with their assets, primarily home values, to retire.
While the St. Louis Fed authors don’t explore the question of rising poverty rates, it could well be that these unplanned departures from the workforce by older adults left many scrambling to replace wage income. For example, payments from social security are greater at age 68, and certainly 70, than at 65. It could also be that the pandemic caught many older adults with savings and investment not as high as they had hoped at the start of retirement. Consequently, the stream of payments from these balances was not strong enough to replace wage income.
If wage income has not been fully replaced by other sources, and if older residents don’t return to the workforce, as seems likely, then the local poverty rate for older adults should remain elevated. The 2023 estimates, available in 6 months, will offer a check to this initial interpretation of this Trends measure.