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Great Layoff, Great Retirement and Post-pandemic Inflation

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  • Guido Ascari
  • Jakob Grazzini
  • Dominico Massaro

Abstract

The Covid-19 shock caused a dramatic spike in the number of retirees – a phenomenon dubbed the “Great Retirement†– and a prolonged con- traction in the labor force. This paper investigates the impact of the Great Retirement on the post-pandemic surge of inflation, via the labor market. First, retirement is generally countercyclical, and the peculiarity of the pan- demic shock was just in its size: the “Great Layoff†in March and April 2020 triggered the Great Retirement. Hence, a transitory labor demand shock generated a persistent labor supply shock. Second, counties more exposed to the Great Layoff exhibit a relatively higher increase in wages. Finally, an estimated model with endogenous labor market participation quantitatively assesses the overall contribution of the Great Retirement to inflation from 2020:Q1 up to 2023:Q2 to be roughly equal to 3.7 percentage (cumulative) points.

Suggested Citation

  • Guido Ascari & Jakob Grazzini & Dominico Massaro, 2024. "Great Layoff, Great Retirement and Post-pandemic Inflation," Working Papers 812, DNB.
    • Handle: RePEc:dnb:dnbwpp:812
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    File URL: https://www.dnb.nl/media/pjpjordb/working_paper_no-812.pdf
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    More about this item

    Keywords

    Great Retirement; Labor Force; Wages; Inflation;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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