In 2022, many major economies globally face uncertainties ranging from inflation, supply chain disruptions and geopolitical conflicts. Consequently, think tanks, policy makers and industries now expect that recessions are very likely to hit in the coming months or years. In November 2022, the Bank of England expected the UK to fall into the longest recession ever. A recession is defined as a general decline in economic activity. It usually leads to a drop in spending; a declining of asset values, including stocks and real estates; and an increase in unemployment. With a rapidly growing elder population in UK society, I will review studies regarding the last recession; the Great Recession (roughly 2007-2009), explore the impacts on the wealth and health of older adults, and discuss some implications for the next recession.
Impacts on wealth
Wealth, such as stock market holdings and other savings, is an important source of income for adults aged 65 and above. This means that, even small decreases of net worth can have negative effects on their economic security. Generally, households headed by older adults are wealthier; they also have more to lose in recessions and less time to wait for markets to recover. Nevertheless, studies of the Great Recession in the US found that, in percentage terms, households headed by older adults experienced a smaller decline in wealth during the recession. For example, among those aged 65 and above, net worth declined by 25 percent between 2007 and 2011, compared with a 33 percent decline among those aged 55-64, and a 61 percent decline among 35-54-year-olds. Therefore, financial help within families also naturally occurred to the greatest extent from older parents to adult children during the recession
Furthermore, for most adults, their home is their most valuable asset and declines in property values have been linked to reduced spending. However, these effects were more obvious among adults under 50. Now, the current looming recession is co-occurring with a sudden rise in the cost of living. Think tanks, policy makers and industries are anticipating and preparing for what has become known as the Great Unretirement, as many older adults will need to find new jobs and work longer than expected before retirement. Policy makers and NGOs are adjusting regulations and support, to reduce age discrimination in the workplace. Industries are leveraging the use of technologies to re-skill older workers and designing more flexible jobs to attract older workers.
Regarding post-recession recovery, studies demonstrated that older adults recovered most of the wealth lost during the Great Recession within a few years (by 2012). Wealthier people, mostly older adults, tend to recover wealth faster which contributes to a bigger gap in inequality. In the UK, the pandemic has already accelerated wealth inequality, and a subsequent recession could further impact this.
Impact on health
Recessions impact the health of general populations in complex ways. While different aspects of recessions have negative effects on individuals, research suggests that recessions may actually improve population health. Reasons given for this range from a reduction in alcohol use, a decrease in traffic fatalities, and a drop in atmospheric pollution, to increases in leisure time. Other research suggests that the Great Recession had heterogeneous effects on the mental health of older adults. While the mental health of the average older adult was not affected, it declined among homeowners with few financial assets because of their vulnerability to falling house prices. Nevertheless, other research found feelings of financial strain surprisingly decreased during the Great Recession, despite house values declining substantially, and many older adults facing associated difficulties such as delays in retirement and job loss. One possible explanation provided by the researcher was that, perhaps the knowledge that others were also struggling may have reduced older adults’ anxiety, especially when younger adults experienced a more difficult recession by comparison. Furthermore, a study of the period of 2006-2016 showed a relationship between increased loneliness and income losses. Adults over 50 years old who lost a significant amount of household income were found to be significantly lonelier than those who did not experience such losses. However, during the Great Recession, the same study reported that negative income shock surprisingly reduced loneliness. The researchers argued that the reduction of loneliness during the Great Recession may have been caused by a sense of belonging and togetherness gained from shared experience.
From the literature, we can ascertain that economic downturns are not necessarily connected to deteriorations in health. After the Great Recession, on 12 July 2012, the United Nations (UN) proclaimed the 20th of March the International Day of Happiness. Secretary General Ban Ki-moon stated that the world “needs a new economic paradigm that recognizes the parity between the three pillars of sustainable development. Social, economic and environmental well-being are indivisible. Together they define gross global happiness.” Since then, the UN published the Global Happiness and Well-being Policy Report as part of their sustainable development effort, with more policy makers (e.g. in New Zealand, Finland and Denmark) focusing on happiness and well-being. Of course, happiness and well-being are culturally relative experiences and intensified research collaborations are being conducted globally.
Findings from the previous recession concerning the impacts of wealth and health on older adults have provided novel insights. However, not all recessions are the same. Many economists have already pointed out that the coming recession will be very different from the past ones, as the robust labour market and high inflation are unusual factors. Some even argue that, as economists’ predictions are often incorrect, there might not be an imminent recession at all. Nevertheless, most people agree that there will be a rise in global economic uncertainty. Therefore, learning from past experience will be important in order to build resilience for businesses and societies; as the philosopher Epictetus, quoted by the President of the European Central Bank, stated: “It’s not what happens to you, but how you react to it that matters”. The recession will impact everybody and older adults will need to decide how they will react to whatever it brings.
About the Authors:
Luc Yao is a Visiting Fellow at the Oxford Institute of Population Ageing. Luc is based in Darmstadt, Germany and is active in the electronics industry, related start-ups, and the Open Innovation networks. His research at the Institute focuses on the adjacent domains of population ageing, innovations and strategic investments.
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