Not retiring: the impact of the cost of living crisis

How people have responded to the cost of living crisis varies a lot across age and income brackets, with older people tending to be less affected than the young, although some older people have been very badly affected. That is the conclusion of a Resolution Foundation study out this week. Torsten Bell, CEO of the Resolution Foundation, said the steep age differential was what struck him most which he said was nearly the same as the income gradient.

Older people were cutting back on things like heating, but not as much as younger people on other areas, such as skipping meals. Eight per cent of people the Resolution Foundation surveyed had skipped meals for seven or more days in the last month, with the poorest most affected. Three per cent had used a food or warm bank. The health impact – both physical and mental – of the cost of living crisis has been large – 30% reported a decline in health due to the crisis, with things like skipping meals making things worse in addition to issues such as poor housing quality or above inflation rent increases for some.

Meanwhile, 37% of people in their mid 30s and 40s relied on formal lending, such as credit cards, overdrafts or loans in March. This was more than double the 16% of over-55s who did so. Across all age groups, the proportion was 26%. The poll also shows that a quarter of 25 to 34-year-olds received financial help from family or friends in the past year, compared to 13% of those aged 45 to 54 and 2% of over-65s.

Grant Fitzner, chief economist at the Office for National Statistics, said that even if inflation falls, that just means prices won’t rise at the same rate that they are currently. It doesn’t mean that prices won’t remain high. He warned that the crisis had some way to go. He added that older people are more likely to have built a savings buffer to draw on, with the pandemic contributing to that, but there had been a lag in pensions and benefits keeping up with the rate of inflation over the past year which had caused hardship for many. Fitzner said there were various reasons the over 65s had been less impacted than younger people, including their greater likelihood of having savings, owning their own home and recent pensions rises.

The report comes in the same week as another report from the Resolution Foundation on enforcement of employment legislation. It found that younger people and over 65s are more likely to be affected by poor employment practices which result in them not getting rights to which they are entitled, like holidays or payslips. However, over 65s were more likely to have the resources to take legal action to enforce their rights in the absence of an effective enforcement system.

There has been a lot of focus on older workers in the last months, particularly in relation to how to entice back those who have dropped out of the workplace and may have taken early retirement. An IPPR report highlights the impact of poor health on work over the last years. What is clear from all these reports is that some groups are more affected than others – women, for instance, when it comes to health and caring responsibilities affecting their work. Ethnicity is another key factor. When it comes to rights and the cost of living, younger people tend to be worse off and less financially resilient that older ones, which is not to say that there are not significant numbers of older people struggling too and those who have taken early retirement due to health issues may find themselves needing to return at some point in the future due to the cost of living increases.

Studies are often used to pitch one group against another, but none of the effects of the cost of living crisis is happening in isolation. We are all affected in some way or another – many of the young are relying on older family members, for instance, whether that is for money or childcare or both. And by looking out for the most vulnerable we build a better society for all of us.

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