Millions of Americans opted to retire early during the COVID-19 pandemic in what has been termed the COVID Retirement Boom, and that drain on workforce participation could be playing a role in wage increases across the country.

According to payroll processing firm ADP Inc., from 2019 to 2021, and in contrast to years prior, low-end salaries increased most rapidly in cities with the lowest pay levels. Because it is more viable to remain out of the workforce in lower-cost cities, employers in those markets are struggling to hire and are offering increased pay to attract workers, the company’s “The Geography of Wage Growth” report theorizes.

As the economy opened back up following the worst of the pandemic, employers were able to bring back workers they previously employed or hire motivated workers. “But when that low-hanging fruit was picked, employers were left with a pool of candidates who had grown increasingly acclimated to living outside of the labor force. They had compelling reasons not to return to work, such as health concerns, school-aged children studying from home, or early retirement. In fact the latter may have been especially important, as the population in the nation’s low-income cities tends to be older than elsewhere.”

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