US Workers Stuck as Retirees Lose Buying Power

American workers are increasingly staying put in their roles as hiring slows and anxiety about the economy grows, a trend experts call "job hugging" [3]. At the same time, retirees are bracing for a historic cost-of-living adjustment in 2027 that may still fail to restore purchasing power lost to inflation [1].

Key takeaways

• The U.S. quits rate has fallen to around 2%, a level not regularly seen since early 2016 [3].
• Social Security’s 2027 COLA is projected between 3.9% and 4.2%, potentially marking a historic streak of increases [1].
• Social Security benefits have lost approximately 20% of their purchasing power since 2010 [1].
• Employee disengagement is estimated to cost a typical 1,000-person company about $5 million annually in lost productivity [3].

Labor market stagnation drives 'job hugging'

The U.S. labor market has shifted significantly since the "Great Resignation," with the economy shedding 1.2 million jobs since April 2024 and hiring slowing to its lowest pace in a decade, excluding the pandemic dip [3]. This uncertainty has driven the quits rate down to approximately 2%, as workers prioritize stability over risk [3]. Consulting firm Korn Ferry describes this phenomenon as "job hugging," noting that wage growth has cooled and job-switching premiums have shrunk, leaving many worried their pay will not keep up with rising costs [3]. This hesitation can mask rising disengagement, with 58% of professionals saying their skills are underutilized in their current roles, according to a LinkedIn survey [3].

Historic raises fail to outpace inflation

While current workers face stagnation, retirees are confronting a different kind of squeeze. Early projections suggest the 2027 Social Security cost-of-living adjustment (COLA) could reach 4.2%, potentially marking the sixth consecutive year of increases at or above 2.5%—a streak not seen since 1997 [1]. However, these increases are driven by factors like rising energy prices and may not improve financial security, as Social Security income has lost roughly 20% of its purchasing power since 2010 [1]. Analysts point out that the index used to calculate adjustments tracks working-age spending habits rather than the higher healthcare and housing costs typical for seniors, meaning larger checks do not always translate to better buying power [1].

Why it matters

The current economic environment poses risks for both productivity and long-term financial security. Rising employee disengagement, where workers stay in roles without fully utilizing their skills, costs companies millions in lost productivity and could lead to prolonged economic stagnation [3]. For retirees, the gap between benefit increases and actual costs means many may need to rely on investment income or part-time work to maintain their standard of living [1].