Why Raising the Retirement Age Is a Lousy Idea
One proposal for cutting the federal deficit that has received support from Republicans and Democrats alike is raising the retirement age. Sen. Richard Shelby, R.-Ala., even favors periodically increasing it "every few years." Labor economist Teresa Ghilarducci argues persuasively that this is a terrible idea:
Raising retirement ages is not a good policy and support for it is based on two wrong assumptions: one, that people can and should work longer and, that two, society cannot afford to pay for retirement because pensions and health care spending for the elderly take too many resources away from younger people.She also makes this vital point in rebutting the blithe assertion that, with people living longer, it's only natural that people put off retirement: Shrinking pensions and patchy health care coverage is already forcing people to retire later.
Research suggests that employees who earned between $31,200 and $72,500 will have to work to age 72 to have a 50-50 chance of having enough money to cover their basic retirement needs. Those with income of $11,700-$31,200 will have to work until 76. Only people earning more than $72,500 have a 50 percent of quitting work at 65 (the age at which a person born in 1937 or earlier many collect full Social Security benefits) and being able to afford their golden years.
The myth of generational warfare
Ghilarducci also notes that withholding retirement benefits is a poor way to cut government old-age spending. For instance, older Japanese men work more than their peers in other developed economies, yet still have higher projected pension costs than those of American retirees.
Why is it mistaken to assume that, as is commonly heard claim in debates over protecting the solvency of Social Security, the current level of pension and health care benefits for the old somehow rob the young? Simply because there's little hard evidence that it does, she says. By contrast, Ghilarducci found in a survey of 58 countries that public spending on such programs doesn't curb government benefits for younger people.
Hard work, tired backs
Another reason to oppose raising the retirement age -- it's not fair to workers in physically demanding jobs, such as janitors, plumbers, construction workers, carpenters, cashiers and cooks. In the U.S., that encompasses one in three employees over age 58, or roughly 9 million Americans. Mounting economic insecurity in recent years adds to the burden of later retirement for blue-collar workers, who tend to pay into Social Security for a longer period of time because they start working earlier. Ghilarducci says:
Though many Americans, especially professional workers, can control when they stop working, most workers leave their job before they plan to because of layoffs and health problems. Though a greater share of older Americans are working longer or looking for work than in the last 30 years, the evidence suggests that older workers are increasing their labor force participation because pensions as a source of safe and secure retirement income is eroding not because employers have made jobs more attractive, better paid, and easier to do.This country clearly faces serious fiscal challenges (although the threat to Social Security is overblown). But glib pronouncements about the virtues of working into old-age ignore the harder truth that for many people, postponing retirement is a hardship. The issue requires far more study than many of our political leaders seem willing to give it.
Chart courtesy of Demos
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