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Life at the Bottom of the Sea
By Beverly Goldberg, The Century Foundation
June 14, 2005
The new American reality is one of lifelong inequality. It has become harder and harder for average Americans to move up the economic ladder and the costs of failing to move up that ladder only intensify as people grow older. One good example of the peril of inequality is the problems facing lifetime low-income workers who have health problems that force them to retire early yet who do not qualify for disability insurance.
Who are these people? Well, they are the nurses aides who cannot raise their arms after spending hours helping move and lift patients, the construction workers who cannot move without pain because their backs are so bad from years of climbing ladders while carrying heavy loads, and the service workers who can barely hobble home after standing on their feet all day behind cash registers. These people often are ill-equipped to enter the world of pink or white-collar jobs. For them, taking early retirement benefits from the Social Security program is a last resort.
Unfortunately, many involved in the current fight over how to save Social Security, a system that is far from as broken as those who want to dismantle the program insist, have ignored these workers when suggesting changes to the rules governing early retirement. They eagerly recount the stories in the media of eighty-year-old professors and lawyers and managers who don't want to retire, or even reduce the number of hours they work, though they can easily afford to. And they talk of those who retire early to pursue a life of leisure, travel, and self-indulgence.
They also justify such changes by pointing out that this would not be the first time the benefits for early retirement have been reduced. In 1983, when the first major changes to Social Security were made because of anticipated problems with the system, the age at which people could retire with full Social Security benefits was increased, and the level of benefits for early retirees was lowered. As a result of those changes, those born between 1943 and 1954 will have their yearly benefits reduced by 25 percent if they retire at 62, while current beneficiaries who retired at 62 lost only 20 percent of the yearly benefit they would have received if they worked until they reached full retirement age.
And so, they say, further cuts in benefits to early retirees or raising the age for early retirement make sense, because of increased life expectancy, the reduction in jobs involving hard physical labor, and the number of people who are eager to retire because they have accumulated enough in savings and pensions to enjoy early retirement.
Before taking such a step, however, it is critical to understand that those taking early retirement fall into two groups: one that will bear the pain of such cuts and one that is likely to ignore them when deciding when to retire.
For example, one study presented at a symposium sponsored by the National Academy of Social Insurance noted that
. some 25 percent of those who chose to retire between 62 and 64 have problems with their health that adversely affect their ability to work;
. people who retire early because of health problems have lower lifetime earnings and fewer financial assets than other early retirees;
. people who retire early because of health issues rely more on Social Security benefits than other early retirees; and
. early retirees with one or more health problems are somewhat more likely to list their race/ethnicity as black, African-American, Hispanic, or Latino than are those who report no health problems
A study looking at the problems facing women who retired as soon as they reached 62 found that
. more women than men retired early because of health limitations; and
. about 25 percent of unmarried women who retire early live in poverty.
When it comes to the effects of increases in the age of early retirement on blacks, in testimony before Congress Cynthia M. Fagnoni of the Health, Education, and Human Services Division noted that "any increase in the age at retirement would decrease the number of years during which individuals would collect benefits while increasing the number of years they would pay Social Security taxes. Because blacks, on average, already can expect to spend fewer years in retirement than whites as a result of their shorter life expectancy, they would experience a greater relative reduction in benefits, compared with whites, from an increase in the Social Security retirement age."
It is also important that those who want to change the rules in favor of a later retirement age do not overlook the fact that in addition to workers who opt for early retirement because of poor health, there is another group that does so in order to survive. These are older workers who have been unable to find new jobs after losing their old ones, who have eked out a painful existence for a number of years. Once they run out of unemployment benefits and savings in a jobless recovery where finding a new job can take many months, these long-term unemployed have taken low-paid part-time work when they can find it. By the time they reach 62, turning to Social Security seems their only choice.
Of course, that still leaves those who choose to retire early and have the means to do so. Those are the people who use their Social Security benefits to augment the amount they have saved and the amount they can draw from well-funded pensions. Imposing what will seem to them a small cut in the amount they receive from Social Security is not likely to affect their decisions to retire early. Thus, making cuts in the benefits received by those choosing to retire early or, worse, raising the age at which one can do so, will have an impact only on those whose health makes their jobs undoable or those who have been unable to find jobs, in other words, those who need the benefits simply to survive.
Beverly Goldberg is vice president and director of publications at The Century Foundation.
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