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Retirement At 70
By Robert J. Samuelson, The Washington Post
August 24, 2005
Economist Robert Fogel, winner of the Nobel Prize, recently told students at Cornell University that "half of you [may] live to celebrate your 100th birthday." Fogel's prediction goes well beyond standard projections, which envision today's college students living into their late seventies. But Fogel, who has studied centuries of change in human well-being, said that conventional forecasts are usually too cautious. "In the late 1920s," he recalled, "the chief actuary of the Metropolitan Life Insurance Co. put a cap of 65 on life expectancy."
Fogel's forecast reminds us that sooner or later Americans will have to work longer and retire later. It will become economically, politically and morally intolerable for government (aka taxpayers) to support people for a third or even half of their adult lives. Our present Social Security "debate" ought to start this inevitable transformation. But it isn't. We are in deep denial about the obvious.
Some months back I advocated gradually raising the eligibility ages for Social Security and Medicare to 70 over the next 25 years. Even this would only reduce the large increases in future federal retirement costs. Naturally, I was deluged with fan mail. "You must be on drugs," said one letter.
Yet my proposal was not harsh. Eligibility ages would rise less than 2.5 months a year, barely affecting those near retirement and giving ample warning to younger workers. (Social Security's eligibility age is already scheduled to increase to 67 by 2027.)
Mostly, people simply don't want to work longer. But one common objection is worth examining: age discrimination. It's rampant, said my critics. If older workers can't keep their jobs or get new ones, then my proposal condemns them to poverty. "The fact is that most employers don't want older workers," said one reader. In one AARP survey, two-thirds of employees over 45 said they had seen age discrimination in the workplace.
Although this sounds plausible, it's an oversimplification. Even now, increasing numbers of older Americans are working. Since 1985 labor-force participation rates of men and women in their sixties have been rising, reports Boston College economist Joseph Quinn. In 1985, 25 percent of men ages 65 to 69 were in the labor force; in 2004 that was 32.6 percent. Among women, the figures were 13.5 percent and 23.3 percent. Indeed, as the inflow of younger workers slows, the demand for older workers should increase. Companies will need them. There's no evidence that the job market can't work for older people.
But it could work better, and age discrimination laws are one reason it doesn't. They act much like minimum wage laws. That is, they protect higher wages and benefits for people with jobs. But by increasing labor costs to artificially high levels, they discourage the hiring of some older workers and lead to the "downsizing" of others.
On average, older workers cost employers more than younger workers. They benefit from seniority or accumulated merit raises. Their health costs are also higher: about double for people 55 to 64 compared with people 19 to 44, according to government figures. But the Age Discrimination in Employment Act and other anti-discrimination laws make it hard for employers to offset older workers' higher costs. I won't get into the debate on whether older workers are less productive, motivated and adaptable than younger workers.
But average sixty-somethings can't justify higher labor costs by arguing they're more productive than average
forty-somethings.
There's a conflict between law and economics. One way companies resolve it is by offering older workers buyouts. In accepting voluntary early retirement, workers typically sign releases saying they won't sue for age discrimination. Companies may also shun hiring older workers because they pose more legal risks. The Equal Employment Opportunity Commission typically receives 16,000 to 17,000 age discrimination complaints annually. About 60 percent are dismissed for "no reasonable cause''; another 20 percent are closed without action.
Nearing 60 myself, I'm not blaming anti-discrimination laws for all of older workers' problems. Older workers (say, north of 50) who become unemployed can have a horrendous time finding work. Being older, they have specialized skills; that makes them more valuable but also limits possible jobs. They may be told they're "overqualified" for many openings. Sure enough, older jobless workers spend more time unemployed. In 2004 the median period out of work for those 55 to 64 was 14 weeks; for jobless workers 25 to 34 it was 9.8 weeks.
But I am saying that the current system's serious problems will worsen. Workers leave career jobs in their late fifties and early sixties, often with buyouts. Some return to work as part-time workers or contract workers.
(One- fifth of workers over 65 are self-employed -- roughly three times the rate in the rest of the population.) They often don't get benefits and are paid at lower rates. But because contract and part-time employees are separate worker categories, a case of age discrimination is harder to make.
The system encourages earlier retirement among career workers and frustrates their reemployment. We could take steps to change this: review age discrimination laws to make it easier for companies to keep career workers; allow people to buy into Medicare at age 62 or 65 while still working. I am now at an age when my body is beginning to break down. But most of us are far healthier than our parents were at similar ages, and most jobs are less physically demanding. Most of us can work longer. That's the essence of our problem, but not of our debate.
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