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The best news I've heard in ages
What's an old person anyway? Does it depend on how many years are behind you, or how many years you still can expect to live? Here is John Shoven:
The current practice of measuring age as years-since-birth, both in common practice and in the law, rather than alternative measures reflecting a person's stage in the lifecycle distorts important behavior such as retirement, saving, and the discussion of dependency ratios. Two alternative measures of age are explored: mortality risk and remaining life expectancy. With these alternative measures, the huge wave of elderly forecast for the first half of this century doesn't look like a huge wave at all. By conventional 65+ standards, the fraction of the population that is elderly will grow by about 66 percent. However, the fraction of the population that is above a mortality rate that corresponds to 65+ today will grow by only 20 percent. Needless to say, the aging of the society is a lot less dramatic with the alternative mortality-based age measures. In a separate application of age measurement...GDP would be between seven and ten percent higher by 2050 if retirement lengths stabilize.
Here is the paper (I can't find a non-gated version). Note that the entire increase of life expectancy of the twentieth century has been taken in the form of retirement, rather than extra work. Of course our social security and Medicare policies have encouraged early retirement, and we have not adjusted age eligibilities for longer life spans and better health. For fiscal reasons, we will likely have to increase eligibility ages; not only will we spend less money but it will encourage more work.
If you have been thinking that a demographically-based American economic collapse is virtually inevitable, this paper gives some grounds for hope. Here is further commentary.
Posted by Tyler Cowen on October 22, 2007 at 07:56 AM in Data Source | Permalink
Comments
Take that, Robert Samuelson.
Now fetch me my free drugs and a Bahama Mama chaser, whippersnapper!
Posted by: Different Jeff at Oct 22, 2007 8:05:35 AM
There's an interesting paper up on the Institute of Actuaries of Australia website from a recent conference: "It's time to abolish retirement, and here's how to do it" (http://www.actuaries.asn.au/IAA/upload/public/5.b_Conv07_Papers_Wickham_Its%20time%20to%20abolish%20retirement.pdf).
Recognising the increasing post-retirement healthy life expectancy, the author argues for introducing a flexible savings vehicle and government policies to allow flexible movement between lifestyles: work periods, leisure periods, study, whatever; and to pre-fund major parts of health expenses. He argues that the government should fund disability income, regardless of age, but not provide retirement benefits as such.
Not sure if this is old hat, but anyway I'm keen to see this sort of thinking spread wider so I can argue for more flexible work/leave arrangements in future years!
Posted by: David Grundy at Oct 22, 2007 9:02:18 AM
This seems like an opportunity for me to tell the changes that I would like to see in SS.
1. Collect the tax on all income.
2. Make one rate of payout. The same for those who paid in much and those who paid in little (SS is not a retirement plan). The payout should be low enough to reduce the total payout.
3. Raise the eligibility age to 73 and then index it for life expectancy from here on out.
Posted by: Floccina at Oct 22, 2007 9:19:50 AM
Demographic collapse was never inevitable. What is inevitable is that the elderly will have to work longer, whether many of them want to or not
Posted by: Yancey Ward at Oct 22, 2007 9:39:41 AM
Social Security actually discourages early retirement, by paying reduced benefits for people who retire at 62 instead of 65. A futile effort, as most people opt for the reduced benefits at 62. Retirement has a very powerful allure that will be hard to discourage.
Posted by: Peter at Oct 22, 2007 10:24:15 AM
"we will likely have to increase eligibility ages; not only will we spend less money but it will encourage more work."
Encouraging more work may be as important as reducing benefits. Fifty years ago productivity of blue collar seniors fell off markedly as their physical capacity declined. In today's information and service based economy, though, workers can remain at peak productivity levels well into their late 60's and beyond. In fact, a lifetime of acquiring job knowledge likely makes seniors more productive than they were as young bucks.
It makes no sense for Social Security to offer the plum of early retirement while simultaneously discouraging the output of those high output seniors who take advantage of it.
Posted by: John Dewey at Oct 22, 2007 10:32:58 AM
Posted by: John Dewey at Oct 22, 2007 10:33:58 AM
the author argues for introducing a flexible savings vehicle and government policies to allow flexible movement between lifestyles
The only useful governemt policy is abolishing the SS ponzi scheme. If retirement and/or disability are funded by private insurance and capital markets, there is no demographic issue.
Posted by: guest at Oct 22, 2007 10:50:10 AM
Given the reluctance of business to hire anyone over the age of fifty, raising the age of retirement merely punishes the would-be retired while illustrating the difficulty of shooting pool with a rope.
Posted by: The Owner's Manual at Oct 22, 2007 11:58:23 AM
Are puns like this even allowed?
Posted by: Andrew at Oct 22, 2007 12:20:07 PM
Social Security is only insolvent by around 2% of taxable payroll. Raising taxes from 12.4% to 14.4% would cause the system to be solvent, though I don't think that is the best option.
If we raise the EARLY and normal retirement ages to reflect current life expectancy (and index after that), raise the cap on taxable earnings from $97,000 to $120,000 or $125,000, and possibly add a .25% or .5% tax to both employers and employees, Social Security will be solvent again.
See this report for some more exact figures (2005): http://www.ssab.gov/documents/WhyActionShouldbeTakenSoon.pdf
Eventually the side clamoring for privatization and the other clamoring for hyper-progressivity (see Floccina's recommendations) will have to come together.
Posted by: Captain Hook at Oct 22, 2007 12:32:24 PM
The average age of death during 99% of man's history was 18.
Our bodies are not designed to live much beyond that.
Grow, mate, die...that's nature.
So, the so-called "adult" (20+) is really a walking corpse...still alive because society has shielded it from natural forces of death. In that sense, all people older than 18 are really the same age: dead.
Posted by: John Bailo at Oct 22, 2007 12:48:06 PM
"The best news I've heard in ages" doesn't include needing to work as a Wal-mart shelf-stocker when I'm 75.
Posted by: ZBicyclist at Oct 22, 2007 2:05:20 PM
ZBicyclist...the title of the post was...um...a pun.
Posted by: Tyler Cowen at Oct 22, 2007 2:22:10 PM
Captain Hook,
Thanks for the link to the Social Security Advisory Board paper. I disagree with their recommendation that payroll taxes should be increased now.
As long as current social security benefit payments are funded, there is no need to raise taxes. In 2017, when benefit payments begin to exceed tax receipts, then we can raise taxes.
If we raise social security taxes before 2017, Congress will spend the increased surpluses, just as they have done the past decade.
If we reduce benefits before 2017, we're just providing more surpluses for wasteful Congressional spending.
I would support legislation which informs future retirees their benefits will be reduced in 2017. I would also support changing the COLA adjustment.
Posted by: John Dewey at Oct 22, 2007 4:01:38 PM
I wonder if young people will start referring to retirees as bums.
Posted by: 8 at Oct 22, 2007 4:39:20 PM
People sometimes complain about age discrimination at work. I'm 27, so I have no idea what they're talking about, but this could be a problem for people who run out of decent job opportunities at 60.
Posted by: mpowell at Oct 22, 2007 6:43:46 PM
There is an advantage to deferring the taking of SS benefits until age 70. It increases the amounts of benefits for each year deferred.
But, I think there is still an age level at which if you have earnings from work, a portion of your SS benefits are reduced. AARP may have gotten that totally eliminated by now, it used to end at age 70. Of course, if one goes on working you continue to pay SS tax. If you working at a lower salary it may affect your SS calculation in some cases. Basically, it's an evolving Mare's Nest.
Posted by: R. Richard Schweitzer at Oct 23, 2007 12:55:10 AM
So, the so-called "adult" (20+) is really a walking corpse...still alive because society has shielded it from natural forces of death.
This rates as the most surreal thing I have read all year.
Posted by: Tracy W at Oct 23, 2007 6:22:32 AM
Yes, it used to end at age 70.
I recall there being a furore when Ronald Reagan, who had a well-paying job at the time where people who cared knew what he earned, applied for Social Security at age 70.
-dk
Posted by: Dick King at Oct 23, 2007 7:00:05 AM
"we have not adjusted age eligibilities for longer life spans and better health"
I thought we did in 1983?
Posted by: John Mansfield at Oct 23, 2007 9:37:17 AM
Richard Schweitzer: "There is an advantage to deferring the taking of SS benefits until age 70."
That's true for those who can expect to live to the age of median life expectancy. But for those with even slightly lower lower life expectancies - African Americans, for one example, or diabetics, for another - that advantage evaporates.
Richard Schweitzer: "I think there is still an age level at which if you have earnings from work, a portion of your SS benefits are reduced. AARP may have gotten that totally eliminated by now"
The earnings penalty now ends at full retirement age. It is true that the liberal AARP pushed for this change. But the SENIOR CITIZENS' FREEDOM TO WORK ACT OF 2000 was introduced and championed by conservative House Republicans Claw Shaw of Florida and Sam Johnson of Texas. The act passed the House 422-0.
John McCain had been fighting for repeal of the earnings test for 10 years before it was finally eliminated for those aged 65 to 69. The SENIOR CITIZENS' FREEDOM TO WORK ACT OF 2000 was approved unanimously by the U.S. Senate. President Clinton signed the act on March 22, 2000.
Conservative think tanks and lobbyists, such as the National Center for Policy Analysis (NCPA), have argued for further reductions in the earnings penalty. They point out that early retirees would work more if not faced with the severe penalty imposed on those 62 to 65.
Posted by: John Dewey at Oct 23, 2007 10:35:05 AM
John Mansfield,
We did adjust full retirement ages in 1983, enacting legislation based on findings of Alan Greenspan's bipartisan Social Security Commission. Many argue the adjustment was not great enough.
What we did wrong in 1983 was raise social security taxes to a level that generated Trust Fund surpluses in the 90's. A Republican Congress and an accomodating President Clinton simply spent those surpluses while simultaneously declaring they had balanced the federal budget.
Greenspan argued in the 90's that social security surpluses should have been used to reduce the national debt. But both political parties ignored him.
Posted by: John Dewey at Oct 23, 2007 10:40:52 AM
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Posted by: 网站优化 at Oct 23, 2007 10:01:42 PM
I'm a physician and I've followed this topic for some time.
I see absolutely no evidence that the rate of age-associated cognitive disability is changing. I do see evidence that employment increasingly demands intact cognitive skills.
Extended lifespan does not have any economic advantages in the absence of extended cognitive functional span.
The situation is not improving, it is worsening.
Your optimism is misplaced.
Posted by: John Faughnan at Oct 28, 2007 4:51:53 PM
