Sunday, October 10, 2010

Conservatives Want to Raise the Retirement Age

Conservatives Want to Raise the Retirement Age -- Doing That Now Would Be Stupid and Cruel

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If House Republican leader John Boehner, R-Ohio, has his way, people will have to wait until age 70 to retire and receive full Social Security benefits. Raising the retirement age has been proposed in recent months by a number of conservative lawmakers, who point to the fact that Americans have been living and working longer than in decades past. But in the midst of an employment crisis that has hit older workers particularly hard, this idea is both ridiculous and cruel.

People who went back to work or kept working past traditional retirement age these days are usually not doing so because they enjoy their jobs; rather decreasing pensions and 401ks have forced them to work just to eke out a living, even if it takes a toll on their health. And since the recession, even those who are willing and able to work through their 60s find there are just no jobs for them. The steep decrease in potential jobs for older workers is not likely to change much even as the economy picks up, experts say, meaning a later retirement age translates to more time facing unemployment without a safety net for people who are supposed to be enjoying their golden years.

Many respected economists are calling for rolling back the retirement age for full Social Security benefits to the former benchmark of 65, or even lowering it temporarily -- or perhaps permanently -- to as low as 60. Noted economist James K. Galbraith has suggested lowering the retirement age to 62 and the Medicare eligibility to 55 for a three-year window, both to help elders survive and also to open up jobs for younger workers during the economic crisis. Similarly, Economic Policy Institute (EPI) economist Heidi Shierholz suggested making the full retirement and Medicare eligibility ages 64 for two years.

Congressman Dennis Kucinich, D-Ohio, has suggested using $15 billion worth of bailout and stimulus funds to create a six-month window where people could retire with full benefits at age 60 – kind of a federal buyout. He framed it as part of a jobs bill that could open up a million new positions vacated by early retirees.

Last week, a million French people took to the streets to protest President Nicolas Sarkozy’s proposed overhauls of their pension system, which includes raising the retirement age from 60 to 62. But the American public has shown no such organized opposition to proposals to raise the retirement age, despite the fact that a majority already suffer significant penalties for collecting Social Security benefits early.

EPI economist Monique Morrissey calls attacks on Social Security -- along with the transition from stable pensions to risky 401k retirement funds -- the “single biggest threat to our long-term economic security.” But though the threat affects everyone, she says,“it’s happening with a lot of misinformation and below the radar.”

Workers 55 and older typically have much lower unemployment than younger workers. But during the current recession, many older workers have lost their jobs as employers shed older, more experienced and often higher-paid employees. An analysis of federal data by AARP's Public Policy Institute found that unemployment among Americans 55 and older increased more than threefold between 2000 and 2009, and unemployment of those 65 and older more than doubled. The number of Americans in each of these age groups who are in the workforce, meaning working or actively looking for work, also increased by about 60 percent in the past decade, as many older Americans are working longer out of financial necessity.

Unemployment rates for older workers are still lower than the general public, at 7.2 percent for workers 55 and older in August compared to a national average 9.6 percent. But unemployment is often a uniquely distressing and chronic situation for older workers who face a number of barriers in looking for new jobs, and who are likely to more urgently need health insurance.

Many argue that this spike in older unemployment is another reason for rolling back the age at which people can collect Social Security benefits with no penalties, a move in the opposite direction from the retirement age increases pushed by Boehner and other conservatives.

Being able to collect full Social Security benefits earlier would be a lifeline for Syracuse resident Cindy Paoletti, 58, who was laid off from her corporate accounting job at JPMorgan Chase in 2007 and hasn’t found work since. Her husband’s life insurance payout is now gone, and she is paying a penalty to withdraw “what’s left of my IRA early,” after it lost thousands of dollars in the recession. She’s nearly given up looking for work, since jobs in her former specialty have largely been outsourced, and when applying for other jobs she’s been told countless times she’s overqualified. Sometimes employers tell her the jobs have already been filled when they discover her age.

In 1983 the retirement age was increased from 65 to 67 (for those born after 1959, with those born after 1938 on a sliding scale) at the urging of Federal Reserve Chairman Alan Greenspan. At the time Social Security was facing a dire funding crisis. It has since stabilized, for years creating a surplus paid into a trust fund that lent to the federal government. Hence some economists and pundits have called for reverting back to a full retirement age of 65. Now as baby boomers retire, Social Security payroll taxes are decreasing and payouts are increasing, with the Congressional Budget Office predicting the program would be paying out more in benefits than it is receiving in payroll tax revenues this year due to the economic downturn -- hence Boehner’s call for raising the retirement age to 70. Morrissey and others say the risk is being exaggerated for political reasons, since Social Security is still running a surplus if interest on the trust fund is included.

“The slight imbalance that exists has been framed as a crisis even though there is no crisis,” said Morrissey. “It’s being used as an excuse to shrink the system even though there’s no real reason we shouldn’t be expanding the system.”

National progressive radio host and author Thom Hartmann is calling for an even earlier normal retirement age, like 62. Hartmann bases his argument not on humanitarian grounds but rather the idea that taking older workers out of the labor force will reduce the available supply of workers, driving up wages and thus increasing Social Security payroll taxes. In his recent book Rebooting the American Dream: 11 Ways to Rebuild Our Country, Hartmann says historically laws and policies prohibiting child labor, limiting immigration and giving unions control of skilled trades effectively limited the supply of workers and hence caused wages to increase.

“If we have a lot of unemployed people desperate for work, wages will be low and tax collection is low,” he said. “If you dropped Social Security and Medicare eligibility to 55, you’d be pulling a large cohort of the labor market out and demand for labor would go up dramatically, increasing wages. That would also mean increased payments to Social Security. Everybody wins.”

Morrissey invokes the traditional image of a three-legged stool for financing one’s retirement, with a pension or 401k earned from one’s job, Social Security benefits from the fund one has paid into throughout one’s career, and personal savings (including the value of a home). But she notes that personal savings have always been negligible for most people, and pensions and 401ks have shrunk so much in recent years that it is really a one-legged stool of Social Security that keeps most people upright in their golden years.

“There has been a trend of people working later into their 60s than they used to,” said Morrissey. “We believe it’s driven not by people wanting to work longer but simply being forced to work longer because their 401k accounts are not as good as the traditional pensions they replaced, and also because Social Security benefits were cut because of the earlier increase in the retirement age from 65 to 67.”

Waiting until age 67 to collect Social Security might be fine for someone who is employed at a job they can physically handle as they age. But what happens when you are laid off in your early 60s and, despite your best efforts, are unable to find another job? Or when the physically demanding nature of your work becomes too much to handle?

“There are workers who do extremely demanding physical jobs their entire lives,” notes Maggie Mahar, a fellow at the Century Foundation and author of Money Driven Medicine: The Real Reason Health Care Costs So Much. “They’re cleaning office buildings at night, carrying heavy things, doing construction outside in all sorts of weather. By age 65 their bodies are wearing out. And most aren’t trained for office jobs, so it’s terribly unfair to tell them just wait your turn and keep going another five years. While most of us are aging healthier, if you’re in a job on your feet all day doing heavy lifting, you’re ready to retire by 65. It’s really a class thing here, and also about racial disparity, which is tied up with class.”

Older workers face plain old ageism, as well as the fact that their technology skills might lag behind 20-somethings who grew up with computers, and their qualifications make them more expensive than lesser-qualified younger people. Older workers are generally earning more at the time they are laid off, which means a tumble to joblessness is more jarring than for younger people who earned less and are more accustomed to switching jobs and looking for work. Many older workers have been at the same job for decades, meaning they have no recent experience in applying for jobs or marketing themselves to fit current market needs.

“If they do find another job, it’s a completely different type of job,” said Morrissey. “Bounced from a skilled position, they end up taking anything -- they’ll work at Starbucks just to get health insurance until they can collect Social Security. Not only are older workers likely to stay unemployed for a longer period, but when they do get a job they are much more likely to see their earnings cut in half.”

Chicagoan Rafael Cervantes, 61, was laid off from his computer programming job a year ago, and is now pushing the end of his unemployment benefits. Since computer programming jobs have been heavily outsourced and converted to freelance work, he notes there just are not jobs to be had in his field. For the few staff positions that still exist, he’s likely at a disadvantage compared to younger programmers who are seen as cheaper and more up to date on the latest programs. Younger workers are also typically more able to relocate for a new job, Cervantes notes. So making a living means hustling for freelance assignments or searching for a new line of work. He’s currently taking expensive online courses in internet instruction. Even once he is able to collect Social Security, he expects to keep seeking freelance work to make ends meet. He notes that even with some health issues, at least he is physically able to work.

“For people in blue-collar jobs, factory work, it could just physically be too hard to keep working until 70,” he said.

Morrissey said rolling back the retirement age to 65 could be funded by an increased Social Security payroll tax. She said Social Security is the one social program people seem to support across the political and socio-economic spectrum, and she thinks the public would be willing to pay incrementally more into Social Security in order to preserve its viability.

“It’s very unusual in public finance that there’s such support for raising anything,” she said. “Social Security is that popular.”

Morrissey and Mahar say allowing full Social Security payouts to those younger than 65 would be unrealistic and create massive costs. But they say other measures to help unemployed older workers are necessary, including extending unemployment insurance payments.

“If you have unemployment insurance extended you have time to find another job without being desperately afraid you’re going to lose your home,” said Mahar. “That would cost us much, much, much less than lowering the retirement age. It’s a stop-gap measure that helps a lot of people. It's hard to look for a job if you’re terrified. As long as you have an unemployment check coming in, you might have to dip into savings but you’re less likely to be wiped out.”

Paoletti said she still looks for jobs, but after almost three years of fruitless searching her heart is not in it. She scoffs at the idea of retraining or going back to school for another profession.

“At 58 years old what in the hell am I going to retrain for?” she asked. “Put myself in hock, more in debt than I already am, so I can get a certificate in medical transcription? Then they’ll say, 'Well I’m sorry but you don’t have any experience.' I figure there’s no light at the end of this tunnel as far as employment goes. All I can do now is hope and pray I can stretch things out until I can collect Social Security."

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