This New York Times story about raising the Social Security retirement age makes one point (one and a half, really) I knew and one I hadn’t thought about. They add up to a strong case against just raising the retirement age under Social Security. That approach turns out to disadvantage poorer (and African-American) workers, compared to saving the same amount of money by cutting benefits by some percentage. The biggest disadvantage is for those in the hardest jobs.
The familiar point is that the professors and civil servants and politicians and pundits and lobbyists who are having this discussion work in much less physically demanding jobs than many of the people whose lives they’re proposing to monkey with.
Professoring, done right, is actually harder than it looks, but the demands aren’t mostly on the body. Some people are bored and want to stop teaching at 65; others are boring others and the others want them to retire. But making someone teach until 70 isn’t exactly imposing hardship.
However, lots of factory and service-industry work is tough on the body. To some extent, changing the rules for them will simply mean reclassifying their condition from “retired” to “disabled,” but in order to be “disabled” for Social Security purposes you have to be incapable of doing any job, not just your job. And I’m not sure I see much benefit in forcing furniture movers to try to get jobs as store clerks when they’re 65.
The partly unfamiliar point was on the equity side of the question. Physically demanding jobs tend to be less well paid than pushing paper. People in poorly-paid, physically demanding job categories tend to die younger than average. In addition, African-Americans are concentrated in such jobs, and they have shorter life expectancies, even after accounting for income, than whites and Asians.
The system as a whole is still a bargain for poor people, even African-American poor people, because the benefits formula replaces a larger percentage of income in lower brackets. But later retirement in effect redistributes income upward. Compared to a straight percentage benefit cut, later retirement is better for richer people and worse for poorer people.
Again, that’s not a new idea.
What is new – to me – is the point that people in blue-collar jobs start full-time employment younger than people who go to college and then graduate or professional school first. If we reckon not on the retirement age but the years of employment before retirement, someone who starts work at 18 and retires at 62 has a longer work-life than someone who gets out of school at 28 and retires at 70.
So while it’s fair to say that longer life expectancies mean that a fixed retirement age provides for more and more years of not working after retirement, people like me take a piece of our retirement early, in the form of schooling.
I don’t play the pensions-policy game, so I don’t know whether someone has offered a formula where the delayed retirement age wouldn’t apply to anyone with, let’s say, 40 years of full-time-equivalent paid employment. But it’s worth some hard thinking.
Personally, I’d rather do the fix on the revenue side: raise the cap, include a piece of non-wage income in the formula. But if we wind up with benefit cuts, just raising the age across the board seems like a worse-than-necessary way to do it.