Against raising the Social Security retirement age

There couldn’t be a less equitable way to save money.

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.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com

17 thoughts on “Against raising the Social Security retirement age”

  1. I sit at a desk and write memoranda and advise regulated parties on the phone. I can do this til I'm 75 if I have to. Hod-carriers can't keep going like this. Hairdressers, on the other hand, can – this is not entirely a white-versus-blue collar thing. Endodontists can't keep going forever, either – physical dexterity is necessary. My own inclination is some kind of a soft landing: partial availability of Social Security which ramps up as you age, so the hod carrier can afford to work at Home Depot wages for a time between, say, 60 and 70. And Social Security should be fully included with taxable income, so Olympia Dukakis pays taxes when she gets her swell lucrative role at 80.

  2. "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."

    Why does it make less sense at 65 than 45? Disabled is disabled, at any age. If we're going from a fixed retirement age to a health status based retirement, it makes little sense to give somebody money because they can't do heavy lifting, when you're NOT giving somebody else money only because their job doesn't require such heavy lifting. Aren't you just proposing to cheat the store clerks by imposing later retirements on them?

    For that matter, I'm fortunate to have one of those jobs that doesn't require heavy lifting. It meant I could work through my chemotherapy, when walking across the room made me break into a sweat. The real disability in MY line of work, engineering, is gradual cognitive decline. I fully expect to work until I'm no longer able to, but barring a stroke, "no longer able to" in my line of work means becoming less ingenious, or making too many mistakes, not my back going out on me. At 51 I'm already on that downward slope, and just making up for it with accumulated job skills.

    Am I going to have to re-take the SAT in order to qualify for social security?

    The real response here that's needed is a mix of making SS needs based, AND a massive investment in anti-aging research. Ideally people should not retire AT ALL, unless it's because they've saved up enough money to do so voluntarily. Not because their bodies or brains fell apart on them.

  3. There are many jobs that can't be held for a full working career and where the people who hold the jobs fully expect to switch to something else long before 65. My brother the iron worker would be a good example. A 65-year-old iron worker is probably a foreman or supervisor, because of the physical challenges. They switch into less-demanding building trades, or become home inspectors, or go to work in a building supply business or … you get the picture. What's needed to support this job-switching is 2 things: the expectation that this is a normal thing to do and then the personal networks to make it happen. If workers in physically demanding occupations don't have those networks, they typically use the state bureau of employment, and it takes longer, but it works in the end (except in this economy).

  4. One of the things that people in white-collar jobs miss is how much really nasty slack there is in the word "able". Of the late middle-aged manual workers I know, pretty much all of them are "playing with pain" on a level that would make most of us blench. The carpenter who spends most of the time he isn't working either at the chiropractor or flat on his back; the plumber who has to move one of his legs by hand because the ligaments in the knee are shot; the quarry laborer who was working right through chemo, just cut back to part-time…

    And some of these people, thanks to the way our propaganda system is set up, don't even know that social security disability exists.

  5. . . . "and a massive investment in anti-aging research" . . .

    Brett, you're an engineer, not a biologist. But even so, you should know that biological systems are far far far more complex than engineered systems. Engineered systems are designed; biological systems just happened. The massive investment in cancer research (Nixon's "war on cancer" and progeny) has not gotten us very far. And I doubt that massive investment in aging research would work all that much better. You will get a lot more short- and medium-term longevity for the buck by behavioral modification on a large scale–smoking, diet, exercise, alcohol. (Let's agree to disagree on guns.) Previous generations got most of their added longevity through plumbing and food supply. Medicine has not been very significant; advanced biological science even less so. (IIRC, statins are the great pill success story, and are only worth about 3-6 months of life expectancy.)

  6. I haven't seen any 65 year old furniture movers.

    I'm not sure what the point about working years is supposed to be. Perhaps it would be good to tell your undergraduate students that every year they spend in college will require them to wait longer to take retirement benefits. Perhaps we should be more rigorous in our recapture of leisure, and adjust for hours worked and vacations days and the rest. Or we could simply judge, as we currently do, that work provides benefits to those who undertake it, as does education.

    paul, we've added a million people to public disability during this recession, with more to come. Insisting on working through difficulty is a matter of pride, of self-definition, not a measure of ignorance.

  7. 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

    Or not. The important number isn't overall life expectancy. It's the remaining life expectancy of those who reach retirement age. That has gone up only modestly since Social Security got started, and most of that has already been made up by the increases already made in the SS retirement age.

  8. "Brett, you’re an engineer, not a biologist."

    I'm an engineer who was a dual major in college, the 2nd major being human biology. (I'd planned to design medical equipment…) I follow the research, and, IMO, we have indeed arrived at the point where an increase in funding would advance the field. This wasn't really true a couple of decades ago, but now we have genetic engineering, and a much better understanding of the biological mechanics of aging.

    It is, in Alan Harrington's words, time to "Spend the money, hire the scientists, and hunt down death like an outlaw." Visit the SENS website, they do a good job of explaining what's involved.

  9. Thomas:

    But what does "disability" mean? If you can still do the work, it just brings tears to your eyes because of the pain, is that disability? (And obviously a lot depends on how the person in a physical labor job is employed — if they're employees, then the question of disability is much more of a negotiation between them and their boss or HR department, but if they're casual labor or "independent contractors" the question is much more difficult. And of course Social Security disability, like retirement, doesn't typically even get you up to minimum wage equivalent.

  10. Dave, I take it you don't know any hairdressers. It's work with a nontrivial impact on the body — the hours of standing with arms outstretched, of course, but also an immersion in often-noxious chemicals.

  11. . . . “and a massive investment in anti-aging research” . . .

    Brett, you’re an engineer, not a biologist.

    Speaking as a biologist, and as someone who's reasonably current on the aging data in model organisms, we know how to extend both lifespan and healthspan: Caloric Restriction. It works in everything from yeast to mammals, compared to other aging research it's much less plagued by the charlatans and dupes that have so characterized the field (and I'm thinking in particular of Glaxo paying $120 million for Sirtris when everyone who'd been paying attention knew Resveratrol was, at best and most innocently, a misunderstanding and a bad joke). And it's free, except for the disruption to your lifestyle. Not a lot of fun, though, and not a lot of money to be made, which is why the pharmaceutical companies are desperately seeking drugs that can mimic its beneficial effects while letting people have their fun.

    IMO, we have indeed arrived at the point where an increase in funding would advance the field. This wasn’t really true a couple of decades ago, but now we have genetic engineering, and a much better understanding of the biological mechanics of aging.

    You are entitled to your opinion, but I'd guess that I follow the field a lot closer than you do, and I don't share your opinion. When you look at what we know about aging, after you exclude the things that are wrong and the things that are trivial, surprisingly little mechanistic insight is left, and what is left is not terribly well suited to pharmaceutical intervention. And if by referring to 'genetic engineering' you mean of humans, rather than as a tool in biological research and in production of biomolecules, you're just flat wrong – no informed person would say that we're anywhere near being able to predict when it might be possible to envision responsible genetic engineering of humans to address normal aging.

  12. Let's just rejoice that Brett is willing to "spend the money." Next step: persuading him that it ought to come from higher taxes on those who can afford to pay them.

  13. Social Security isn't broke; fully funded until 2037. A permanent fix is easy; just tax all income. Presently, income above approximately $102K/yr is not taxed. This is completely backwards. If all income was taxed, the rate itself could be lowered; a tax break for everyone. If upper incomes are taxed, the lowest incomes could get a tax break, perhaps the first $15K/yr not be taxed.

    A means test will shore up Social Security. People with an income over, say $250K/yr, or have assets of around 3-5 million dollars shouldn't receive SS payments. It's insurance mainly against a poor old age. Sure, some will yell about paying in without receiving anything back – but it's insurance. We pay auto insurance for years and hope to never use it.

    The estate tax should have a disbursement level where multiple recipients aren't taxed up to around $5M. Remember, the tax is on the recipient, not the deceased. It's up to the estate to distribute the wealth, managing the tax. The estate tax is responsible for people building hospitals, museums, cultural and philanthropic organizations. America prides itself on a meritocracy, and a billion dollar estate passing hands endlessly is an aristocracy opposite America's self-notion.

  14. I'd add that there's a major factor of age discrimination.

    This is one of the reasons to resent those professors and pundits who want to rip off Social Security – the professors have tenure, and it's long been clear that pundits will draw a paycheck for decades after they've last have an original idea.

  15. Barry, professors who got onto the train on time have tenure. These days, an increasing amount of college teaching is done by adjuncts who have low wages and no security. The pundit business is no gold mine either: what will Tim Rutten do when the LA Times goes under? It's true that there are some islands of privilege in the midst of trouble, but it's not clear how many of them will last.

  16. First, interested readers should check out this brief: “Would Raising the Social Security Retirement Age Harm Low-Income Groups?” http://www.urban.org/UploadedPDF/311413_Raising_R… It makes the standard policy argument that any proposals that are good generally policy but might be regressive should not be discarded, but should be implemented along with policies that offset the reduction in progressivity.

    Second, “Compared to a straight percentage benefit cut, later retirement is better for richer people and worse for poorer people.” This is misleading. As the Urban brief explains, “Increasing the NRA [Normal Retirement Age] is equivalent to reducing benefits across the board for most retirees and has no more impact on work incentives at older ages than a general benefit cut.”

    Some necessary background, which I’ll try to keep short: There are two Social Security retirement ages: What’s usually called the Normal Retirement Age (NRA) was 65 for people born before 1938 and under current law is increasing to 67 for people born in 1960 and later (see http://www.ssa.gov/OACT/ProgData/nra.html). The early eligibility age, the age at which people can first claim benefits, is 62 and will remain 62 under current law.

    To compute your benefits, you first compute what benefits you would get at the NRA, then reduce that number if you are claiming early (down to 62) or increase it (up to 70). Details here: http://www.ssa.gov/OACT/ProgData/ar_drc.html

    So increasing the NRA, which is what most policymakers are discussing, means that for any given claim age, benefits would be lower. For example, with an NRA of 65, you would get 80 percent of the “full” benefits if you claim at 62 – a 20 percent reduction. For people with an NRA or 67, the reduction would be 30 percent. If you increased it to 70, that might mean a 45 percent reduction, but people could still get benefits at 62.

    Now, people could just respond to increases in the NRA by retiring later and collecting the same benefit for fewer years. But many won’t, putting them at risk of being poor. That’s why some people suggest increasing both the early eligibility age along with NRA. But that’s separate from the main current debate.

    On your question of exempting people with long work histories from the increased retirement age, I can’t think of any such proposals. There have been proposals to exempt people with long work histories from paying Social Security taxes (see, e.g., http://www.ssa.gov/OACT/solvency/Warshawsky_20080…. There have also been proposals to give people with many years of work at low annual earnings higher benefits than they would get under the standard benefit formula: see http://www.ssa.gov/OACT/solvency/provisions/benef…. And as I mentioned above, you could simply make the basic benefit formula more progressive.

    The interaction with the disability program is discussed a bit in the Urban brief, but I’ll just say that changes to DI are very, very hard – to think about, to deal with politically, and to implement.

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