Retirement Age

We hear a lot of rhetoric about raising the retirement age as a means of saving Social Security. On the surface this sounds like an OK idea. After all we are living productive lives a lot longer than we used to. Staying active and engaged keeps us alert and staves off aging so it improves our health. Boy, I can just hear the bean counters rubbing their hands together in anticipation of the savings in both Social Security payments and medical costs, as well as the extra taxes we will be paying.

Unfortunately there is an unintended consequence. Perhaps in a booming economy with a low unemployment rate raising the retirement age might be advantageous. But, we are not in a booming economy, and the unemployment rate is showing no signs of getting better. In fact if you add in the people who are underemployed, the actual figure is much higher than reported, and getting worse. The recession has enabled a lot of companies to close older less efficient plants (and lay off workers) and when the economy started to recover they expanded production by automating and/or moving operations out of the country. Those jobs are lost forever.

So we have an economy with a limited number of jobs. Given that the normal work career is about 40 years, raising the retirement age by 1 year will increase the workforce by 2.5%. (yes, I know this is a bit oversimplified, but I could do a bunch of complicated math and get an accurate figure which will still be something over 2%). Since there is a limited number of jobs to be had, that automatically raises the unemployment rate by 2.5%. During the whole economic recovery, and with all the job stimulus money spent, we haven’t lowered the unemployment rate that much. It doesn’t sound like a good idea to me.

To make it worse, the bulk of those people who enter the ranks of the unemployed will be either the fresh out of college kids looking to start a good paying career (and pay a lot into Social Security) or the older workers (who were going to keep active and healthy an extra year). So, if college graduates can’t get good jobs, whats the reason for kids to go to college? If they’re going to end their career looking for a job and burning their retirement savings it’s not much of an advantage for the older folks as well. Looks kinda like a negative snowball effect to me.

In fact, thinking about it, why not lower the retirement age? If we get 2.5% more unemployment by raising the retirement age 1 year we should get 2.5% less unemployment by lowering it. If we dropped it to 62 from 65 we could wipe out most of the current 10% unemployment in this country. Yes, Thats way simplified and paying for it might be a bitch, but someone should seriously study the economic impact, factoring in savings on unemployment insurance, welfare, defaulted student loans etc. Besides, having all those skilled, vigorous seniors at loose ends might stimulate some them to start businesses and pull this country out of the economic doldrums.