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If Social Security reform is political dynamite, the battle over whether to raise the retirement age may be the fuse. I got a hint of the passion behind this issue at an Urban Institute panel I moderated yesterday on Capitol Hill.
In recent weeks, both Steny Hoyer (D-MD), who is the number #2 House Democrat, and John Boehner (R-OH), the top House Republican, have put the idea on the table. Ah, you say, there is finally bipartisan support for something in Washington. Not so fast. Both are far out on a legislative limb with little public support from fellow lawmakers.
To review the bidding, for those retiring today the eligibility age for full benefits is 66 (slowly rising to 67 for future pensioners). Today’s retirees also may receive partial benefits at 62. Most economists who specialize in retirement issues would increase both eligibility ages. At yesterday’s panel, Rich Johnson, who directs Urban’s program on retirement policy, laid out four reasons: Americans are both living longer and spending more time in retirement, older Americans are better able to work than in the past, working longer can boost their retirement incomes, and raising the retirement age can help make Social Security solvent over the long run.
As Rich noted, over the past seven decades, life expectancy for 65-year-old men has increased by more than five years, and by more six years for women. And even as people live longer, they have been retiring earlier. Thus, today’s retirees are collecting for seven more years than in 1950. Women are receiving benefits for an average 20.5 years—more than one-quarter of their lives.
Seniors are not only living longer, they are healthier. From 1983 to 2007, the percentage of those 65-74 in either fair or poor health declined from one-third to barely one-fifth. Twice as many are college educated. And only about 40 percent of workers age 50-61 held physically-demanding jobs in 2006. Overall, the number of workers in these jobs has dropped from 57 percent to 46 percent.
Supporters of the status quo remind us that low-income people are likely to die at an earlier age and thus would disproportionately be hurt by changes in eligibility. Monique Morrissey of the Economic Policy Institute argued yesterday that in the last quarter century, life expectancy of low-income men increased by only one year. She also said that many people can’t work at 62—either because they are physically unable, are caring for sick family members, or because they cannot get a job even though they want to work.
A word about this last claim: While it is tough for older workers to find employment in today’s soft economy, we are talking about Social Security changes that won’t take effect for decades. By then, younger people will make up a much smaller share of the workforce, and there may be far more jobs available for seniors. In addition, older workers are likely to be healthier and better educated even as work continues to be less physically demanding.
Still, Monique is right that there will be many 60-somethings who can’t work. And we are obliged to help them out. But the solution should be to reform the Social Security disability program for those who need it, not to allow everyone else to retire early. Similarly, we need to find ways to help caregivers and others who can’t continue to work. But it is time for Social Security to recognize profound changes in both the nature of work and the abilities of many older workers.
My bet is we will raise the retirement age as one element of Social Security reform, along with requiring bigger contributions from high-earners and other reforms. As more older Americans are able and anxious to work, we ought to build a retirement system that encourages them to stay employed.
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