What Can the Long-Term Unemployed Tell Us About Raising The Social Security Retirement Age?

Ezra Klein had an article in Newsweek over the weekend We Should Leave Social Security Alone where he points out that “Raising the Social Security retirement age has become as close to a consensus position as exists in American politics.” Which is bad news, because there are lots of reasons not to do that. Here are 10 from EPI. Jane Hamsher catches people up to the dealings of the Catfood Commission here.

I was wondering if the current Great Recession could tell us anything about the retirement age, especially after I went to the 75th Anniversary of Social Security at the Franklin Roosevelt Presidential Library. I snapped these two pictures of want ads from the era blown up:

The issue that older workers had trouble finding any jobs was a major motivation for creating Social Security in the first place.

But maybe that is different now. Maybe raising the retirement is appropriate now because the issue of older workers near retirement being less employable in the work force isn’t true in the 21st century. A quick test would be whether or not older workers have lower rates of unemployment, especially long-term unemployment, and when unemployed are quicker to be reabsorbed into employment among the workforce.

Do we even have to ask? This is the beginning of a series of posts on this topic; criticism and links to other similar arguments and data would be much appreciated.

From Bureau of Labor Statistics we have Long-term unemployment experience of the jobless (June 2010). Two figures:

And quoting from the paper:

While young workers had the higher nominal increase in their long-term unemployment rate, prime-age and older workers had a somewhat larger increase on a percent basis…As shown in table 1, only 23.3 percent of unemployed youths were jobless for 27 weeks or more in 2009, compared with 33.4 percent of prime-age workers and 39.4 percent of older workers…

Older workers also experienced an average duration spell of 29.5 weeks of unemployment, the longest among the groups…In 2009, 18 percent of workers ages 25 to 54 were successful in their job search. Younger workers were about as likely as prime-age workers to find work in 2009. Unemployed older workers were the least likely of all to find jobs, with only about 15 percent of jobseekers finding jobs each month in 2009, compared with about 22 percent in 2007…unemployed prime-age workers and older workers became substantially less inclined to drop out of the labor force between 2007 and 2009.

What can we say? Those approaching the retirement age have been devastated in this current epic recession. Their numbers are high among the worst indicators, including the length of unemployment. Older workers are the slowest to be reintegrated from unemployment to employment and are unemployed the longest, with the human capital depreciation that goes along with that isolation from the workforce, extra vulnerable to swings in the economy. (Question: is there good data on salary drops for unemployed going to employed by age groups?)

These effects could be normal for older workers in general – that their “reservation wage” could be higher – but one should note that the unemployment -> not in labor force has dropped; older workers are desperately looking for job, and the normal channels of “taking time off to coach little league” outside of the labor force has collapsed. If you take worries about hysteresis seriously, the likely scenario of a government shut-down next year and a new normal of very high unemployment means that the labor situation of older workers will only get bleaker.

To raise the retirement age at this point, a point where the economy is not showing any additional interest in hiring older workers than it did a decade ago, and instead leaving them to rot in the unemployment lines, is a direct insult to what Social Security stands for.

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16 Responses to What Can the Long-Term Unemployed Tell Us About Raising The Social Security Retirement Age?

  1. 25-54 is too big a group to lump together. Employer interest drops off dramatically after age 40 or 45.

    The choice to keep health care tied to employment weighs significantly against hiring older workers.

    Notwithstanding anything else, however, the SS age was based on existing life expectancy, so it does make sense to adjust SS age as life expectancy changes.

  2. Tony says:

    The argument that “people are living longer” is a bit of a red herring, too.

    Part of that comes from lower infant mortality, so the average rises.

    And, c’mon, 70-year-olds aren’t really able to work at much higher rates today than they ever were. 70 is still pretty old, esp. in a blue collar situation.

  3. This is a crucial thing which I and many people have noted. There are a lot of inefficiencies in our economy when it comes to employing the elderly.

    There are so many elderly who want to work, but can’t. Or they would like to work and could create a lot of value, but only 40 hours per week or less, with extra flexibility, vacation, and sick days, not 50 hours a week or more with little flexibility, vacation, and sick days.

    You want to stop this waste and have people create a lot more material value in their later years, then you’re going to need smart government regulation against age discrimination and to require the offering of shorter and more flexible hours. And lowering the Medicare age would help a lot (with the company then not required to offer health insurance), so employers wouldn’t not employ the over 50 due to increased health insurance costs.

  4. Employers aren’t going to take into account the externalities from seniors being unemployed, like increased Social Security costs to the tax payers. So you either (smartly and reasonably) regulate to prevent the resulting waste, or you get rid of Social Security, as libertarians and so many Republican politicians would secretly love (they opposed it tooth and nail, as well as Medicare, when it was first offered). Then we can return to the good old days before FDR when seniors lived in the street and were the largest group in poverty.

  5. Lynn says:

    Ezra Kline’s article regarding social security was excellent! I intend to forward it to everyone I know. People better wake-up and realize just what they are supporting when they go to the polls. We can fix social security without any radical movements destroying this program. I don’t understand how this country has been brought to its knees with this recession and now we are going to make the poor pay for it. How the hell does that make any sense?

  6. Pingback: Wonk Room » The WonkLine: September 9, 2010

  7. chris says:

    you’re going to need smart government regulation against age discrimination

    We *have* government regulation against age discrimination, but it’s almost unenforceable because it’s too easy to come up with another plausible pretext, and the only remedy available is after-the-fact lawsuits, assuming the laid-off 50-year-old can even afford a lawyer.

    The Department of Labor might help some with an enforcement push, I guess, if they had the funding and the motivation to do so.

    I don’t understand how this country has been brought to its knees with this recession and now we are going to make the poor pay for it. How the hell does that make any sense?

    It makes plenty of sense if you’re not the poor and you control the government.

    • I’ve studied a fair amount of business law. It is possible, if congress wants, to pass anti-age discrimination laws with a much lower burden of proof, and with much stronger enforcement and funding. The attorney staffers in congress can write such law.

      It’s not that this kind of thing is not legally possible, it’s getting it passed over the Republicans without abolishing the filibuster.

  8. Morgan Warstler says:

    No one is talking about raising the age over-night.

    Ultimately, the age has to go up. And since the price of their labor goes down, and there are so many of them… entrepreneurs will find it easier to innovative – find some marginal profit on their work.

    Necessity. Mother. Invention.

    • It doesn’t really HAVE to go up. Productivity advances can outpace age advances. Eventually we could have robots building robots, cheap solar, etc.

      This shows, like with most problems, a great solution is far more spending on basic scientific research and far less spending on mansions, $20,000 suits, and $100,000 watches.

  9. Pingback: Fixing the World: Understanding Root Causes of Injustice » Blog Archive » links for 2010-09-10

  10. Mitch says:

    Quick pushback: is it possible that older workers have more savings and can thus afford to be unemployed longer? This is a counterargument that probably needs to be refuted.

  11. Mike says:

    Thanks everyone for the great comments.

    Mitch,

    I tried to address that in the “reservation wage” paragraph, which is also impacted by liquidity issues in the search function. The short answer is I’m still looking for data and the arguments. On the first pass, there’s no specific reason why this should go up right now disproportionately unless older workers suddenly have more savings than they did a few years ago; also the percentage of older workers who are leaving the labor force has gone down dramatically. If older workers simply had more savings, enjoyed more leisure, took more time to plan their search, etc. we wouldn’t see the rate older workers stop searching for a job and decide to leave the labor force (retire, take a break, etc.) to go down (we may even see it go up).

    The obvious meta-argument is that it’s up to those who want to raise the retirement age to make the argument that the labor markets are serving workers in their late 60s well. This isn’t the case from the data we have.

  12. Rick Jones says:

    These are scary numbers. As one of the older job seekers I have seen first hand the difficulty and discrimination employers have in today’s economy. I really never thought of myself as old, untill I had to look for a job. I’m going on 2 years now and so far only had a handful of interviews. I’m fortunate that I stayed out of debt and have some savings. Will I really be out of work for the next 15 years?

    jobfable.com

  13. Pingback: SF Fed on Labor Force Participation and Older Workers « Rortybomb

  14. Pingback: Why Lack of Retirement Security Matters to Young Workers « Young Workers Movement

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