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.