Should the retirement age be lower, not higher?

[GregLee]

Seriously? The more people who are working and providing goods & services and the fewer there are receiving social security and other benefits, the less the burden on those working. This is NOT a judgement or comment, just the math.

I don't see any math going on here, at all. And since we're commenting here on a theory according to which the more people retire, the greater the opportunity for the not-yet-retired to find jobs, thus lessening the burden on them, your thesis certainly doesn't seem to be the tautology you think it is.

 

[Lazarus]

As long as there are enough people working to pay my Social Security and produce what I need I will be satisfied in retirement.

I don't think the point of life is to produce the most possible over your lifetime. Or to consume the most for that matter.

There was a time when most of the women were not in the workforce and we got by fine.

 

[youbet]

Is there some factual basis for this statement?.

Yes.

 

[youbet]

As long as there are enough people working to pay my Social Security and produce what I need I will be satisfied in retirement.

.

Then we should reduce FRA for SS to a low enough age that there are not enough people working to pay your SS and produce what you need. That would keep a little spice in your life!

 

[Gone4Good]

I don't see any math going on here, at all.

Economic prosperity happens when more people engage in productive work. More people working @ higher productivity = a bigger economy and everyone is better off.

It is undeniable that at a given level of productivity, a smaller work force results in a smaller economy.

We have a current GDP of $14.7T produced by 139.2MM workers. The labor force is 153.7MM, meaning 14.5MM of our fellow citizens are out of work. Assume we could pay 7MM people to take early retirement and that those jobs would be filled with by the currently unemployed. The unemployment rate would drop to the "full employment" level of 5.1%. Assuming there was no change in productivity and that the pool of unemployed workers seeking work exactly matched the pool of early retirees our GDP would be unchanged. However, our "potential" GDP would decline from $15.5T to $14.7T due to the smaller potential work force.

So in the best case scenario we'd have lower unemployment at the expense of future economic growth. A more reasonable scenario would be one where worker productivity declines, as well matched and desirable employees are replaced with second choice candidates. It is also likely that some skilled workers will retire where no suitable replacement exists, resulting in a less than one for one retirement to new employment ratio. That means lower current GDP, lower potential GDP, and higher than promised unemployment.

The expected price tag (excluding financing costs) of moving 7MM workers to retirement three years early based on the average SS payment is $293B. Add another $206B for medicare. And we have a program cost of $500B over three years.

 

[RonBoyd]

It is undeniable that at a given level of productivity, a smaller work force results in a smaller economy.

<and so on>

The biggest problem I'm having with this thread is that solutions suggested in this (and the bulk of previous) Post start from a sufficient number of Jobs (to support the solution) and expect the number of jobs to grow in the future. Yet, here we are, starting with a (greater than?) 11 million deficit and a reasonable expectation that the gap will increase in the future not diminish.


What is 'Watson'? IBM computer wins 'Jeopardy!' practice round - USATODAY.com

(I, also, seen an article a couple days ago that very tiny creatures (Microbes?) are being used to create miniature circuits for the Game Software industry... but I can't quickly find the cite.)

Anyway, we are heading closer to the "Man and a Dog" Era than away from it.

http://www.early-retirement.org/forums/f28/will-this-forum-become-extinct-46980-4.html#post868992

http://www.early-retirement.org/forums/f27/whats-with-society-and-er-53271.html#post1003858

 

[harley]

The biggest problem I'm having with this thread is that solutions suggested in this (and the bulk of previous) Post start from a sufficient number of Jobs (to support the solution) and expect the number of jobs to grow in the future. Yet, here we are, starting with a (greater than?) 11 million deficit and a reasonable expectation that the gap will increase in the future not diminish.

14.5 million at last count. Employment Situation Summary

(I, also, seen an article a couple days ago that very tiny creatures (Microbes?) are being used to create miniature circuits for the Game Software industry... but I can't quickly find the cite.)

Are you talking about nanites (microscopic robots)? If it's actually microbes, I'd be interested in reading that if you ever find the article.

 

[ziggy29]

It's quite a conundrum. On one hand, as the ratio of those working to those receiving public benefits continues to decline, the less we can afford to reduce the retirement age (and skew that ratio even more). On the other hand, with unemployment quite high and looking like it will stay high (north of 8%, say) for quite a long time, reducing the number of people that need to w*rk would reduce the number of people who need a j*b and can't find one.

I for one am not smart enough to figure out how these two seemingly contradictory factors can be reconciled.

 

[RonBoyd]

Are you talking about nanites (microscopic robots)? If it's actually microbes, I'd be interested in reading that if you ever find the article.

I am going to have to stop my habit of reading headlines only. Nevertheless, the article still is appropriate to my belief that "our" desire to avoid w*rk will result in fewer and fewer Jobs until there is only a "Man and a Dog" as the workforce... and the rest of us? Enjoying all that leisure time hopefully.

Living microorganisms used to make video games

The biotic games incorporate living cells like paramecia, which are single-celled organisms, with video games in order to allow everyday people to participate in experiments and learn more about biological processes.

“We would argue that modern biotechnology will influence our life at an accelerating pace, most prominently in the personal biomedical choices that we will be faced with more and more often,” said Riedel-Kruse. “Therefore everyone should have sufficient knowledge about the basics of biomedicine and biotechnology. Biotic games could promote that.”

 

[Independent]

IMO, lowering the SS retirement age is a valid topic for discussion as a short range strategy for dealing with the economic downturn, but it's a bad idea for the long term.

"Conventional" economics says there's a difference between long term and short term forces. In the long term we believe wages are flexible and will adjust so that anyone who is capable of doing productive work and willing to work will find a job at some wage, and will add to the economic pie. But, in the short term wages are sticky, we can get into a vicious spiral of low expectations leading to low results, and we incur a lot of pain while we wait for the long term to get here.

We've borrowed money to extend unemployment benefits, pick up COBRA for unemployed workers, keep state/local workers employed, give tax breaks to businesses and individuals, all to directly reduce the pain and/or try to break the spiral. Maybe early retirement would be a more efficient way of using those borrowed dollars. Gone4Good has a good start at analyzing this idea, the next question is how many of those dollars will go to people who would have retired at 62 without the extra incentive.

Unfortunately, Gailbraith's piece appears to say this is a good long term idea, I can't see the wisdom of that.

 

[ziggy29]

We've borrowed money to extend unemployment benefits, pick up COBRA for unemployed workers, keep state/local workers employed, give tax breaks to businesses and individuals, all to directly reduce the pain and/or try to break the spiral. Maybe early retirement would be a more efficient way of using those borrowed dollars. Gone4Good has a good start at analyzing this idea, the next question is how many of those dollars will go to people who would have retired at 62 without the extra incentive.

This is part of the equation. On one hand it would significantly increase the public burden of benefit payouts, but this is partially offset by a reduction in unemployment benefits paid out, as well as other public assistance programs to the involuntarily unemployed. To what extent there would be an offset, I can't say.

And to some degree, reducing unemployment boosts consumer confidence which might be one of the primary drivers of economic recovery. But at the same time, at some point the ratio of workers to benefit receivers could become dangerously high.

 

[Gone4Good]

The biggest problem I'm having with this thread is that solutions suggested in this (and the bulk of previous) Post start from a sufficient number of Jobs (to support the solution) and expect the number of jobs to grow in the future. Yet, here we are, starting with a (greater than?) 11 million deficit and a reasonable expectation that the gap will increase in the future not diminish.

Creative destruction is nothing new. Nor is productivity growth that destroys jobs. In 1870 75% of all jobs were agricultural, now only 2-3% are. Manufacturing employment in the U.S. has declined by 40% from it's peak, and yet our manufacturing output is 75% higher. If thousands of years of innovation haven't prevented economies from reaching full employment before, I have no reason to believe it will now.

Considering that we were at full employment just a couple of years ago, it is hard to pin the current high unemployment rate on innovation. Nothing really new changed in the past few years that would account for an additional 7-8MM workers becoming obsolete. Rather the old explanations still serve best. A fall in aggregate demand caused by a tightening of lending standards has resulted in an economy with excess capacity. That excess capacity will persist until the constraints on overleveraged players are somehow relaxed. If debt paydown is the the sole, or primary, path to relaxing those constraints, the process will take several years. But the situation is not permanent.

 

[Nords]

It is undeniable that at a given level of productivity, a smaller work force results in a smaller economy.
A more reasonable scenario would be one where worker productivity declines, as well matched and desirable employees are replaced with second choice candidates. It is also likely that some skilled workers will retire where no suitable replacement exists, resulting in a less than one for one retirement to new employment ratio. That means lower current GDP, lower potential GDP, and higher than promised unemployment.

One of the reasons for the apparent jobless recovery seems to be another round of productivity boosts, so any view of the workforce should look at productivity growth.

I wonder if higher productivity comes from training an entire workforce of "second-choice candidates" or if it comes from just one or two tools being powerful enough to raise the productivity of any bunch of monkeys. It doesn't take a big training investment for the users to realize the benefits of a more powerful computer network or a smartphone or social networking. Infrastructure, sure, maintenance & repair, sure, but not at the user level.

Unfortunately FICA payments come from workers, not from better tools or productivity or profits, so as the employment pool shrinks even faster than the available workers then SS becomes tied to the economic growth of businesses beyond their productivity improvements.

At least the cost of the safety net of Social Security is paid for from the wages of workers. I'd rather support that than have my personal ER's income taxes rise to handle welfare or other safety-net programs. And imagine what would happen to runaway CEO compensation if a company's payroll taxes were tied to the size of its executive compensation, including options & perks & deferred benefits...

 

[ziggy29]

Considering that we were at full employment just a couple of years ago, it is hard to pin the current high unemployment on innovation.

Not entirely, at least within the context of a single nation's economy. Innovation in the past has always displaced workers, not eliminated the need for them. Robots in auto assembly plants, for example, displaced assembly line workers but that was offset by the creation of good jobs that produced the robotics. When we became more industrial than agrarian, people moved from the farms to the cities and worked the factories -- but the jobs weren't overseas.

But now we're at a point where most "innovation" jobs can be done anywhere in the world. Computer hardware and software advances up into the 1990s eliminated the need for some other jobs but produced a lot of domestic jobs in computer engineering and software development. Needless to say, much of the engineering is done elsewhere now, the assembly of computers and computer parts are done mostly in China and the software is increasingly done in India.

So while your statement may be true for the *global* economy, for the first time it seems like most domestic jobs being displaced by technological advances are being filled in other cheap-labor nations, so we're not really reaping the benefits of it in terms of employment.

 

[Westernskies]

Another way to look at it is that if we are going to accept the prevailing notion (and pay for) 10+% of the workforce to be unemployed for the next 5? 10? years, it might as well be those who WANT to be [-]ER'd[/-] unemployed.

And the recipients of those jobs vacated by ER's will be gaining work experience and skills that will help us 5? 10? years down the road instead of having them just entering the workforce when the last few boomers retire, certainly the boomer-gen x transition would be smoother than the class warfare the current unemployment/SS situation is formenting.

So, where do I sign up for this exciting new ER stimulus package??

 

[dex]

The biggest problem I'm having with this thread is that solutions suggested in this (and the bulk of previous) Post start from a sufficient number of Jobs (to support the solution) and expect the number of jobs to grow in the future. Yet, here we are, starting with a (greater than?) 11 million deficit and a reasonable expectation that the gap will increase in the future not diminish.

I call it the 'one variable' solution i.e. changing only on variable will solve the problem (we've seen similar solutions with the health care and illegal drug discussions). It ignores, population growth, off-shoring of jobs, productivity increases, skill mis-matches, decrease in salary, benefits etc.

Over the next few years I think we will have a new normal:
- higher systemic unemployment
- higher underemployment - high skilled workers taking low skilled jobs
- limited job advancement as older workers do not retire until they are forced to by the company
- more people on government assistance

 

[RonBoyd]

I call it the 'one variable' solution i.e. changing only on variable will solve the problem. It ignores, population growth, off-shoring of jobs, productivity increases, skill mis-matches, decrease in salary, benefits etc.

On the contrary... or exactly. I am not quite sure of what you are saying. Everyone seems to be concentrating on those issues and ignoring my point. (And, I am not proffering it as a "solution.")

Additonally, I am not thinking in the short term (~50 years) but gradually over the next hundred or so years. In any event, it will be gradual (becoming worse going forward) and non-stoppable.

Yeah, this is exactly like the "Global Warming" issue (not that I am completely sold on that) and should be looked at it in that vein.

 

[dex]

Additonally, I am not thinking in the short term (~50 years) but gradually over the next hundred or so years. In any event, it will be gradual (becoming worse going forward) and non-stoppable.

From the previous posts, I think we agree.

I think I disagree with you on the cycles. I think what I outlined as the new normal will be our next phase but it will not last 50 years - look towards Europe that is our immediate future and it is under a strain now. So, that is our 'new normal' for less than 50 years while costs in China and India increase. They begin social programs similar to the west or like the mid east where basics are subsidized e.g. food and energy. After that period the west decreases its unsustainable subsides and jobs slowly begin to move back to the west. Then again, the unknown is Africa and South America. Maybe, one of those places becomes the low cost producer and the economic growth moves from China/India to Africa or South America.

It is difficult for us to think of the USA this way because we are so close to the issue and we love it. But, no empire has reversed its decline once the debt has gotten to our current levels. The debt will be another drag on reducing unemployment.

There are no magic bullets.

 

[ziggy29]

I think for the time being, a weak economy, depressed job market and people and businesses looking for the "cheapest" solutions will continue the net job exports overseas for a while. But the combination of rising standards of living in emerging economies *and* Peak Oil and its aftermath could combine to move jobs closer to the end consumers, at least where stuff that has to be transported is concerned. It will take longer for the trend of job loss to reverse where "moving information" instead of "moving stuff" is concerned, since the Peak Oil factor doesn't much come into play.

But I think I'll be retired or dead before we really see this happen in large numbers (though Peak Oil and oil prices that far outpace inflation may hit a bit earlier than that).

 

[Independent]

Creative destruction is nothing new. Nor is productivity growth that destroys jobs. In 1870 75% of all jobs were agricultural, now only 2-3% are. Manufacturing employment in the U.S. has declined by 40% from it's peak, and yet our manufacturing output is 75% higher. If thousands of years of innovation haven't prevented economies from reaching full employment before, I have no reason to believe it will now.

Considering that we were at full employment just a couple of years ago, it is hard to pin the current high unemployment rate on innovation. Nothing really new changed in the past few years that would account for an additional 7-8MM workers becoming obsolete. Rather the old explanations still serve best. A fall in aggregate demand caused by a tightening of lending standards has resulted in an economy with excess capacity. That excess capacity will persist until the constraints on overleveraged players are somehow relaxed. If debt paydown is the the sole, or primary, path to relaxing those constraints, the process will take several years. But the situation is not permanent.

This is all true. But, looking forward, I think we still have to deal with the results of globablization.

US workers are accustomed to earning much higher real wages than Indian and Chinese workers. That difference is harder to maintain today than it was 40 years ago. Now that more US workers compete in a global labor market, I think that getting back to full employment will require lots of US workers to accept jobs at wages that compete against the global standard. That will take time and put a lot of downward pressure on living standards.

 

[RonBoyd]

14.5 million at last count. Employment Situation Summary

And that's just here at home:

Global Unemployment Rates

 

[Westernskies]

And that's just here at home:

Global Unemployment Rates

View attachment 10991

Where's China on your chart?

 

[RonBoyd]

Where's China on your chart?

China don't count.

 

[Pete]

"Thanks to all the hard work, the United States produces twice the goods and services per person that it produced in 1948. Everyone in the country could, in principle at least, work a four hour day or a six month year and still maintain a standard of living equivalent to that enjoyed by our parents. Almost uniquely among the developed nations, America took none of its productivity gains in additional leisure. It bought consumer items instead. And that, if it is any comfort to you, explains why you have a houseful of labor saving appliances and are more tired than ever." -From Bill Brysons book Made In America

 

[haha]

This is all true. But, looking forward, I think we still have to deal with the results of globablization.

US workers are accustomed to earning much higher real wages than Indian and Chinese workers. That difference is harder to maintain today than it was 40 years ago. Now that more US workers compete in a global labor market, I think that getting back to full employment will require lots of US workers to accept jobs at wages that compete against the global standard. That will take time and put a lot of downward pressure on living standards.

This will be impossible given US politics. It just isn't going to happen.

Ha