The Economist Free Exchange has an interesting post up about retirement. To some extent it rehashes the arguments about raising the retirement age and the need for individuals to take more ownership of their retirement planning. What was interesting to me was this passage:
From a historical perspective the entire retirement concept it is relatively new. For most of civilisation the average person worked until they became too sick or feeble, or died. According to Dora Costa’s book on the history of retirement, in 1880′s America more than three-quarters of men over 64 and half of 85-year olds still worked. When people did retire they had little wealth and often were dependent on relatives. The growth of retirement was driven by changes in the labour force (a move away from family farms and toward production and services), new social norms (which made retirement the expectation and created a critical mass of retirees), and financial incentives (income from state pensions and private pensions from employers). The introduction of state pensions was significant because it provided retirement income for everyone (including those too poor to save). This allowed elderly people to cease work and not be dependent on their families. To this day, many people rely on state benefits as their primary source of retirement income.
In late 19th-century Germany, Otto von Bismarck first introduced the concept of receipt of a state income after a pre-specified age. But keep in mind—he set the retirement age to 70, well beyond the average life expectancy then. Twenty-seven years later that age was lowered to 65. It’s extraordinary that the 65 retirement age seems to have stuck, or even been lowered, while life-expectancy has steadily increased. This means each generation gets successively longer retirement. Retirement, like other post-industrial inventions like electricity or television, has become a luxury we’ve come to expect and rely upon. Like consumption of other goods, as technology advances and we become wealthier, we expect more and better retirement. This is not entirely unreasonable. Western countries have more wealth than before and better technology to save, invest, and redistribute income. There is no need to go back to the work-until-you-die model. But this does not mean current retirement expectations are reasonable either, especially when so many depend on the government to provide their retirement income.
OK, aside from a couple of statistics and the fact that the retirement age went backwards in Germany, there isn’t a lot new there. It’s still just a restatement of the retire later meme that is getting a lot of play, and that’s most likely to become official government policy at many levels in the next few years.
The problem is, as I’ve stated before, where are the jobs for these workers going to come from? Suspend belief for a minute and suppose that the US gets back to something approaching full employment in the next couple of years. Even at that happy juncture going to run smack into a cultural trend that views anyone over the age of 45 with scepticism and considers 60 to be an age beyond which coping with the modern world is nigh impossible.
Consider a couple of recent opinion pieces. Ezra Klein blogging about the inability of Congressional members to cope with new technology:
As Jonathan Bernstein has argued before, the current Senate is the oldest Senate in history, with the average age about 63. Age brings wisdom, of course, but concentrating our upper chamber in a particular age group also brings costs, not least in familiarity with new technologies whose development the Senate has quite a bit of say over. This might not matter that much, as the relevant decisions are being made by staff and lobbyists and advocates, but it probably matterssome.
At any rate, one side benefit of an anti-incumbent year may be that a fair amount of new blood gets injected into an institution that could use a bit of it. The Senate’s age is largely a function of its reelection rates, so bringing those down should bring the average age down, too.
And Jonathan Bernstein opining somewhat on the relative age of senators:
This is not good news at all for those who want a less aged Senate. The average age of the retiring Senators is only 62.6, just barely older than the Senate as a whole. Meanwhile, Senators Leahy, Inouye, Mikulski, McCain, Shelby, and Bennett (UT), all well over the Senate average, appear to be shoe-ins for re-elections to six more years (most of this group will be over 80 by January 2017).
I’m strongly against term limits, and I think that experience is a good thing in Congress…but I would like to see a lot more Senators in their 30s and 40s, and a lot fewer over 75.
While their comments are directed at the Congress, I think it fair to say they represent a general attitude that’s alive and about the country. Age is considered a liability and generally an unspoken disqualifier for employment all other things being equal.
I’m not sure that this is all that new in American culture. Certainly it has probably been at work at least since the Boomers emerged. But now the bias is running directly into an economic need to keep people employed later into their lives. Their is a mutual exclusivity here that isn’t going to be all that easy to reconcile.
I think that most Boomers would amenable to working longer and many would welcome the alternative. The caveat is that the work be relevant to their experience and expertise. If it means serving out more years working in a call center then there is going to be serious resistance.
There are a lot of challenges here. Will younger workers accept a slower climb up the income and responsibility ladder in exchange for reducing the pressure on them to fund retirements? Will business abandon its propensity to fire the older worker in the interest of reducing costs? Will employers become less age biased in their hiring practices? And will older workers put in the extra time as well as make a few sacrifices themselves to put this puzzle together.
It’s not as easy as just raising the retirement age, but it is a solvable problem given some flexibility on all sides.