Against Retirement

In July, Chatterbox wrote that economists weren’t certain whether the U.S. retirement age was going up or down. Clearly, it had gone down for most of the 20th century. But on July 12, the Wall Street Journal reported that the downward trend had stopped, and that the retirement age might be headed back up again. Now a new study by Gary Burtless of the Brookings Institution and Joseph F. Quinn of Boston College concludes that it does indeed seem to be going up.

Retirement was more or less invented during the last century. In 1900, the vast majority of Americans didn’t even live to age 65 (average life expectancy back then was about 45). But if you were a man and still living at that ripe age, odds were you worked: Two-thirds of all American males older than 65 had jobs. That proportion dropped to fewer than half by 1950. By 1985, only 16 percent were either employed or seeking employment. According to Burtless and Quinn, the 20th-century trend toward retiring began with the very oldest people and later spread to the not-so-old. For men older than 70, the big stampede to retire occurred between 1910 and 1940; for men between the ages of 65 and 69, it occurred between 1940 and 1970; and for men younger than 65, it occurred during the 1960s after it became possible to collect Social Security benefits starting at age 62. (For women, the trend toward lower retirement ages got swamped by women’s overall greater participation in the workforce. As a result, between 1950 and 1999 the percentage of 70-year-old women who were employed actually rose by 7 percent.) In America today, work has become what you do when you’re done being a kid and you’re waiting to get old. Indeed, Burtless and Quinn note, “for many workers, retirement will last longer than the period from birth until full-time entry in the job market.”

But that appears now to be changing. Starting in 1985, for both men and women, the average retirement age began going up. For instance, the proportion of 62-year-olds still working started rising about 0.7 percent annually for women, and about 0.3 percent annually for men. Is that because the economy since 1985 has been red hot, with only one recession? Probably not, Burtless and Quinn say; the economy was red hot in the 1960s, too, when U.S. males were retiring in droves. A more likely factor, they argue, is that Social Security benefits aren’t rising as steeply as they did between 1950 and 1980, and that Social Security recipients who continue to work are treated more favorably today than they used to be. They also point out that, in the private sector, “defined contribution” pension plans, which are age-neutral, are displacing “defined benefit” plans, which penalize recipients who continue working after age 65. Finally, Burtless and Quinn observe, mandatory retirement has been pretty much wiped out in the United States. As recently as the early 1970s, roughly half of all American workers were forced to retire when they reached a certain age, usually 65; in 1978 the mandatory retirement age was raised to 70; and in 1986, mandatory retirement was eliminated altogether for most workers. Adding to all these policy-related factors is the likelihood that people over 65, feeling much fitter than people over 65 used to feel, often don’t want to retire.

This year’s presidential candidates have been falling all over one another swearing that they won’t raise the Social Security retirement age; Steve Forbes even disavowed an essay he wrote years earlier advocating such an increase (“I grew away from that initial position”). But reforms instituted in 1983 have already been gradually raising Social Security’s optimal retirement age from 65 to 67 and older. As baby boomers achieve even longer life expectancies, that will surely have to rise to 70 and older. (The far less attractive alternatives will be to cut benefits or increase payroll taxes.) Medicare eligibility should still start at 65, of course, and Burtless and Quinn sensibly propose that the federal government encourage employers to retain older workers by making Medicare the “first payer” for over-65 workers who also have private health-care plans. (Currently, the private health-care plan is first payer.) They also propose that workers who engage in physical labor–whom Al Gore has argued would be harmed by raising the Social Security retirement age–should be permitted to retire earlier than everyone else. This could be achieved by liberalizing the rules for claiming disability. (It would have to be done with sufficient care that younger whiny layabouts like “Parvati,” aka Janice Soprano on Chatterbox’s favorite TV show, couldn’t abuse the system.) Chatterbox, who turns 70 in 2028, says let’s do it.