Cash for Geezers? Lower the Retirement Age to 55 Now!
One of the most powerful forms of stimulus we could apply to our economy right now would be to lower the current Social Security retirement age from the current 65-67 to 55, and increase the benefits back to where they were in inflation-adjusted 1960s dollars by raising them between 10 to 20 percent (so people could actually live, albeit modestly, on Social Security).
The right-wing reaction to this, of course, will be to say that with fewer people working and more people drawing benefits, it would bankrupt Social Security and destroy the economy. But history shows the exact reverse.
Instead, it would eliminate the problem of unemployment in the United States. All those Boomers retiring would make room in the labor market for all the recent high-school and college graduates who are now finding it so hard to find a job.
If enough Boomers left the job market, it would even flip the current dynamic of too-many-people-chasing-too-few-jobs upside down, and create a tight labor markets. Tight labor markets drive up wages.
And as wages go up, tax revenues – which are paying for Social Security (among other things) – would increase.
Additionally, these new-into-the-workforce people can then pay off student loans, buy new houses and cars, and otherwise drive the economy from the bottom up. Which will further increase tax revenues further strengthening the Social Security system.
To further tighten the job market and drive up wages (and tax revenues), modify the Fair Labor Standards Act of 1938 – which tightened the labor market and reduced unemployment by establishing the 40-hour work week – to include all hours worked by a person. We could also, like in France, drop the 40-hour maximum-workweek threshold to 35 hours (used by the Mitterrand government to successfully lower unemployment and stimulate the French economy). A final step would be to emulate the rest of the developed world and require by law that every worker get at least two to four weeks a year of paid vacation – further tightening the labor market.
In Uganda, Joseph Okwakoi gets it. He’s the president of the National Youth Council in that nation, a group that has considerable political power (and an affiliated Member of Parliament, the Central Youth Party’s Joseph Kasozi).
Earlier this month, Okwakoi called on Parliament and President Museveni to lower the age of retirement for government workers (the country’s largest employer) from the current 60 years of age to 55. This single act would instantly create about 15,000 job openings in the country, which could be filled by currently unemployed young people.
President Museveni replied that he’d consider it seriously, pointing out that, “The retirement age was actually 55 when we came but because of manpower shortage we put it at 60.” Now that the manpower shortage has eased, wages are falling, and unemployment is rising, he noted, “We shall study it.”
What Joseph Okwakoi understands is that there is a marketplace for labor. When the supply of labor exceeds demand, the price of labor (“wages”) falls. On the other hand, when the demand for labor is at or greater than the supply of labor, the price of labor – wages – increases.
This is the main reason why the labor movements of the 18th and 19th centuries fought so hard against child labor; they knew that if children were removed from the labor marketplace, then the supply of labor (the number of people available to work) would decrease and the price of labor (wages) would increase. And, sure enough, that’s exactly what happened – and it began the creation of a blue-collar middle class.
It’s also why the labor movement pushed for an 8-hour day and a 40-hour maximum workweek. By reducing the amount of labor available from each worker from the average 60 hours a week or so people were working before 1938, the labor market tightened up, increasing the number of people who could be employed and raising wages.
Of course, this is the exact opposite of American labor policy ever since the Reagan/Bush/Clinton/Bush era. Reagan drove down wages by busting unions (which tighten a labor marketplace); declared an amnesty for millions of then-illegal immigrant workers to increase the supply of labor and depress wages (particularly whacking the carpenters and other construction trades unions); and began the process (completed in a big way by Bill Clinton with NAFTA and GATT/WTO) of dismantling tariffs, taxes, and laws that made it expensive or illegal to export American jobs.
Reagan also put into the chairmanship of the Fed Alan Greenspan, who openly declared that his most important job as chairman of the Fed was to prevent “wage inflation” – a term which he exclusively applied to working-class people. Greenspan is still preaching that now-discredited and anti-American philosophy he learned from Ayn Rand, in fact.
Having already largely wiped out the ability of a blue-collar single-wage-earner family to have a middle class lifestyle over the past 30 years, Greenspan now wants to go after white-collar workers by eliminating limits on H1B visas for skilled workers ranging from computer programmers to physicians to scientists. The investor class would always be protected, in the Greenspan world, but the working class – regardless of skill level – should always be the working poor.
In September of 2007, in an interview on C-SPAN for Book TV, Greenspan said:
“We pay the highest skilled labor wages in the world. If we would open up our borders to skilled labor far more than we do, we would attract a very substantial quantity of skilled labor which would suppress the wage levels of the skilled, because the skilled are essentially being subsidized by the government, meaning our competition is being kept outside the country.”
It’s shocking that ideologues like Greenspan, Reagan, and Clinton believe this, but they do. And the only way to reverse the past 29 years of Reaganomics/Clintonomics is to tighten up the labor market again. While a great start would be to pull out of our insane trade treaties and begin again protecting American manufacturers, that will take a decade for the impact to be truly felt even if we were to go back to our 1980 tariff levels today.
But providing space for a good chunk of the 16 percent of the American workforce over 55 years old will immediately take us to nearly zero unemployment and dramatically stimulate the economy. Then we can begin to bring our manufacturing jobs back home from China and the other important steps (Medicare For All and Card-Check for unionization) to restore the strength and integrity our nation and national economy once had.
Another idea for lowering unemployment would be to institute a required minimum vacation time, just like the countries in Europe. If you work in the US, then employers would not only be required give you 4 weeks off a year, but be penalized if you do not actually use it. All that time off would require employers to hire more people to cover the vacation time. It would pump more money into the economy from people going on vacation and spending. Further, it would not require one cent in government money to institute.
What about creating incentives for one parent to stay home to care for kids? That would tighten the labor market and we'd get the advantages of a fulltime parent.
What a freaking brilliant idea! And I'm not just saying that because I am 55 and completely burned out from working for corporate greed monkeys.
In order for this economy to ever come back, working people need more disposable income. High unemployment (which is expected for years by most economists) will allow corporations to continue to reduce benefits and stiffle wage increases. Where as, low unemployment will cause compitition for employees, which will increase both benefits and wages.
Of course, this makes too much sense to ever happen and because it benefits real people instead of corporations, there will be no lobbyists supporting it and endless lobbyists and cash to defeat it.
Still, at least mentally, I am sailing in the Keys instead of leaving in fear of my job being outsourced, and I thank you for that.
Matt's idea is great!!!
Great ideas for the overall advancement of modern life.
Unfortunately, the multi-national corporation behemoths are working toward opposite ends. They can (and do) legally flood American labor markets if any labor “shortage” exists that “drives up” their labor costs through a two pronged approach.
One is to offshore work to India and other low standard of living areas that Americans can not compete against. This is done by US corporations who do little or no business in India or other offshoring nations, so in effect they're flooding our labor market here.
The other method is to have high profile greed meisters like Bill Gates cry the blues to Congress that there is a shortage of highly skilled and highly educated workers in the US. Congress then allows literally hundreds of thousands of H1B visas each year to bring in these workers which floods the market as well.
As a note, in my 20+ years of working in hi-tech in the US I've yet to see any shortages, and even worse I have never seen a hi-tech job that a reasonably intelligent and motivated person couldn't learn.
Great idea, Thom! I'll diseminate it.
One criticism in your article, though, about tariffs...
According to the chart at http://home.netcom.com/~rdavis2/tariffs.html , tariffs were dismantled before Reagan. Tariffs have remained virtually unchanged since the mid-70's.
Thom! Talk about lousy branding! Can we call it something other than Cash for Geezers? Jeez, that rivals Public Option for lack of appeal. How about Senior Incentives, or Senior Choice...
Next year, it'll be 75 years since the U.S. followed the lead of 34 other countries and adopted Social Security. Some people thought at the time that it'd be part of a quick slide toward totalitarianism. It wasn't. FDR, the "tyrant" who passed it, was elected 4 times and is revered even now.
One of the effects of Social Security was that it allowed people to retire who faced the choice of either work themselves to death -- or just die of destitution.
The experience with Social Securty Kinda puts the whole "universal health care will lead to Stalinism" meme into context, I think. Just sayin'.
/\Chris and Matt\/ I Couldn't agree more. I don't understand the short-sighted-ness of people that listen to the airheads in mainstream media and buy the idea that France and other European countries are always "in trouble" or "in debt." They've only come close when they start connecting theirselves to, or start emulating are messed up economics like severe globalism (i.e. corporate socialism.) I love this country as much as anyone, which is exactly why I don't just instantly hear that this is "are" idea and we should stick to it for that reason... which is no reason. We should be the country that uses the best ideas from all over the world, and when it's clear that something works somewhere else we should be the very next people to do it. I don't know where this idea came from that we should just be proud that we work so hard and are the most productive. I would be more proud that my work actually comes to anything for me and or my family and not just some corporate pig. I wouldn't be proud to be some drone for theives that take everything for no real reason than to be jerks. I don't consider that "making something of myself" and I never will. The idea that the retirement age should be raised only because people are living longer is shortsighted not only for the reasons listed on this page but also for the fact that the people making it to even 70 have more health problems than ever before, and it was recently stated that children born recently will live shorter life spans than their parents anyway so the longer life idea is out the window. It's quite simple tax the rich [bleeps] that make more than the next 95% combined which they have absolutley no right to anyway which would quickly fund SS to where it needs to be and bring this country to the 21st century in tech and infrastructure. And this BS idea that-that would send jobs away...1st of all they're leaving anyway, corporations and jobs are already moving overseas (Halliburton's in Dubayy to avoid paying taxes,) and already most larger corporations are paying 0 of some types of taxes that regular non reptiles are, and foriegn corporations with U.S. ops pay 2/3's less. Either way I say LET THEM "go to Ireland" or whatever their vacancy would easily be filled with smaller companies that aren't being allowed to compete and whom would actually hire instead of making employees do far more than their share with threats they would just hire the desperate and pay them less.
Given your logic, why not give everyone on Social Security $100,000 each, let people retire at 40, give everyone 10 weeks of vacation and reduce the work week to 4 days a week and 5 hours a day? Wouldn't that help even more?
"Geezers at 55?" Hmph. Nothing like passing your 55th birthday to make you reconsider that notion. That said, there is no chance of rebuilding the economy, restoring the middle class and saving the poor (and the middle can't be rebuilt without shoring up the poor), unless we restore the former role of US workers. We aren't going to do that because it requires that we reinstate all the (gasp) rules and regulations on corporations that existed until Reagan's deregulation frenzy. For years, our govt has distributed billions of dollars of no-strings-attached corporate "tax relief", much of which has gone into building factories and offices in foreign countries, exporting our jobs. We have paid for a portion of this since 1996 with money that once went into basic aid for our poor.Why don't we have the courage to stop it? Simple as that, just stop it. Restore the competitive free market system, restore rules to prevent "too big to fail," and let corporations accept personal responsibility for failure or success.
We've lost hundreds of thousands of jobs at the same time that welfare ended and workfare created a massive and growing bottom-wage, involuntary, temp help workforce, often used as replacement labor. Far more workers for far fewer jobs. Between desperation and years of anti-union propaganda, we threw away our own job protections. In the past, employers couldn't get Americans to work bottom wage jobs with no security and dangerous conditions, and corps were forced to embrace a measure of fairness. Today, so many are desperate and have no choice but to take those jobs. Between exporting jobs and the abuses of welfare-reform-as-we-got-it, today's workers are powerless.
We allowed the policies that created our economic disaster. We can either start fighting back by reversing "Reaganism in the Workplace", or resign ourselves to indentured servitude.
Great article Thom! I thought the best way would be to increase the minimum wage - to $10 or $12 or $20 and hour and the shorter work week. But this may be a better start since most voters tend to be at or near retirement rather than near minimum wage.
This sounds like a great new May Day and new New Deal platform!
*Reduce Retirement age to 55
*Paid Vacation for Every Job
*Three Day Weekends
*Medicare For All
*Family Friendly Wages
Keep up the great work!!! Both Thom and Louise!
Confirming what Thom has been saying for years. http://www.foreignpolicy.com/articles/2011/01/02/unconventional_wisdom?page=0%2C7&sms_ss=facebook&at_xt=4d3796697682d17a%2C0
Thom is generally well-informed, but this plan is fraught with problems. Consider:
(1) We're already facing some tough political choices in regard to Social Security, e.g., raising taxes, because of the number of boomers, choices further compounded by the likelihood that tomorrow's SS recipients are likely to live longer than today's recipients.
(2) Thom's argument doesn't account for the fact that a lot of wage earners pay into the system but never recover because they die early. While it sounds morbid, the system depends on this result. Reducing the retirement age to 55 would completely change the landscape, and result in benefits being paid to a whole new cohort.
(3) Thom's plan presumes the labor market will tighten because those age 55 will stop working. This is a pretty bad assumption, as many people already receiving Social Security continue to work in order to supplement their income, e.g., Wal-Mart greeters. Additionally, I suspect a lot of people have saved enough to adequately supplement their Social Security benefits, which would result in a lot of older workers continuing to work given that the present recession has wiped out a lot of 401k accounts. Additionally, mortgages are not usually satisfied by age 55; and parents are often forced to delay saving in order to send their children to college, a necessity given the outrageous growth in college tuition. Accordingly, I suspect that allowing people to retire at 55 will not tighten the labor market, but instead result in a lot of double-dipping, thereby raising the costs of Social Secuity without the attendant benefit of decreasing unemployment.
(4) Thom's argument also fails to account for the lost productivity we'd likely experience. Frankly, at least as far as white-collar industry is concerned, there's a lot of productivity left between 55 and 65, given that experience is paramount. I'm not sure that we'd want to throw all that experience overboard. To the extent we allowed people to continue working, you're right back at square one, only now you're paying them Social Security, too.
(5) Finally, Thom's argument assumes an insular labor market. Jobs are already being shipped overseas as fast as they are created, however, thereby rendering his forecast concerning greater opportunities available for younger Americans in this country shaky, at best. Any benefits are likely headed to China and India, Mexico and Indonesia.
I support the idea of lowering retirement age to 55.
Opening up jobs for the younger generation to come into the workforce and take over the responsibility.Between the age of 18 and 54 you would have plenty of skilled people to train the new comers into the workforce.
Most company's are looking for younger more energetic and physically able people with no health issues to deal with, to do the job.
Retiring at 55 would be a choice left up to the individual to make . not for others
At 55. people could invest their SSI income to start their own small business. Or just enjoy their retirement and travel.
Retiring at 55 would give them time to do the things they want to do with their life while they still physically can.
Really excellent idea. Not sure I would go all the way to 55, but certainly 60 would be a good start. In addition, I'd like to see Vietnam era veterans who served either 2, 3 or 4 years during the war get additional credit, perhaps another 2 years.
I haven't done the math, but I suspect that eliminating the current cap on Social Security taxes would more than pay for the changes. We need more people like Thom in Congress!!