Should we retire later

by John Quiggin on June 2, 2010

I’m working on a longish piece on how to pay for the global financial crisis, and it seems like a good idea to deal with some side issues separately. One of the standard post-crisis responses of governments, i has been to increase the age at which people become eligible for public old age pensions. This change is likely to flow through to other policies, for example by shaping the presumptions around the tax treatment of private retirement income.

I want to step away from these financial questions and ask the question: does it make sense, in general, for people to retire at older ages than in the past? For those who want the “shorter” version, my answer, on balance, is “Yes, at least in Australia”.

Update The qualification “at least in Australia” is more important than I initially thought. In particular (and surprisingly to me), the US has not had anything like the increase in conditional life expectancy seen in Oz – a gain of about 2 years since 1980 for the US compared to 6 for Oz (US source here, Oz here). Also, the Australian old age pension is flat rate (subject to a means test) and essentially the same as the disability support pension, which is the main source of support for people who are too old to work in physically demanding jobs. Again, it seems worth pointing out that the best solution here is to make the jobs better, by reducing working hours and improving conditions.

There are two main factors that should influence the age at which we retire. First, improving productivity means that any given standard of living can be achieved with less work, and we would expect at least some of this benefit to take the form of an increase in leisure, including more years spent in retirement. Second, and going in the opposite direction, we are living longer and (because of higher education levels and increased difficulty of entry to the workforce) starting work later[1]. So, with a fixed retirement age, the number of years out of the workforce is increasing, while the number in the workforce is decreasing.

At least in the Australian context, the second of these factors is dominant. In the last 30 years, the expectancy of remaining life at 60 has risen from 18 years to 24. I’ll guess that average age of entry to the workforce has also risen by about 5 years, say from 17 to 22. That implies a “typical” 1980 life course for full-time workers retiring at 65 of 48 years with 30 years pre- and post-work. The comparable figures now are 43 and 41. So, a proportion of the productivity growth in this period has been used to reduce the proportion of lifetime years spent at work, from over 60 per cent to just over 50 per cent.

By contrast, at least for full-time workers, there has been no reduction in annual hours of work. Official full-time conditions were fixed in the early 1980s at 38 hours/week with four weeks annual leave + public holidays and some long-service leave. That hasn’t changed, but there was a big increase during the 1990s in people working longer hours, and that’s been only partially reversed since then. Given that prime-age adults also have responsibility for children, this doesn’t make a lot of sense.

Those who think employment conditions reflect voluntary bargaining might argue that this apparently unsatisfactory outcome must reflect the preferences of workers and employers. I don’t buy this, at least as far as workers are concerned. But even if it were true, preferences are affected by policy settings such as pension ages. Leaving the pension age unchanged when life expectancy changes pushes people to work harder since their required savings increase. This is, on the face of it, a bad outcome. So, it makes sense for public policy to encourage later retirement, and discourage ultra-long working hours.

fn1. This assumes that time spent at school/uni should not be regarded as “work”. There are some complex issues here I’ll try to discuss more.

{ 104 comments }

1

Marc 06.02.10 at 5:54 am

One major issue with this approach is economic class. Upper-middle class folks don’t have the same physical demands on them that blue collar workers do. Working until you’re in your late 60s looks different if you’re a construction worker than it does if you work on a computer all day. This tends to get completely missed because of the people who are actually engaged in doing the discussion. It’s related to why very high unemployment in the US isn’t perceived as a crisis because it’s primarily happening to Them (at least as far as the college-educated people talking about it are concerned.)

2

John Quiggin 06.02.10 at 6:23 am

True, but the point about the need shorter annual hours applies with even more force for construction workers, I would say.

As a side point, “upper-middle class” tends to imply a relatively small minority. Actually, management/professional is easily the biggest category in the workforce (close to 40 per cent), followed by “sales and office”, so the perception that work involves staring at a computer all day is pretty accurate for most people in the US
ftp://ftp.bls.gov/pub/special.requests/lf/aat9.txt

3

Martin Bento 06.02.10 at 7:39 am

Well, one of my minor hobby horses is the notion that we should, in fact, develop institutions that bring the retired more fully into child-rearing, to relieve their boredom and loneliness, make them more useful to society, and lessen the burden on the middle-aged. The extended family largely did this, and the atomized society we have now doesn’t seem to have found the path to this situation, though I think it is one to aim at.

4

Ian Whitchurch 06.02.10 at 8:03 am

Martin Bento,

Grandparents acting as childcare is pretty darn established in Australia at least.

5

Tim Worstall 06.02.10 at 8:30 am

“By contrast, at least for full-time workers, there has been no reduction in annual hours of work. Official full-time conditions were fixed in the early 1980s at 38 hours/week with four weeks annual leave + public holidays and some long-service leave. That hasn’t changed, but there was a big increase during the 1990s in people working longer hours,”

This is true and not true. It’s true if you only consider market working hours. But as Stiglitz and Sen pointed out in their report for Sarkozy, that’s not entirely the relevant point. What we really want to know is total working hours: household production and market production hours, leaving (after personal care) the balancing item of leisure hours.

And household production hours have been falling steeply for generations: largely for technological reasons (washing machines, tumble driers, microwaves, more reliable cars etc). I know JQ has said before that he’s not all that keen on the evidence from time use surveys but they are all we’ve got. And what they are showing is that while market working hours have, as he says, bumped around a bit, leisure hours have definitely been rising, so total working hours have been falling.

“Leaving the pension age unchanged when life expectancy changes pushes people to work harder since their required savings increase. This is, on the face of it, a bad outcome.”

I’m very taken by Brad DeLong’s argument here. Specifically about the state pension age rather than retirement age as such. The state pension is social insurance: insurance against outliving your savings. When such pensions were introduced they were (usually at least) set at about the average age of death. The pension was thus received by those who lived longer than average and thus risked outliving their (rational, given lifespans) savings.

Over the past century, life spans have of course increased. Now the state pension is more a form of social assurance. That is, not insurance against something which may or may not happen, but a form of saving for something which is highly likely to happen (to highlight the difference between insurance and assurance: fire insurance is insurance. It’s unlikely to happen so we pool the risk. Burial is highly likely to happen so burial insurance is a form of saving for it, not a pooling of risk in the same manner.).

DeLong’s proposed solution (and I’m not sure how much this is just an impish desire to shock and how much a real policy proposal) is to return the state pension to what it was: social insurance. This would mean that pension age would be the average age of death of that age cohort. As that’s rather difficult to predict in advance, we might use the average age of death of the previous age cohort. Say, 75/77 for men at present?

What people do with their own money is up to them: but social insurance should be insurance, not assurance.

6

Kevin Donoghue 06.02.10 at 8:31 am

Since you’re working on a longish piece, I’d suggest that you devote a bit of space to ageism. Until attitudes change dramatically, it’s pointless to suggest that older people should continue working. Their services are not in demand. Maybe enlightened policy can change attitudes, but what form is it to take?

7

Earnest O'Nest 06.02.10 at 8:48 am

John, I’m surprised you’re so easily won over in this debate. Don’t you think that the high levels of (forced) unemployment are enough of a question mark to seriously question such very crude and simplistic ‘activity’ thinking? And looking globally – isn’t it more challenging to get the large part of the world at the levels of wellbeing that are currently enjoyed by relatively small parts of it (as against a seemingly minor problem of keeping up the wellbeing in face of the slow moving demographic evolution in the West)?

And if the choice would be as you put it, what elements do you have to think people would go in for the preference of later retirement? Maybe the stress (if stress there must be) is managed the best if people can work in peaks and be assured that at some fixed age they can not work at all.

The real question is what is the target: keeping the status quo of the current system or making a change to the system that minimizes the amount of forced employment & unemployment alike. If it is the latter, there have to be solutions other than maximizing the quantity of ‘activity’ – as there have been in the past century. Maybe it can start with questioning the unbounded nature of ensuring people can die only after 20 years of unenjoyable back and forth in hospitals.

8

ajay 06.02.10 at 8:49 am

does it make sense, in general, for people to retire at older ages than in the past? For those who want the “shorter” version, my answer, on balance, is “Yes, at least in Australia”.

I agree. I would very much like to retire in Australia.

9

alex 06.02.10 at 9:01 am

If anyone can come up with something that strikes a reasonable balance between tinkering round the edges of a demographically unsustainable system, and requiring wholesale socio-economic revolution, I’m all ears.

On a side-point, the argument about rising productivity allowing increasing leisure is well-put, but how does it account for people in other places who are willing to work harder for longer, potentially undercutting the prosperity of high-wage economies? Can we be sure that whatever future level of equilibrium the countries of the Pacific Rim find, it will be one which the retired working class of Australia and the aspiring middle class of China can both be comfortable with?

10

ejh 06.02.10 at 9:33 am

This would mean that pension age would be the average age of death of that age cohort. As that’s rather difficult to predict in advance, we might use the average age of death of the previous age cohort. Say, 75/77 for men at present?

Shorter this: if you’re down the lower end of the wage scale, you ought to work another decade before you get your pension.

This is what all this means. All of it. It’s going to be a discussion about what “we” need to be doing in the future where “we” means not only “you”, but “fuck you” too.

11

Malaclypse 06.02.10 at 11:03 am

I think telling a roofer (to pick an example) that s/he needs to postpone retiring a few years won’t end well.

There’s a tendency, at least in the US, for people to discuss “work” as though it was all white-collar work now, when for most people work still involves some degree of manual labor.

12

Steve LaBonne 06.02.10 at 12:26 pm

Solution for this utterly phony “problem” in the US:
1) Cut the bloated military budget by at least half and stop looking for excuses to start wars.
2) Raise the top tax rate to recapture some money from the assholes who got us into the financial mess.
Voila! “Problem” (more than) solved. Let’s not mince words here- the likes of Brad DeLoser speak for super-wealthy assholes who are all about “I’ve got mine, fuck you”. Their “ideas” about the pension “problem” should be treated with nothing but mockery and contempt.

13

jazzbumpa 06.02.10 at 12:48 pm

Ernest and Steve are right on (though I don’t share Steve’s contempt for Delong.)

I retired at a year and a half ago, a week before my 62nd birthday, and about 3 years earlier than I expected to, partly because I was given an incentive that was hard to refuse. My employer was cutting costs (read efficiency gains benefit execs and possibly shareholders – I go to pension and SS, and become a liability to society.)

Raising the age for S.S benefits would assure that I deplete my retirement savings, and leave little or nothing for my heirs . The top earners and generational rich don’t have that problem. One effect of raising the age to receive benefits is to lock the social structure, and we already have too much of that, at least in the U.S.

Complex issue. Don’t forget to include considering unintended consequences.

Cheers!
JzB

14

Steve LaBonne 06.02.10 at 12:52 pm

@13: What is there to like about somebody like DeLong? He talks a good game against Chicago economics, but whenever anything serious is actually on the table he’s a good soldier for neoliberal orthodoxy. For the left, “friends” like DeLong are much more dangerous than enemies.

15

Pete 06.02.10 at 12:54 pm

My wife has just turned 60. Wehad no intention of retiring but she could not get any more work. She is ighloy qualified but on a contract which finished. My income was such that we were forced in to retirement. ( I am a viet vet) Until ageism is addressed this a futile dicussion

16

Barry 06.02.10 at 1:24 pm

John, a few points – first, I’m rather pissed off at you eating some right-wing garbage points so easily. What the f*ck is wrong with economists that, after the colossal failure of neoliberalism, neoclassical econ and the whole Chicago school that alleged liberal economists’ first reaction to such things is not ‘hang them and hang them high!’. Frankly, it’s clear by now that AEI/Heritage/Hoover/etc. are nothing but propaganda mills. The only consideration which should be given to anything that they say is to inquire as to how they are lying and/or BS-ing.

Second – as has been pointed out here above, and in every other discussion of this issue I’ve seen on the internet, you’re assuming a low-stress job. Not just something outside of construction, but the sort of job where standing and walking around briskly for 8 hours is part of the job.

Third – last I’ve heard, age discrimination starts in the 40’s (at best). You’re asking people to spend 25 years working in an environment where they’re first to be laid off, and beyond last to be hired. In the sort of job (I’ve got to dig at you here, because you richly deserve it where you don’t have tenure.

Fourth – you said ‘True, but the point about the need shorter annual hours applies with even more force for construction workers, I would say.’ (a) Once you’ve conceded the right’s argument for later retirement, just how the heck are you going to get the right to agree to shorter annual hours? (b) Please note, if you haven’t, that the trend of increasing productivity has *not* been for shorter annual hours, aside from perhaps increase unemployment. You’re arguing here like you’ve got a magic wand with one wish left in it.

Fifth – for those unfamiliar with history, the Greenspan Commission (G-d d-mn that man to h-ll) came up with a solution in 1983, in the USA, that increased Social Security taxes, to pay for the Baby Boom’s retirement. That, of course, was spent on tax cuts for the rich. Once you’ve let those wh*resons get away with something like that, and have conceded their points, again, how in heck are you going to enforce any agreement?

How about we raise taxes on the rich, to pay for things? It’s no longer honestly arguable that cutting taxes on the rich had any other result than making them richer and trashing the financial system; how about we raise taxes on the rich, and you alleged liberal economists call opposing economists for the liars and wh*res that they are. Start with Gregory Mankiw and Martin ‘Lying about Social Security for Thirty Years’ Feldstein.

17

Barry 06.02.10 at 1:27 pm

Sorry for the bad punctuation and spelling, John – you seriously pissed me off. It’s infuriating to see people suck down right-wing lies so willingly.

As time goes by, I’ve watched profession after profession demonstrate that they have no real ethical standards; it’s still maddening.

18

Barry 06.02.10 at 1:44 pm

Malaclypse 06.02.10 at 11:03 am

“There’s a tendency, at least in the US, for people to discuss “work” as though it was all white-collar work now, when for most people work still involves some degree of manual labor.”

I know that I’m hammering repeatedly, but hanging, drawing *and* quartering sometimes is appropriate:

John, you redo your resume so that you’re a 50 year old economist in the private sector, or even an economics professor who was forced into retirement made an offer he couldn’t refuse. See how long it takes for you to get a job paying over $10/hour. Ask some non-professor friends your age at a party just how long it’d take them to get a new job, if they were laid off. Do it after a couple of drinks, so that the barriers are down.

Watch their faces. You’ll see some bleak looks, as if on people looking into a cesspool they’ll soon be swimming in.

19

Nick 06.02.10 at 1:48 pm

Very sensible post. I wonder what’s got some of the commenters so riled up. We have more leisure time over lifetime than before but there is no reason to artificially concentrate it all at the end of life, when for a lot of people Continued work might be more interesting/fulfilling.

20

y81 06.02.10 at 1:48 pm

“For the left, “friends” like DeLong are much more dangerous than enemies.”

This reminds me of when I was in law school (early ’80s), and the primary intellectual energy of people on the left (e.g., Mark Tushnet, Duncan Kennedy) was spent attacking liberals (e.g., Larry Tribe). After 30 years of the Rehnquist and Roberts courts, and a federal judiciary dominated by members of the Federalist Society, they have their reward. My impression is that leftist legal academics have learned something, and no longer consider liberals their most dangerous enemies.

21

alex 06.02.10 at 1:49 pm

What gives you the impression that this is about the particular contortions of US politics?

22

Glen Tomkins 06.02.10 at 2:12 pm

The work of living

Only some fraction of the total work needed to live well is “on the economy”, remunerated with wages or salary. It therefore is a false dichotomy to characterize retirement as a contrast to work.

Insofar as individuals have useful work off the economy that they want to engage in after retirement, the growing gap between the age of retirement from salaried work, and eventual death, is not merely some debit to the overall economy of life. As Martin Bento hints at, the extended family can deliver some services (if you insist on characterizing these things in terms more suited to a money economy) more cheaply and at higher quality than if everything had to be done by people hired on the moneyed economy.

Of course, some people don’t find cooking from scratch, child-rearing, or the supportive care of the elderly, very personally rewarding. Retirement plans should be flexible enough to accommodate all preferences. People who feel more rewarded by doing the sort of work that is best done off the books of the money economy, should have available a retirement plan that offers modest pay-outs starting at some comparatively young age. People who can’t find useful work off the economy should by all means be encouraged by higher pay-outs to remain as long as possible at the oars of the remunerated work that they presumably find more to their liking (or less to their disliking). But it really isn’t a question of either group not working. The difference is just between types of work, not between work and unproductive leisure.

We should probably also find a way to send a little money the way of people who choose, in retirement, to take on work that we would otherwise have to provide, at higher cost and lower quality, on the economy. People who choose to care for an elderly and infirm relative at home, rather than fob them off on a nursing home, are saving somebody a nice piece of change. If funneling a little of that savings to the people doing the work of home care will enable them to to do that work, rather than be off working on the economy to make ends meet, then we all win.

The interface between work on the money economy and the total work of living is not, of course, only found at retirement. Paid parental leave is sort of an interval retirement, in the sense that the continued pay during an interval off the job allows for the accomplishment of the off-the-economy work (and, boy, is it work) of caring for an infant. There is clearly room, especially where we already pay for services that are arguably more efficiently accomplished by the family (extended or otherwise), to expand the concept. If the employer or the government is already paying for a child-care facility to take care of children between infancy and school age, it seems to make sense to offer at least the costs of that care to family members to do the same work, only in the home rather than at some facility.

23

Billikin 06.02.10 at 2:16 pm

Tim Worstall: “DeLong’s proposed solution (and I’m not sure how much this is just an impish desire to shock and how much a real policy proposal) is to return the state pension to what it was: social insurance. This would mean that pension age would be the average age of death of that age cohort. As that’s rather difficult to predict in advance, we might use the average age of death of the previous age cohort. Say, 75/77 for men at present?”

In that case, shouldn’t cohorts take class and race into account, as well as gender?

24

Steve LaBonne 06.02.10 at 2:17 pm

If y81 and his law-school friends were more observant, they’d notice that neoliberals take us to the same destinations as the Federalist Society types, just a bit more slowly and politely (= insidiously). But they’re too blinded by “our crowd” vs. “not our crowd” tribalism to carry out such an analysis.

25

Barry 06.02.10 at 2:21 pm

Nick 06.02.10 at 1:48 pm

“Very sensible post. I wonder what’s got some of the commenters so riled up. We have more leisure time over lifetime than before but there is no reason to artificially concentrate it all at the end of life, when for a lot of people Continued work might be more interesting/fulfilling.”

Because it’s a very, very stupid post? As for concentrating leisure time in retirement, that’s been an actual problem of the industrialized world for decades. Go back and read some predictions decades ago, that people would be working 2-3 days a week, and enjoying the leisure of a more developed economy. And then cry.

26

chris 06.02.10 at 2:22 pm

Well, one of my minor hobby horses is the notion that we should, in fact, develop institutions that bring the retired more fully into child-rearing, to relieve their boredom and loneliness, make them more useful to society, and lessen the burden on the middle-aged. The extended family largely did this

Not in a relevant way. No preindustrial society had a substantial population of 70-year-olds at all.

People who are now considered middle-aged are the ones who in former times were the “greybeards” (just think about how young, by modern standards, you can be and still have grey in your beard) that were *already* mostly retired from physical labor and acting in advisory or supervisory capacities. (On the other hand, people who are in extended education now — teens and early 20s — were historically part of the workforce and did most of the grunt work.)

And the extended family solution was mostly about aunts and uncles anyway — because many grandparents weren’t fit for physical labor and some weren’t even mentally competent. (Most, of course, were dead, which is the major way traditional societies differed from the modern demographic problem and why their solutions are no longer operative, even aside from the obstacles to extended families posed by modern population mobility.)

Frankly, the idea of even a relatively healthy 75-year-old (let alone 85-year-old) taking primary care of a toddler and chasing them down when they misbehave is pretty hard to imagine. (I remember my grandparents taking care of me *occasionally* as a kid — when they were about 60. Of course that seemed really old to me at the time, but compared to modern retirement ages, those are the people who would still be working 40 hours at Wal-Mart, plus their commute. You can guess how much energy they’d have in their off hours.) And many old people have chronic health conditions, too.

Keeping a large population alive to older and older ages in spite of numerous chronic health conditions requires a growing amount of resources devoted to keeping people alive to older and older ages in spite of their chronic health conditions.

27

sg 06.02.10 at 2:30 pm

Minus the anger I kind of agree with Barry. I think superficially it’s correct that retirement ages should rise in line with life expectancy, but in practice we need to even up a whole bunch of workplace issues before we do that. And we should never trust suggestions to raise the retirement age from a class of people (academics, economists, reserve bank chiefs) whose jobs are so interesting and rewarding that they voluntarily work into retirement anyway.

28

Landru 06.02.10 at 2:34 pm

I think Barry’s point the fifth at #15 should by law appear at the start of all printed discussions of Soc. Sec., sort of like the warning label on cigarettes.

1. SocSec saved for the future, ie BabyBoom retirement, by raising payroll taxes and lending the excess to the Treasury, at modest return.

2. The Treasury accepted the money and the obligation; and then decided that the best thing to do with the extra income was to reduce the income taxes paid by rich people. Implicitly, this was done on the theory that it would make the obligation easier to repay when the time came, because in the 30-year interval those rich people would have used their tax cuts to make themselves more productive and so more easily able to pay the increased income taxes that would be required.

3. The scheme may have worked, or not, depending on whom you talk to. But regardless, the Treasury still owes that money to the SocSecTF. Treasury will have to get the money somewhere, or else effectively perpetrate a trillion-dollar theft by defaulting on the obligation. Re-raising the income taxes on those people who had them lowered for thirty years is one obvious source; but that’s independent of the fact of the obligation.

4. Rich people, not surprisingly, don’t want to pay back that obligation and will use any kind of propaganda tool they can afford to distort and obscure the issue. Thus, _any_ discussion which includes suggestions aimed at reducing this obligation — benefit cuts, raising retirement age, etc. — is _automatically_ suspect as part of that propaganda effort, even from the lovable Prof. DeLong, no matter how innocent or thoughtful it may sound.

29

Steve LaBonne 06.02.10 at 2:44 pm

Landru summarized the state of play admirably. I don’t even have a personal stake in this game- I’m a public employee in a state where members of the state pension system don’t pay into SS (and where said system, thank the FSM, is in better financial shape than the vast majority of such systems), and SS benefits I earned from previous jobs will be slashed to ribbons by the “windfall elimination” provision due to my pension benefits (on a side note I’d love for somebody to explain to me why this is fair). But the outrageous reverse Robin Hood act still makes my blood boil.

30

Barry 06.02.10 at 3:05 pm

Steve LaBonne 06.02.10 at 2:44 pm

“Landru summarized the state of play admirably. I don’t even have a personal stake in this game- I’m a public employee in a state where members of the state pension system don’t pay into SS (and where said system, thank the FSM, is in better financial shape than the vast majority of such systems), and SS benefits I earned from previous jobs will be slashed to ribbons by the “windfall elimination” provision due to my pension benefits (on a side note I’d love for somebody to explain to me why this is fair). But the outrageous reverse Robin Hood act still makes my blood boil.”

Steve, indirectly you do – the most powerful feature of us “proud, independent, ornery, gun-holdin’ authority-buckin’ ‘Meriken people” is that we kiss up and kick down better than any peasant. If the elites f*ck us, we certainly don’t go against the, ’cause that’d be islamocommiehippiefaggism, or something like that.

Instead, we go around looking for somebody whose better off, but with little power, and knock them down a peg or three. Note that one sees a lot of people happy to stick it to UAW retirees, but not nearly as many eager to even stick it to current Wall St people, let alone Wall St retirees.

If Social Security is seriously cut, your benefits will be next. And it doesn’t matter that they are independently funded – cutting the benefits would allow funds which would otherwise have gone in to be diverted.

31

Omar Khan 06.02.10 at 3:05 pm

I havent see data on this, but I assume that each additional year of life results in a greater proportion of people being unable to work. That is, if the employment rate at 60 is x%, i assume it is x-1% at 61, x-2% at 62, etc. In fact, it’s also very likely that people can work less hours, or are less ‘productive’ as they get older; and more likely to get ill/injured? I suspect insurers will respond quickly to an increase in the number of 70 year old men working in office environments, and you can bet employers will pass this cost on to employees.

If we assume that people cannot claim retirement-related benefits until they turn 70, do we then assume that (at least some) people will have to claim unemployment and/or disability benefits? Private pensions (given both take-up and annuity rates and timings) or asset-selling won’t meet the basic needs for everyone over 60 who is unable to work, or unable to work a 30+ hour week. And although health care systems vary enormously, a change in the retirement age is likely to have some effect on the way health costs are distributed everywhere.

I’m not saying we should reject the idea of raising the retirement age, but it’s not obvious that this will be less costly, nor that it will have no impact on the dignity of people in their 60s and 70s. There is a significant difference between claiming retirement benefits and claiming unemployment benefits, and given the ageist attitudes of many employers, i’m somewhat pessimistic that everyone who is able or willing to take a job in their 60s or 70s will be able to do so – or that they will be working in a job commensurate with their skills and experience.

32

mds 06.02.10 at 3:07 pm

I think superficially it’s correct that retirement ages should rise in line with life expectancy, but in practice we need to even up a whole bunch of workplace issues before we do that.

Which is why Professor Quiggin’s answer was “Yes, at least in Australia.” It’s possible that Australia, or other places that are more social-democratic than the US, could implement the latter as well as the former. In the US, of course, where electing a Democratic president leads to the creation of a Deficit Commission to Destroy Social Security, productivity gains going to greater leisure for workers stands the chance of a celluloid dog in hell. Which is what Barry is so righteously angry about. Though it might be better for his anger to remain focused on those who have prevented things like “Official full-time conditions were fixed in the early 1980s at 38 hours/week with four weeks annual leave + public holidays and some long-service leave” from becoming the US status quo; Professor Quiggin writes from a slightly happier place.

Not just something outside of construction, but the sort of job where standing and walking around briskly for 8 hours is part of the job.

So … how about reducing that 8 hours, as Professor Quiggin suggests? Though I think this still allows the implication that coal miners would be much healthier later in life if they had a somewhat shorter work week.

Anyway, as someone whose co-workers have a grandfathered full retirement age of 65, while mine is already 67, I would actually prefer that this not be pushed much further back. How about a shorter workweek and fixed retirement age? Unfortunately, that doesn’t seem to be in the same room as the table, let alone on it. So perhaps this post could be charitably recast as “Give us the fruits of our productivity in leisure and social democracy in the here-and-now, and we’ll be more open to arguments about raising the retirement age.”

(I’m trying to avoid concluding that JQ is actually a freshwater economist after all, or a useful idiot for same. Because it seems both unlikely and unhelpful.)

33

Barry 06.02.10 at 3:09 pm

“(I’m trying to avoid concluding that JQ is actually a freshwater economist after all, or a useful idiot for same. Because it seems both unlikely and unhelpful.)”

The frustrating thing is that he’s not. That’s one of the things that pisses me off – he’s somebody who should be opposing Chicagoites, not carrying their water.

34

Steve LaBonne 06.02.10 at 3:11 pm

If Social Security is seriously cut, your benefits will be next.

Oh, trust me, I’m well aware of this. Efforts to destroy public-employee pension systems are already quite far advanced, and the propaganda drumbeat is relentless. That’s also part of why I’ll stand up for SS recipients- “first they came for the SS recipients”, etc.

35

Sebastian 06.02.10 at 3:49 pm

Barry’s fifth point only makes sense if you analyze it as the same rich people across all time which doesn’t make sense as the main points in question are income tax and Social Security tax. In reality the fix was designed to make sure that the Baby Boomer generation middle class and up paid lowest income taxes in their peak earning years by screwing over the younger working middle class and up later. This was a class issue, but the question is which generational class you are in.

36

Nick 06.02.10 at 3:49 pm

‘Because it’s a very, very stupid post? As for concentrating leisure time in retirement, that’s been an actual problem of the industrialized world for decades. Go back and read some predictions decades ago, that people would be working 2-3 days a week, and enjoying the leisure of a more developed economy. And then cry.’

I agree. Many of us should be on 3 day weeks. The problem is that labour Market inflexibilites and distortion has led to people concentrating leisue at beginning (long student degrees and gap years) and end of life, rather than spreading it more evenly and enjoyably. Just because it’s been a problem for decades doesn’t mean it can’t start to be addressed now through an approach that quiggan seems to be suggesting.

37

ejh 06.02.10 at 4:08 pm

When the libertarians start applauding your economics, it’s time to look again at your economics.

38

Barry 06.02.10 at 4:09 pm

“Just because it’s been a problem for decades doesn’t mean it can’t start to be addressed now through an approach that quiggan seems to be suggesting.”

You know, it does mean that. The right-wing policies *are not to help people, they’re to hurt people*.

39

Glen Tomkins 06.02.10 at 4:10 pm

“No preindustrial society had a substantial population of 70-year-olds at all.”

This is a common mistake, based on the idea that the life expectancy at birth quoted for any particular historical epoch and society, is the same as the age at which most people end their lives, the expected age of death. These two measurements are actually completely different. The numbers come out very close for our times, so it’s natural for people today to conflate the two. But for most of history, and still for some societies, the two numbers diverge widely.

Average (or “mean”, more technically) life expectancy at birth, generally shortened to just “life expectancy”, is the mean of the ages of death that anyone born in that society at that time could expect. If, as is true for most societies through most of history, the first six years of life are the years of greatest likelihood of death, life expectancy will be in the 30s or 40s, even though the 30s and 40s are not, at all, years of much likelihood of dying.

Before antibiotics and immunizations, the best guess is that mortality was about 50% by age six. It isn’t entirely clear that the eras on which this is based, because they are best attested, don’t overstate the extent of child mortality. It may be that the problem was much less in true pre-industrial societies (nothing today really escapes contamination by industrial society) because there was less crowding, but clearly childhood infectious diseases exact a heavy toll under all pre-immunization/antibiotic conditions.

In actual fact, for most of history, if you made it to age 6, you wouldn’t again see high death-rate years until your 60s and 70s, just as today, when cancer and the metabolic disorders start to kick in as the leading causes of death. To put this technically, life expectancy for a 10yo was not much different than for a 10yo today, despite the huge difference in life expectancy at birth.

Sometimes the mistaken idea that the 30s and 40s used to be high death-rate years is attributed to the prominence of infectious diseases in the pre-antibiotic/immunization era. Granted, infectious disease played a larger role as cause of death in the pre-antibiotic era, but the effect was still concentrated at the extremes of age, young and old, and, relatively, tended to spare everyone else. A 45yo was in greater danger from infectious diseases before immunizations and antibiotics, but was still less likely than a 75yo to die of, say, pneumonia (called “the friend of the aged” in the old days, because it was a relatively benign way to go once you reached the age of high risk from worse horrors like cancer). The death curve was somehwat flatter on the old side before antibiotics and immunizations because infectious diseases did tend to strike more evenly across different ages than cancer or the metabolics. But the curve still had a very clear late peak to go along with the more prominent childhood peak. The death curve is still bimodal, only now the higher peak has shifted to old age rather than infancy/early childhood.

In our present state of low childhood mortality (relatively, the first year of life is still more threatened than any until old age), the average life expectancy at birth happens to track the ages at which people do most of their dying fairly closely. But that’s entirely because the old age years now have little “competition” to skew things away from their dominance of mortality. The avg life expectancy at birth today, somewhere in the late 70s, corresponds to when we see people dying in great numbers pretty well, thus the two concepts are often confused.

At any rate, the idea that some 40yo would ever commonly be among the older members of any society, is not very realistic. If you survived childhood in any era, you would have roughly the same expected age of death, around 75yo, not 45yo, as people in industrialized society today. Middle age and old age have always been delimited by about the same chronological ages as today.

40

Barry 06.02.10 at 4:12 pm

mds: “So perhaps this post could be charitably recast as “Give us the fruits of our productivity in leisure and social democracy in the here-and-now, and we’ll be more open to arguments about raising the retirement age.””

That’s the point. John Quiggin is arguing ‘give in to the proven dishonest positions of the right, and hope that they won’t give you a quid pro nada. (I’m using ‘you’ because he’s not somebody who’ll be screwed over like we will be, although if stuff like this happens I’ll happily support ending tenure).

41

Nick 06.02.10 at 4:34 pm

‘You know, it does mean that. The right-wing policies are not to help people, they’re to hurt people.’

speaking for myself, I’d like to help people rather than harm them. But regardless, you should judge these sort of policy questions on the likely outcomes rather than the alleged intentions of those supporting the policy.

42

ejh 06.02.10 at 4:36 pm

Quite. Personally, I’m judging that the likely outcome of my working several years more is that I die earlier.

43

Omega Centauri 06.02.10 at 4:47 pm

I want to make a point that has only been alluded to above. In my opinion the biggest negative of our current employment system is that it is largely binary, either you work full time (or often full time plus overtime), or you don’t work at all. So few of the part-time positions pay enough for someone whose expenses could be met on say half of a fulltime salary. I.e. with only rare exceptions, if you don’t work fulltime, you are not considered to be a serious person careerwise. So what we do lifecyclewise, is train people nearly full time for an extended period. Then we work them flatout, until retirement (forced or otherwise), then we let them linger on. This dichotomy, I contend, is the progenitor of much of our difficulties. I can recall entering the forkforce having aspirations beyond my career (in my case serious hobbies/possible future career), but my only choice was to pursue a full time career, or starve and pursue my other interests. And obviously as people age, a sysytem that allows gradually decreasing workhours and responsibility rather than an either/or choice becomes important.

In the future there is a good chance that we won’t have enough work to can around, at least if the distribution of work follows the existing paradigm. We know we have to evolve into something resembling a steady-state economy -at least with regards to our consumption of resources and ecosystem services. And that likely means the number of fulltime jobs won’t be largeenough for our population. We are going to have to come up with a better solution to the problem of distributing X amount of work to Y potential employees better than we currently do.

A lot of our problems involving defined benefit retirement systems are due (I claim) to an inevitable decline in the rate of return on longterm investment. As the economy approaches steady state, as opposed to the rapid exponential growth phase that all these systems were financially engineered around, these systems are going to breakdown bigtime. The problem boils down to the promise fixed sized slices of pie, from an unknown sized future pie. If the sum of the promised pieces islarger than the pie you actually get, then something has to give.

44

mds 06.02.10 at 4:57 pm

This was a class issue, but the question is which generational class you are in.

Spot-on. The people who benefited from Reagan’s successful push to slash the top marginal tax rate, who benefited from the fact that raising the FICA tax is regressive, who benefited from the Greenspan-endorsed Bush tax cuts, who oppose the expiration of those same cuts at the top, and who are currently shrieking about how the out-of-control deficit means we must immediately do something to “fix” Social Security, are all entirely different groups of people. Because human beings have the generational span of mayflies.

45

Barry 06.02.10 at 5:08 pm

Nick: “speaking for myself, I’d like to help people rather than harm them. But regardless, you should judge these sort of policy questions on the likely outcomes rather than the alleged intentions of those supporting the policy.”

Intentions matter, if you expect that the other side will keep their bargain. Or not.

46

mds 06.02.10 at 5:15 pm

Again, it’s possible that in Australia, the deal wouldn’t actually involve selling one’s birthright for a mess of pottage, the way that it inevitably would in the US. Though I will admit that seeing left governments in Europe forced at bondpoint to impose Hoover-style austerity is not encouraging.

47

kharris 06.02.10 at 5:42 pm

Ah, assumptions, assumptions…

Let’s begin by assuming an economy of a fixed size at any given time. Size and efficiency may increase over time, but on Tuesday, the economy will produce a certain amount of stuff with a certain number of workers. So the decision to require later retirement before benefits can be collected is, necessarily, a decision to have a higher jobless rate. The unemployed may receive benefits, or may not, depending on their status within the system. Some, in any case, will not and those who do will very likely receive less in the way of benefits than would a retiree. On the assumption that the economy will be of a given size, raising the age at which we are eligible for retirement benefits means lowering benefit costs. It also will mean, in many cases, that older workers will be supporting youngsters in their family who might have work if the retirement age were lower.

All of which is to say that, assuming a given size of the economy, all we are deciding when we set a retirement age is who will work to support whom, and what pipes the money will flow through. Raising the retirement age expresses a preference for having the public sector less active, families more active, in supporting those who are not working.

Now, assume that the economy will be of a given size, but that the labor force can change size. All that means is that wages will adjust downward (relative to where they would have been) in response to a higher retirement age, as the workforce is kept larger. I don’t know that the wage bill will remain the same size. That seems unlikely, and would be what economists like to call “a trivial result” if it did happen. We don’t know how much lower, but we know lower.

Find me a mechanism by which having a larger workforce produces such a large productivity gain that it can overcome capital’s tendency to appropriate gains and generate real wage gains, and you will have shown a third alternative, in which everyone can have more goods and services – though not more leisure, as a result of working longer. Otherwise, we are still looking at deciding who should support whom, and how high or low we want wages to be, when we decide on a retirement age.

So when do you want your leisure? How do you want to divide up national income? Those are the questions that lie behind discussions of eligibility for retirement benefits, not some magic equation that makes us better off by making us work when we don’t want to or some national “place in the world” business about maintaining power through working as hard as the Vietnamese.

48

Sebastian 06.02.10 at 6:52 pm

mds, the tax structure you are talking about is set up to vastly benefit the baby boomers over the surrounding generations. We are talking about something that was negotiated near the peak of the baby boomer earning years (40s-50s) such that the income tax would be lower when they were earning the most. They ‘negotiated’ that the income tax would rise to cover it 20-30 years later. Which would be when they are retiring, and thus not subject to high income tax rates (as they wouldn’t be earning much income). The high tax rates would be taken on by totally different people in their highest earning years. This wasn’t a ‘class’ deal, this was a generational deal where the baby boomers made sure that they would get the best part of both ends [lower income taxes when they earn the most income, higher income taxes after they retire]

49

Nick 06.02.10 at 6:53 pm

Kharris: I think your initial assumption prevents your rumination from having any relevance here : http://super-economy.blogspot.com/2010/05/simple-pictures-agains-bad-ideas.html

essentially, employment scales up remarkably well to labour availability. The idea of holding the size of an economy stable while increasing the availabilty of labour is bordering on ludicrous.

50

piglet 06.02.10 at 7:20 pm

Worstall 5:

Specifically about the state pension age rather than retirement age as such. The state pension is social insurance: insurance against outliving your savings. When such pensions were introduced they were (usually at least) set at about the average age of death. The pension was thus received by those who lived longer than average and thus risked outliving their (rational, given lifespans) savings… social insurance should be insurance, not assurance.

This is nonsense. Social retirement insurance was originally for those who didn’t have any savings, and their dependents. It was never conceived as individualized “insurance against bad stuff happening”, but as a collectively organized inter-generational contract. Playing semantic games with “insurance” vs. “assurance” is beside the point. Retirement insurance doesn’t work the way fire insurance does, and it never has.

(Likewise, “health insurance” is really a misnomer and it would help if Americans stopped thinking of health care in insurance terms. Many of the problems with US health care – bureaucracy, exclusions, lengthy legal fights about claims – originate from the attempt at organizing health care around the insurance principle, which simply doesn’t work.)

51

Pat 06.02.10 at 7:22 pm

Glen beat me to the life expectancy fallacy. But speaking of grandparents raising children, I remember an anthropology article from only a couple of years ago showing that grandparents rearing the children allowed the parents to roam farther for food, and may have been a turning point in the development of civilization. I can’t find the article though.

And forget roofers. I’m looking forward to all the big rig truckers being 70-something.

52

mds 06.02.10 at 7:22 pm

This wasn’t a ‘class’ deal, this was a generational deal where the baby boomers made sure that they would get the best part of both ends [lower income taxes when they earn the most income, higher income taxes after they retire]

Well, thank goodness the primary beneficiaries of the top-end tax cuts, whether they’re baby boomers or not, are working so hard to make sure that none of those higher taxes get re-imposed on schedule, and that a plan to cut future Social Security benefits gets implemented ASAP. Because otherwise the baby boomers, including the low-income ones, would be getting away with something.

I mean, I understand your confusion. That whole section of the 1040 that sets your top marginal tax rate based on whether you’re a baby boomer or not? That’s actually just an elaborate practical joke by the IRS. It’s meant to be a gentle tweaking of those who keep pretending that a couple trillion dollars in tax cuts weighted towards the rich, and financed with the Social Security “trust fund,” has nothing to do with economic class. Oh, those IRS jokers.

53

kharris 06.02.10 at 7:26 pm

Nick,

Ah, those who read very, very slowly sometimes fail to read to the end, then cry “ludicrous” to make themselves feel all smart even though they failed to do the reading. My initial rumination was not my only rumination. We made the labor market bigger in the next paragraph, and wages fell. All better now?

The point is that we are merely shuffling welfare among various participants, or potential participants, in the labor force, by changing the rules on them. We need to keep that in mind when deciding what rules we want. If you want to make the argument that somehow the economy produces more stuff by requiring more people to work, that’s fine, but it needs to be enough stuff to compensate them for lost leisure. If you don’t, then you aren’t really addressing the point of that next paragraph you apparently didn’t read.

54

Landru 06.02.10 at 7:32 pm

Re mds and Sebastian and generational classes:

First, the generational dimension shouldn’t be a distraction from the class dimension. Right here, right now, and over the next 20-30 years, there is a bill to be paid to fund SocSec benefits, which proportionately do the most good for non-rich people. The bill is currently on the books of the income-tax-paying upper classes, and whether they were hornswoggled by the previous generation of income-tax-paying upper classes is beside the point. At the moment and in the near future, one of two things is going to happen: (1) The bill will be paid by today’s richer people, as scheduled, and the less-rich retirees will benefit, or (2) Today’s rich will find some way to game the system and avoid paying the bill, effectively sticking it to the less-rich retirees. All else, as they say, is commentary.

Now taking in the generational dimension, I don’t think the groups of people mds outlines at #44 are really all that disjoint. Given how low estate taxes have gone over the same period, I would think there’s a very strong overlap between the money that was given back to older rich people in the 1980’s and the money held by younger rich people today. And, it’s not necessarily just in the form of cash. If RWR was to be believed, the benefits of tax cuts for the rich are to build up the nation’s productive capacity when they invest that money; the benefits of the increase then return to the owners of that increased capacity, who are today’s tax-paying rich people. So today’s upper class did benefit from yesterday’s tax cuts, and it’s not unreasonable that they should return the benefit when the bill is due.

In any case, whether today’s rich people are relatively screwed compared to their retired rich parents is an argument they can have with the Treasury, which borrowed in the children’s name to give to the parents. Taking it out of SocSec is just theft, plain and simple, and let’s never lose sight of that.

55

Simple answer 06.02.10 at 7:40 pm

Let me give you a simple answer to the work question: 75 percent of all “work” is neither necessary nor socially useful. I say this from personal experience with “work.”

If every single person that teaches economics, works as an economist or writes about the economy were fired tomorrow the world would get along just fine, probably better without the meddling of fools like Alan Greenspan. He finally admitted that everything that he was so confident about was not only wrong but terribly wrong. Not only was the old fool useless with his meddling, he had never actually “worked” in his life. Never talked to a waitress working two jobs to pay the babysitter and feed and house her kids.

His entire life was based on upper class privilege. A feeling of I’m running with the big dogs does not make you aware that unemployment is one step from starvation now that all of insane “policies” of believing that the rich have honor and will not embezzle, steal, lie, cheat, or rob have pretty well destroyed 20 percent of the american workers’ lives.

Raising the age of retirement is truly incredibly short sighted and stupid: screw every young person out of work that pays well. “Oh, kid, you got to work the fast food driveup because the engineering training you have is in a field full of old people. You’ll have opportunity in about 15 years.”

A truly effective alternative is to pay people to retire earlier. Keep dropping the retirement age until a society has full employment. Keep raising the retiree’s income so they don’t moonlight.

You got a shortage of youngsters to pay the taxes, go to Egypt, India, Brazil, Mexico, Vietnam, North Korea, South Africa, Tanzania, they have plenty of spares.

56

Nick 06.02.10 at 7:48 pm

Kharris: In the second paragraph , you are still assuming the size of the economy stays the same, which remains a peculiar premise.

57

chris 06.02.10 at 7:51 pm

If you want to make the argument that somehow the economy produces more stuff by requiring more people to work

Yes, there may be an outlandish and obscure process by which more people working will get more work done. Somehow.

The fact that you regard this as dubious says little about economics, but a lot about you.

the benefits of tax cuts for the rich are to build up the nation’s productive capacity when they invest that money

Is it at all relevant to this concept that we have a ton of unused productive capacity and a lot of investment has recently gone into speculative asset bubbles? (I rather suspect the answer is “it would be if Reagan had been arguing in good faith, but in fact, no.”)

I mean, if there were some way of identifying a shortage of capital investment, and we actually had one, then it might make some sense to concentrate wealth to generate investment (although it still seems rather dubious compared to a SWF or an ownership society in which the masses actually own equity and aren’t just mortgaged to the eyeballs), but that’s not even a problem we have or have had in living memory AFAIK.

Also, on behalf of all the other Americans on this thread, I would like to apologize to JQ for the threadjack. Lots of industrialized economies face similar problems but not everything is about American domestic politics.

58

mds 06.02.10 at 7:52 pm

To add a sprinkling of bile to Landru’s summary, “baby boomers” supposedly agreed to cuts in the progressive income tax rate being replaced by an increased regressive tax on wages during their productive earning years. Whereupon the surplus built up by those regressive taxes on their own wages was borrowed to finance further cuts in the progressive income tax weighted toward the top end. But there’s no economic class divisions to be found in there, oh dear me, no.

Now taking in the generational dimension, I don’t think the groups of people mds outlines at #44 are really all that disjoint.

Me either. For God’s sake, the author of the plan to “save” Social Security by raising FICA taxes and the primary exponent in 2001 of how we must slash income taxes because the Social Security surplus has gotten too big are the same person. Hence my subtle, yet withering, sarcasm.

59

dilbert dogbert 06.02.10 at 8:02 pm

Martin Bento
F That! I and my wife raised our kids with very little help from our parents and we are not about to take on that responsibility now. Just my 2 cents. Our kids and those of our friends are delaying children to the point where the grandparents are in their old old age. Hell I am 75 this year and have only one grandchild and the wife is 63 and has only one. If this trend continues there won’t be any grand parents left to take care of the grand kids. The up side of this, in our life, is we have time to ski, ride our horses, hike, snowshoe and sail our boats (not yachts).
Anyway, I remember back in the day when TRW was cleaning out the top layers of the engineering and science jobs down at One Space Park, my boss saying that the reason was you could hire two fresh out PhD’s and lay off one senior engineer or scientist and save a bunch of money. Where I come from tech jobs are a young man’s game. Once you have passed 50 you are considered obsolete. I thanked my lucky stars that I transferred from a secondary source of government money to a primary one – NASA.

60

Landru 06.02.10 at 8:54 pm

“For God’s sake, the author of the plan to “save” Social Security by raising FICA taxes and the primary exponent in 2001 of how we must slash income taxes because the Social Security surplus has gotten too big are the same person.”

Ah, yes, the comic book series in which the dessicated yet immortal super-villain Alan Greenspan pulls all the strings and levers, engineering the great transfer of wealth from the poor to the rich in a patient plan spanning decades. (You know, I don’t remember where I’ve read it, but I think he’s admitted to exactly as much.) And who should appear to thwart him? but the mildly-elevated-hero Al Gore! who suggested instead that the high income tax revenues of the late 1990’s, ie the budget surplus, should go toward paying down the SocSec obligation. (At least, that’s what I _think_ he was saying.) But, his “lock-box metaphor” ray failed badly at the crucial moment, landing us in the ongoing despair that is the 21st century.

I grew up on Classic Comics, and so comic book history always makes sense to me. But, just between you and me, the more learned types here may try to distract us with talk of “cultural change” or some equally wooly and boring notion of why things happen. Resist! and stick with heroes and villains; at least they make for better illustrations.

61

Yarrow 06.02.10 at 9:10 pm

So Sebastian: would you prefer to fix this intergenerational injustice by (1) cutting Social Security for boomers, or (2) revoking the tax preferences for IRAs and other private wealth held by boomers?

62

chris y 06.02.10 at 9:26 pm

an anthropology article from only a couple of years ago showing that grandparents rearing babysitting the children allowed the parents to roam farther for food go to West End restaurants on Friday nights…

Plus ca change.

The pensionable retirement age has already been raised to 68 in Britain. Enough people have already pointed out that this is a terrible idea, because it’s the people who need, physically, to stop working who will get it in the shorts, while those who regard their state pensions as a subsidy for their second holiday will be unaffected. I’m surprised and depressed that JQ doesn’t instinctively understand this.

63

James Wimberley 06.02.10 at 9:27 pm

Please think about efficiency wages. It’s an obvious but unstated corollary of the Stiglitz efficiency wages model that under asymmetric information about diligence, not only will market wages be higher than in the perfect-competition equilibrium, and some workers be stably unemployed, but those employed will work longer hours: golden handcuffs. But what happens about retirement? One consequence of slave-driving the employed is that some older workers can’t take the pace, and will be forced out earlier than they would have gone under perfect competition. This pattern is reinforced by institutional rigidities like final salary pension schemes, a tontine for the benefit of those lucky in the promotion stakes. But a Stiglitz-model employer should still face an incentive to hang on to reliable, known-quantity older workers, rather than hiring possibly more energetic, but possibly idle and/or disruptive, young ones. That would create a pressure for a later retirement and flexible working hours we don’t observe much outside say Norway.

64

Sebastian 06.02.10 at 9:28 pm

It probably can’t be fixed, which is no reason to pretend that it didn’t happen. Intergenerational justice often can’t be fixed. I can’t think of a good way to bring back the Indians either. I guess I’m stupid.

65

Yarrow 06.02.10 at 9:34 pm

It probably can’t be fixed

I see. Or ameliorated?

66

chris y 06.02.10 at 9:44 pm

Proposal:

People whose annual income has not exceeded 20,000GBP (or equivalent) for more than 5 years during the 20 years before their 60th birthday can retire at 60;

People whose annual income has not exceeded 30,000GBP (or equivalent) for more than 5 years during the 20 years before their 65th birthday can retire at 65;

People whose annual income has not exceeded 40,000GBP (or equivalent) for more than 5 years during the 20 years before their 67th birthday can retire at 67;

People whose annual income has not exceeded 50,000GBP (or equivalent) for more than 5 years during the 20 years before their 70th birthday can retire at 70;

Anybody else can make their own arrangements.

67

Martin Bento 06.03.10 at 2:20 am

Chris, what Glen said. Besides which, people used to have children at younger ages. Two generations that have their first child at 15 gives you grandparents at 30. Two at age 20, and the average pre-WW2 was probably less than that, gives you grandparents at age 40. Who are the same 40 as someone now, as Glen showed, not some mythical old age 40.

As for the notion that people in their 60s and 70s are too decrepit to help with children, some are, some aren’t. I had occasion once to go interview all the people in a senior housing complex. They were so bored and lonely, the hardest thing was to politely get them to stop talking to me. Most seemed in reasonably good health – ambulatory, not in obvious pain, and coherent. Obviously, there are people in nursing homes much worse off than this. But I’m not talking about forcing anyone into this. I’m talking about creating institutions and attitudes that reward it, so it is a more natural thing for people to fall into if they want.

68

Tom M 06.03.10 at 3:11 am

The idea that the SocSec money went to fund the tax cuts is irrelevant. Had the Treasury not been able to borrow from the SocSecTF, they’d have borrowed from China or the other hordes who are buying 30 year Treasuries at 3.3%. The obligation is exactly the same and there is no difference as to obligation of the US Treasury to repay the bonds of the SocSecTF or China. So they funded the tax cuts, 2 wars and the Medicare Part D pander with some of the TF, so what?
IIRC the maximum annual gross cost of SocSec over the 75 year horizon is about 6.5% of GDP but FICA collections run about 4 to 4.6% of GDP meaning that at the peak, the baby boomers might cost all of 2% of GDP (and that’s the midpoint assumptions, at the optimistic assumptions, i.e. what historical GDP growth rates) or half the Defense Dept. budget.
Despite the Health Care bill, Medicare expenses are projected to top 18% of GDP by 2050 or about the same % of GDP as long term total federal tax receipts. We currently pay 40% more in per capita health care than the next most expensive system (Switzerland) and 3x what Japan spends.
If we could fix that, SocSec would be available at 62 and pay full benefits.
But we won’t.

69

Earnest O'Nest 06.03.10 at 7:31 am

The simple answer wins but it is simply wicked to award no credit and get so personal with John for entertaining a thought. It is a wicked, wicked place where your character can be asassinated for merely entertaining a thought (even one that seems a clear loser).

70

alex 06.03.10 at 7:55 am

Boomers? Kill them. They’re all Cylons anyway.

71

Marc 06.03.10 at 8:11 am

Pedant point on lifetimes: if you really want to talk about earlier societies you really have to factor in things that are far less common today. For example, there was high mortality in the 20s, 30s, and 40s – for women in childbirth. And prior to the advent of modern medicine, plagues and diseases could kill people at any age. Go to any cemetery and look for the graves of families – father, mother, children – all dead in the same year or two. Then add in war, violence from societal collapse, and famine – not uncommon events in human history.

The oldest people lived as long as the oldest people today, but you had to be lucky; we really sometimes discount things like how much of an effect mass vaccinations have had on our health. And I haven’t even gotten to parasites, contaminated water, or spoiled food…

72

Marc 06.03.10 at 8:12 am

Tom: the surpluses in the USA generated the political support for the tax cuts for the rich. In effect, we raised taxes on everyone, then used the improved budget position to justify showering riches on the rich.

73

Barry 06.03.10 at 1:01 pm

Earnest O’Nest 06.03.10 at 7:31 am

“The simple answer wins but it is simply wicked to award no credit and get so personal with John for entertaining a thought. It is a wicked, wicked place where your character can be asassinated for merely entertaining a thought (even one that seems a clear loser).”

When one’s though is extremely and multi-layeredly stupid, it is a good thing to dump on him. And it isn’t an innocent thought; it’s another propaganda attempt at ripping off 90-odd % of society to aid the elites even more.

74

mds 06.03.10 at 1:35 pm

I guess I’m stupid.

Nah. I know you’re not actually seriously comparing the baby boomers, most of whom are still in the workforce, with Native Americans of a bygone age. You’re not stupid, just dishonest.

S: “Oh, dear me, they’ve stolen all that money from future generations, and now there’s nothing to be done.”
CHORUS: “Well, actually, a tax scheme that …”
S: “Nope, nothing to be done.”

So since the boomers are still in the workforce, we don’t yet have to worry about Yarrow’s suggested amelioration of their intergenerational theft. As a first step, we can make sure their income taxes return to their 2001 levels. If you’re very insistent about the injustice, we can return the top marginal rate to its 1980 level; that would really show them. Alternatively, we could go with longer-term approaches in spirit of the Yarrow model. For instance, the wicked boomers are probably stuffing their estates with much of their ill-gotten loot, so that their own heirs can better weather the high-tax suffering imposed on members of the next generation who aren’t descended from the previous one. So we get their stolen money back from their estates when they die via the estate tax. Yes, all of these methods will also affect non-boomers, but so did the original tax cuts, a point which mysteriously continues to elude certain parties.

Now, this punitive taxation scheme in the here-and-now, to make the boomers pay a little bit more of their fair share, overlooks the fact that boomers have been paying payroll taxes all this time, along with other wage-earners; but ignoring payroll taxes is common on the right anyway. Nevertheless, re-funding Social Security with restored progressive income taxes will ironically allow boomers to more affordably collect the Social Security they’re owed. So you can’t have everything.

Ah, yes, the comic book series in which the dessicated yet immortal super-villain Alan Greenspan pulls all the strings and levers, engineering the great transfer of wealth from the poor to the rich in a patient plan spanning decades.

Well, I hope he’s merely superannuated, not immortal. Or we’re going to be in even more trouble when Ben Bernanke leaves. And as a wise man once said, “Just because it’s in a comic book, doesn’t mean it isn’t true.” I think it was Balzac, from when he was scripting Cromwell vs. Lizardman.

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Cannoneo 06.03.10 at 2:17 pm

I don’t see political conditions in the U.S. allowing for shorter work hours or much other improvement in working conditions. But political conditions do allow us to protect what benefits older folks currently have, such as the retirement age. So if we here were to accept a higher retirement age, we would be doing so without any hope of compensating factors, thereby screwing ourselves, the young who need jobs, and especially those of us with hard jobs. So advocates for raising the retirement age are essentially declaring themselves members of the anti-worker camp.

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chris 06.03.10 at 2:51 pm

Besides which, people used to have children at younger ages.

ISTM that that undermines your point, rather than supporting it. Today’s grandparents are older than preindustrial grandparents and therefore, less able to assist in childcare on average (even after their own retirements from the workforce). So the fact that a 50-year-old grandmother was perfectly capable of watching her grandkids on a more-than-occasional basis then doesn’t make a 70-year-old one equally capable now.

And today’s 50- and 60-year-old grandparents (particularly the working-class ones) are likely to still be holding down jobs. Most likely the 50-year-old grandmother of the 1800s would have been a stay-at-home mom for most of her life, which positions her pretty well to be a stay-at-home grandma. Modern career women are *still in their careers* until retirement age and the men are just as bad off when it comes to having substantial spare time to devote to extended-family childcare. The whole childcare problem has blown up in recent times precisely because there isn’t a childcare professional in every household anymore. This has allowed enormous economic gains but the cost has to be accounted for somewhere now that it is no longer hidden in off-the-books nonwage labor.

Come to think of it, the same loss of nonwage in-household labor accounts for part of the on-the-books cost explosion of eldercare, too. Traditional extended family caring went both ways. But a two-income couple can’t run a nursing home while they’re both away at work any more than they can run a nursery. Whatever previously nonwage labor can’t be reduced by mechanization has to be outsourced or crammed into their nonwork hours — and caring for people who can’t care for themselves is a constant responsibility, not something you can reschedule when it is convenient for you.

I’m not completely convinced by Glen’s assertion that all the change in life expectancy occurs in childhood — see, e.g., Marc @71 — but unless someone is going to post actuarial tables from different centuries it’s hard to pin down how big the difference is. Certainly infant and child mortality has changed a lot and naive interpretations of life expectancy at birth don’t hold up, and I admit that “no substantial population” may have been overstating the point, but do you really think that life expectancy at 15 or 20 hasn’t changed *at all* in industrialized societies?

Heck, if there really weren’t a difference in the relative size of the elderly population we probably wouldn’t even be having this discussion.

P.S. All that is on top of the issue of greater population mobility moving the extended family physically apart from each other. But presumably you’d like to encourage retirees to move near their younger family members or even into the same household?

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Earnest O'Nest 06.03.10 at 3:10 pm

Barry, it is a many bad thing because are you the judge of what is multi-layered stupidity? I sure hope not because I would hate that somebody capable of so much profanity would be my judge.

78

Dizi izle 06.03.10 at 3:14 pm

“Landru summarized the state of play admirably. I don’t even have a personal stake in this game- I’m a public employee in a state where members of the state pension system don’t pay into SS (and where said system, thank the FSM, is in better financial shape than the vast majority of such systems), and SS benefits I earned from previous jobs will be slashed to ribbons by the “windfall elimination” provision due to my pension benefits (on a side note I’d love for somebody to explain to me why this is fair). But the outrageous reverse Robin Hood act still makes my blood boil.”

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Barry 06.03.10 at 3:43 pm

Seth, if you could rewrite that in English, I’ll try to answer it.

80

ajay 06.03.10 at 4:21 pm

couple of historical points:
76: Most likely the 50-year-old grandmother of the 1800s would have been a stay-at-home mom for most of her life

Actually, she would have worked for most of her life; most women in the 1800s did.

67: Two generations that have their first child at 15 gives you grandparents at 30. Two at age 20, and the average pre-WW2 was probably less than that, gives you grandparents at age 40.

No. Pre-WW2 first children weren’t born to teenagers.

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Sebastian 06.03.10 at 6:00 pm

“I know you’re not actually seriously comparing the baby boomers, most of whom are still in the workforce, with Native Americans of a bygone age. ”

You’re using a lot of work with that ‘most’ and a huge percentage of that ‘most’ is due to later than expected retirements due to the financial crash.

You’re also ignoring the fact that of those baby boomers still in the workforce, they on average are not now, and are not likely to, be earning their peak amounts as they in general have been moving toward retirement for almost a decade, so your corrections aren’t going to change much. And the estate tax isn’t going to do it either–you seem to be counting only the hyper-rich, but the critique hits pretty much any boomer who made in the top income tax brackets during their 40s-50s, most of whom are VERY unlikely to have a considerable-enough estate to be a big deal in the analysis even if we were taxing all of it away, which is never happening anyway. So in short, your analysis probably works really well for about 1,000-5,000 CEO or real VP level boomers over the past 20 years. Which is to say almost none of them. (Heck it might even be 10,000. Which is still almost none).

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Martin Bento 06.03.10 at 9:32 pm

First of all, Sebastian do the math: the oldest baby boomers hit 65 only this year, so, no, most of this “most” has nothing to do with early retirement.

Let’s look at this “generational theft”: the first step is that payroll taxes were substantially raised, which would disproportionately hit those in their peak earning years. So, it is disproportionately boomers paying in. This money is given back in tax cuts (by and large, let’s keep the argument simple) to the rich. So it benefits the rich and perhaps upper-middle of all generations at the expense of the middle and below of all. Does the benefit flow disproportionately to boomers? Well, the taxes cut were not just wages on employment income, which does tend to vary with age, but also investment income: capital gains, for example. But capital gains do not vary with the age of the investor; they vary with the market. And if we’re going to talk about who pays the most capital gains per capita, that would be the old, as they have the most accumulated wealth (keep in mind, we are talking about asset wealth here, and therefore only upper middle class and up, and very disproportionately the rich, count. Poor people of all ages are not significantly part of this calculus) and are doing the most liquidation. So, no, boomers as a generation have not been disproportionately benefiting from these tax changes to the same extent they have been disproportionately paying in. High wealth boomers have disproportionately benefited, but no more so than other high-wealth groups.

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Martin Bento 06.03.10 at 10:04 pm

ajay, OK, I don’t have any hard statistics on this, so I will stipulate to the point. But as Chris suggests, this argument was actually counter to my main point, which I realized when I made it, but I wanted to show that Chris’ assertion that grandparents could not have been widely available for child-rearing was false.

Chris, first of all, you misunderstood my point. I’m not suggesting the use of elders for childcare be achieved within the extended family *now*. That is how it was done in the past; therefore, this constitutes something that has been viable. I assume that is being done within the family to pretty much the extent it is viable already, which is less than the past, partly because, as you say, people move around more. I’m suggesting encouraging the same relationship now, outside the family, given that the extended family is no longer the institution it was.

Of course, middle-aged people are having trouble providing adequate childcare now. That was explicitly one of my reasons for wanting to involve the elderly more. After all, someone has to do it. If you rule out the middle-aged and the elderly, who is left? Sure, I would like people to have more leisure, but they don’t, and it’s not a easy thing politically or economically to achieve. In the meantime, the kids are there and have needs.

I’m talking about incentives. If you don’t want to be caring for the “little brats” when you’re 70, fine. You’ll be relieved to know I won’t be sending the gestapo out to force you. And incentives don’t mean pulling people out of nursing homes or compelling the unwilling or unsuited. The question isn’t “are there old people for whom this would not be a good idea?” – of course, that’s true, but what kind of job is suitable for everyone anyway? The question is “Are there old people who would be suited for this: who are in good health, who like children, who are bored and lonely?” Or course, there are. Since I’m proposing an activity for some people, not for everyone, it is the second group that matters. But the organizational structure to make this easy isn’t there, and there are some disincentive. For example, some forms of retirement income penalize continued employment, and paid childcare is, logically enough, counted as such. If it were not so counted, there would be an incentive to move in this direction. That’s not the same as pointing guns at people’s heads and forcing them to take care of babies.

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Martin Bento 06.03.10 at 11:51 pm

#81 “early retirement” should be “delayed retirement”

85

Martin Bento 06.04.10 at 12:10 am

Chris, one more thing: Healthy life expectancy is extending as well as life expectancy per se. Currently, according to the WHO (as referenced here), a European 60 yr old has about 13 – 16 years of full health ahead.

86

Martin Bento 06.04.10 at 12:11 am

Make that 13- 18 yrs. Mistyped.

87

Sebastian 06.04.10 at 1:27 am

“First of all, Sebastian do the math: the oldest baby boomers hit 65 only this year, so, no, most of this “most” has nothing to do with early retirement.”

But it has everything to do with the tax game being played as the higher income taxes have not (so far as I can tell) been implemented even yet. They aren’t going to be implemented in the middle of the recession. They won’t be implemented until the boomers are safely in retirement with much lower incomes. You are all talking about this as if the high income tax part of the ‘deal’ has already happened. It clearly has not. As for the capital gains analysis, it is a small portion of the federal income tax compared to other forms of income so side-stepping the discussion about income tax as if capital gains were the decisive part isn’t accurate.

I don’t particularly care from a personal point of view, I’m not likely to be paying the top bracket anyway. But it is annoying to have this analyzed as a pure class issue. It is particularly tied to rich baby boomers and tailored to maximize their benefit throughout the entire term of the ‘deal’.

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Kaleberg 06.04.10 at 1:34 am

Raising the retirement age only makes sense if there is a shortage of workers which would be indicated by falling unemployment rates and rising wages, at least in a market economy. Unemployment is high and wages have been flat for a generation, so it makes more sense to lower the retirement age. Technological and organizational improvements mean that productivity has been rising, so unless workers receive much higher pay, the indirect demand for labor, in terms of demand for goods and services, has been falling. There is nothing like getting people out of the work force to improve productivity and increase the availability of goods and services overall.

Of course, we need a proper excuse, and for that we need an anthropological imperative to provide people with goods and services. Traditionally, the excuses have included class, money, age, and sex. Social Security is our excuse for providing older people with goods and services. The parental relationship, biological or adopted, is our excuse for providing younger people with goods and services. Possession of money, usually in the form of bits encoded in rotating magnetic database, are our excuse for providing rich people with goods and services. In some societies, certain classes of people are simply marked as entitled, as with aristocrats in traditional societies and beggars in nations ruled by Islam.

Taxes in the U.S. are extremely low, especially when compared with the rates during the high growth periods of the 1950s and 1960s. Our failed social experiment in lowering taxes has not produced high growth rates since most of the money has simply been turned into status information, and not demand for goods and services. Lowering the retirement age to 55 and raising the top marginal rate on high incomes to 70% to pay for it would dramatically increase demand for labor. This would lower the unemployment rate. In fact, some retired folks might even be lured back into the labor market, a boon to employers who need to track their cyclical and seasonal markets.

89

Martin Bento 06.04.10 at 2:25 am

Sebastian, payroll taxes. The payroll tax increases were implemented before the very first of the tax cuts, in 77, and then increased again in the early 80’s. That’s the tax raise part of the exchange. And that is where the social security surplus that has been raided originated. These payroll taxes were specifically to pay for boomer retirement, and, yes, they mostly hit boomers. Trying to limit the issue to income taxes is trying to bias the matter. And I would like to seesome documentation of the claim that taxes on unearned income and inheritance in the early 80’s were, or even now are, a trivial part of the total tax liability of rich and upper middle taxpayers. This is sure contrary to what they have been loudly braying.

90

Sebastian 06.04.10 at 6:21 am

“These payroll taxes were specifically to pay for boomer retirement, and, yes, they mostly hit boomers. Trying to limit the issue to income taxes is trying to bias the matter.”

Martin you’re only talking about half the deal. Increased payroll taxes now, increased income taxes later.

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Martin Bento 06.04.10 at 7:48 am

First of all, the Greenspan commission concluded that the payroll taxes were adequate to fund the boomer retirement based on more conservative assumptions than what has actually happened. What basis do you have for saying that they necessitate further income tax increases? And don’t say “the deficit”; social security is still greatly in surplus. To talk about the deficit, we have to look at the spending and taxation decisions that have been made, including several wars of choice. What the political establishment seems to be trying to do – under Bush, and, through the deficit commission, probably under Obama – is to cut and/or privatize social security. Changes to social security now, of course, will screw the boomers out of what they have been paying elevated payroll taxes for all these years. Whether it will be “necessary” to raise income taxes in the future relies on the number of disputable postulates, nor is it necessary, if so, that the taxes raised be income – they could be capital gain or other unearned income taxes. In fact, unearned income taxes at the high end are what primarily were in the health care bill.

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Martin Bento 06.04.10 at 7:52 am

Capital gains were a much larger share of the tax pie before the tax changes we are talking about took place: the capital gain tax rate was more than triple what it is presently, and the tax free vehicles of 401Ks and such didn’t exist. In measuring the change from those tax cuts, you have to look at the percentage of revenue they constituted before the cuts.

93

Earnest O'Nest 06.04.10 at 7:54 am

Barry, I could but I won’t because I know you understood and are just being a whimp about it ;-)

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Barry 06.04.10 at 2:57 pm

Earnest, I don’t have any mushrooms available, so I’m genuinely unable to understand you.

Martin: “These payroll taxes were specifically to pay for boomer retirement, and, yes, they mostly hit boomers. Trying to limit the issue to income taxes is trying to bias the matter.”

Sebastian: “Martin you’re only talking about half the deal. Increased payroll taxes now, increased income taxes later.”

Accepted. Raise taxes on the rich.

95

piglet 06.04.10 at 3:05 pm

chris 76: “Heck, if there really weren’t a difference in the relative size of the elderly population we probably wouldn’t even be having this discussion.”

Just a clarification, the relative size of the elderly population in developed countries has increased fro two reasons: increased longevity, and lower birth rates. It is a common mistake to focus on the first factor. The second is more important. And no, it is not a problem per se. No reason to be concerned about “demographic collapse” and all tat propaganda crap. It’s just the predictable result of controlling population growth. The share of the elderly increases and the population share of children decreases, until a new balance is established. The economically active share of the population doesn’t change that much. Only, more resources have to go into supporting retired people as opposed to children.

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Sebastian 06.04.10 at 3:21 pm

“First of all, the Greenspan commission concluded that the payroll taxes were adequate to fund the boomer retirement based on more conservative assumptions than what has actually happened. ”

Not in spending it didn’t. Their assumptions on spending ended up being rather naive.

“To talk about the deficit, we have to look at the spending and taxation decisions that have been made, including several wars of choice. ”

Wars of choice may speak to the justice of the whole problem, but they don’t speak to the facts of the problem. An enormous debt caused by wars of choice remains an enormous debt.

“Whether it will be “necessary” to raise income taxes in the future relies on the number of disputable postulates, nor is it necessary, if so, that the taxes raised be income – they could be capital gain or other unearned income taxes. In fact, unearned income taxes at the high end are what primarily were in the health care bill.”

Just because you want the social security trust fund to represent a reserve of money doesn’t mean that you can avoid paying for it with taxes or massive inflation. That money isn’t just floating out there. The health care bill is a great example of ‘choices’ you deride earlier in your comment, if we are paying for *it* with one source of revenues we can’t be paying for other things with that same cash.

And 401ks are tax free under the same assumptions as the whole baby boomer deal–that it is better to allow them to defer much of their taxation to a time when their income will be lower. So yes, we could raise more money now by cutting off that taxation later. Hooray for short sighted!

Or I suppose you could tax it now AND later. Hooray for getting rid of 401ks????

As for capital gains, ‘much larger share of the tax pie’ and ‘enough’ are rather different propositions when you are talking about demographic shifts of this magnitude.

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Sebastian 06.04.10 at 3:28 pm

“Accepted. Raise taxes on the rich.”

Well of course we will. I’m all about accepting the reality of how much money we need. But in raising it now, it will hit the non-boomer rich much harder and for much longer. Which was of course the whole point. The boomers got their lower taxes, all the spending they wanted, and a retirement package paid for by the government which will not be equaled by the later generations who will also be paying more for it all along the way.

We will do it out of necessity. But don’t talk to me about the ‘justice’ of it all. Boomers engineered the whole game so that they got the best deal at every part.

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Earnest O'Nest 06.04.10 at 3:57 pm

93- You clearly have no mushrooms available because you consumed all of them, and this propelled you into yet another bad trip. I forgive you.

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Glen Tomkins 06.04.10 at 4:11 pm

marc @71
chris @76

“…unless someone is going to post actuarial tables from different centuries it’s hard to pin down how big the difference is.”

That really is the nub of it, that such actuarial tables don’t exist for very far back, not at all for pre-industrial society. Edmund Halley (http://www.york.ac.uk/depts/maths/histstat/halley.pdf) is generally recognized as having prepared the first protoptyical life table, in 1693. But it was another almost century before the figures in such tables were considered reliable enough for insurance to be sold based on actuary, as opposed to the rule of thumb the nascent industry had relied on prior to that.

I’m not sure that I have fully understood Halley’s scheme, because I can’t fully square it from internal inconsistencies. And there are clearly questions about the generalizability of his findings, because he had to go pretty far afield (to Breslau, the capital of Silesia) for his study subject, as London and Dublin did not report ages of death very exactly or fully (If you want precision, you need to go to the Germans!), and because he suspected, based on many more deaths than births, that London and Dublin would be badly skewed by immigration, whereas Breslau, at least to his imagination, was more stable in that respect of population mobility. It is quite possible that Sir Edmund didn’t understand Breslau well enough not to have missed local effects and events that would make its figures not generalizable. But insofar as we do accept his work as generalizable for the period, he reports the conventional wisdom that I recited earlier. Breslau had a 50% mortality by age 7, with the biggest chunk of that in the first year of life. After that, it is certainly true that the middle years were more mortal for the people of Breslau in the waning days of the 17th Century than they are today. Only half of the people who made it to age 7 went on to make it to age 61 alive, where today that would be closer to 90%. At age 61, the mortality again picks up, and was 4-5 times greater than it was in those middle years. This still leaves a respectable number of people well into their 80s.

If that idea of 50% mortality by age 7 stands as generalizable to all early societies, then the huge decrease in that child mortality is indeed the overwhelming difference between then and now, between most of history and present conditions. But there is some question about that generalizability. Specifically, a city size of 34,000 (Halley’s estimate for Breslau) is both probably historically atypical, a population concentration reflecting the beginning of the Industrial Revolution, and probably way too big for a city to get to without adequate sewerage and not pay a horrible price in terms of diarrheal disease, which causes a mortality that falls very disproportionally on the very young. We really don’t know if childhood mortality figures from the early Industrial Revolution weren’t highly atypical because we have no life tables from earlier centuries.

Whatever the truth status of that generalizability of the Breslau of 1690, there is little point trying to find rationales for why a life expectancy for a given era reported to be in the 40s might actually mean that the 40s were about as old as many people at all would get at that time. Such reported estimates were all generated by assuming that pre-antibiotic/vaccination societies had Breslau’s 50% by age 7 morality rate. Make a different assumption about child mortality, and you radically change the life expectancy. Yes, it would not be as high for Breslau in 1690 even if we changed Breslau’s figures to get rid of that high child mortality, because, yes, even the middle years in 1690 were more mortal than they are today, but avg life expectancy would still be in the 6os, with many people surviving into their 80s.

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Cranky Observer 06.05.10 at 5:17 pm

> Yes, there may be an outlandish and obscure process by which more
> people working will get more work done. Somehow.
>
> The fact that you regard this as dubious says little about economics, but
> a lot about you.

There is also a process by which the amount of work that “needs” to be done expands to fill the people and time available, often with zero or negative affect on productivity or output. The reality is that in the United States we already have enormous numbers of makework jobs designed to keep the population’s nose to the grindstone, Scots-Presbyterian style, and if technology and productivity actually do continue to advance (arguable) that situation will only get worse.

Cranky

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Martin Bento 06.05.10 at 9:12 pm

Sebastian, boomers didn’t engineer anything in the early 80s. Once again, do the math: the oldest boomer on Earth did not turn 40 until 1985. Greenspan was no boomer; nor Reagan; nor any significant number of Congressmen in this period. The system we are talking about was not arranged by boomers for their own benefit, not least because it was not arranged by boomers at all.

Boomers came to political power in the 90s, and what did they do? Raise taxes, right in their peak earnings years, and bring the budget into surplus for a few years. Budget surpluses have actually been rare in US history.

Let’s remember what the point of distinguishing income from other kinds of taxes was: you said that the tax cuts of the 80s went disproportionately to boomers because they were in their peak earnings years. I pointed out that the government also raised payroll taxes, which do indeed vary directly with wages and therefore generally with age, though they cap out at around the level of upper-middle class. The compensating tax cuts were only partially income and therefore only partially varying with wages, and therefore earnings potential and age. You responded that the non-income portion was trivial and could be disregarded. I doubted this was so, and suggested that taxes on unearned income, particularly before the cuts we are talking about, were a significant portion of the tax revenues drawn from the upper-middle and upper classes. Now, you are trying to dismiss this by saying they are not sufficient to cure the deficit, which is an entirely other question. Also, you should recognize that if the payroll taxes were offset entirely and solely by earned income taxes, which is clearly not the case, boomers as a generation would only be breaking even, and redistribution would be by class within all generations. Since capital gains and other unearned income taxes were in fact cut significantly, this is not the case. Finally, if capital gain, inheritance, and other unearned income taxes are in fact trivial in the aggregate, will you stipulate for the record that all conservative moaning about these taxes is also trivial and to be dismissed as fundamentally dishonest? And, indeed, was also so back in the 80s, as you are implicitly arguing the cuts in those taxes then were trivial, and conversely, that complaints that they previously had been too high had to be false, as they had been trivial? (if the taxes were non-trivial, then my point that a non-trivial portion of the tax cuts went to these taxes stands, as it is clear that the taxes were cut quite substantially).

The mandate of the Greenspan commission was to fund social security, not to ensure general budget balance for the next few decades, which would clearly be beyond their capabilities. When I said their assumptions were conservative, I meant on general economic performance and resulting payroll tax income, where, of course, their assumptions should have been conservative. And it is not that “I want” social security to be a separate fund. It’s separation is an accounting convention in the same sense as the ownership of the money in my bank account by me rather than the bank that possesses it is an accounting convention. That money is not literally “floating there” in the vault; the bank has done something with most of it and has a bit of reserves. This does not mean that if the bank gets in trouble, they can repossess my account and say that I was “naive” to think that the legal fiction that assigned it to me would and should not give way before fiscal realities.

And if we’re going to play this silly cohort game anyway, I should point out that Medicare passed in 1965, when the oldest boomers were 20. This makes boomers the first generation that has paid into it their entire working lives, subsidizing for decades older generations that had not. Indeed, Strauss and Howe argue that the great intergenerational transfer of wealth was from the boomers to the greatest generation. Now that they are ready to start collecting, Medicare is being eyed for cutbacks. Of course, the Democrats have now partially wrapped Medicare in a broader health program, which complicates things. Nonetheless, it looks likely the deficit commission will come after Medicare with the axe.

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chris 06.07.10 at 2:13 pm

The reality is that in the United States we already have enormous numbers of makework jobs designed to keep the population’s nose to the grindstone

I find this hard to believe. In the private sector anyone who didn’t eliminate those jobs would be crushed in competition by a leaner competitor, and in the public sector it would be exactly the kind of wasteful government that everyone loves to go after with a chainsaw. (I’m assuming you don’t classify, e.g., safety inspections as “makework”, because if you do, I have a lovely oil rig to show you.)

Please provide examples.

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Barry 06.07.10 at 2:19 pm

06.07.10 at 2:13 pm

Another: “The reality is that in the United States we already have enormous numbers of makework jobs designed to keep the population’s nose to the grindstone”

chris: “I find this hard to believe. In the private sector anyone who didn’t eliminate those jobs would be crushed in competition by a leaner competitor, …”

Yes, in Econ One oh f*cking libertoonian One. In the real world, life is different.

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chris 06.07.10 at 6:01 pm

What possible motive would a corporation have for putting its own employees in makework positions as opposed to laying them off and saving a bundle in wages? You seem to be envisioning them as some kind of mustache-twirling overlords conspiring to keep the peasants in their place, but that just doesn’t make sense — there’s too many and they hate each others’ guts.

An individual industry conspiring to raise prices, sure. They benefit from that. By definition, nobody benefits from makework. So who gets together to impose it on the whole workforce and why? (“Designed” implies a conscious process — unless it was just careless word choice.)

On top of that, plenty of people in the private sector love to go after conspicuous waste with chainsaws, too. So the argument you’re attacking as too theoretical isn’t even necessary.

I really would like to see the examples.

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