All through this recession, we've been looking for an easy answer to the jobs crisis, something that could shift millions of people off the unemployment rolls and back into the workforce. Writing for a series entitled "Unconventional Wisdom" in Foreign Policy, economist JK Galbraith believes he's found one: let people retire earlier. Specifically, he advocates enacting a temporary extension to the age at which people can receive Social Security benefits:
"Older people who would like to retire and would do so if they could afford it should get some help. The right step is to reduce, not increase, the full-benefits retirement age. As a rough cut, why not enact a three-year window during which the age for receiving full Social Security benefits would drop to 62 -- providing a voluntary, one-time, grab-it-now bonus for leaving work? Let them go home! With a secure pension and medical care, they will be happier. Young people who need work will be happier. And there will also be more jobs. With pension security, older people will consume services until the end of their lives. They will become, each and every one, an employer." (Emphasis added.)
Don't worry: you read that right. Despite the prominent role the deficit played in the recent election cycle, Galbraith is essentially advocating increasing it to create jobs. Which is exactly the reason it'll never work: such a proposal would last around five minutes before being destroyed by the exactly the same kind of "government overreach" and "stimulus doesn't work" rhetoric we've seen of late.
But leaving the politicking aside, does the substance of what Galbraith has to say have any merit?
His argument is based around three main points:
- • That only wealthier people are living longer (and have comparatively less strenuous jobs), while those who need to retire younger would be hurt by raising the retirement age.
- • That workers who are approaching retirement age have a harder time finding work and often retire simply because there are no jobs available for them. Therefore, maintaining or raising the retirement age just extends the amount of time people have to spend searching at the end of their careers before they qualify for retirement benefits.
- • "We don't need the workers." Quite apart from productivity gains from technology, Galbraith points out that we still have a shortfall of 11 million jobs to make up as a result of the recession. And he notes that "common sense suggests we should make some decisions about who should have the first crack: older people, who have already worked three or four decades at hard jobs? Or younger people, many just out of school, with fresh skills and ambitions?"
There's little doubt that Galbraith's solutions are designed with concepts such as quality of life and fairness rather than deficits in mind (his argument includes repeated references to happiness—not exactly a classic economic term!), and they definitely raise more questions than they answer.
Here's just one: suppose for a moment that Galbraith's three-year window is adopted. How would you feel about supporting those people with your current and future tax payments? And would your opinion change if you were a young, unemployed person who was likely to benefit from the window?
Feel free to contribute your opinion in the comments section below.
Foreign Policy: ACTUALLY, THE RETIREMENT AGE IS TOO HIGH
--Phil Stott, Vault.com