Forbes Post, “Too Old To Work, Too Young To Retire? ‘Everyone Just Works Longer’ Isn’t An Easy Fix”

Originally published at Forbes.com on May 24, 2018.

 

It’s taken as a given these days: The current state of affairs with respect to Social Security solvency and Americans’ retirement savings rates inevitably means that Americans will have to work longer, whether that’s to the Social Security Full Retirement Age, or to age 70, or even later.  But’s it not that simple: workers will need to be healthy enough to continue working, and they’ll need jobs available for them.

Let’s back up briefly: readers may be familiar with the concept of the Old Age Dependency Ratio, defined as the ratio of older dependents (people older than 64) to the working-age population (those ages 15-64), expressed as the proportion of dependents per 100 working-age population.  For example, in 1950, there were 14 retirement-aged people for each 100 people of working age; in 2015, 25; and the relative number of older people increases to 33 in 2025 and in 2075, there are projected to be 49 retirement-aged people for each 100 people of working age, according to the OECD.  To be sure, this isn’t as bad as most OECD countries (the most extreme:  Greece, Japan, Korea, and Portugal, each with over 75 oldsters per 100 working-age people in 2075) but it remains a considerable source of worry.

And, as ratios go, both sides impact the changes over time.  There are relatively fewer people of working age, when the birth rate drops.  There are relatively more people of retirement age when longevity increases.  (And incidentally, but perhaps best reserved for another article, in the real world it also matters greatly how many of those people of hypothetical working age, are actually working — vs. spending increasingly many years in schooling to earn more credentials, for instance, or out of the labor force for childrearing or video gaming purposes.)  Whether one has many, few or no children, clearly enough, doesn’t necessarily have anything to do with whether older Americans are able to work later in life.  But we tend to assume that increased longevity more or less automatically means that these longer-lived older Americans will be able to defer retirement for the necessary number of years to keep retirement finances in balance.

To the extent that Americans choose to retire just because they’ve reached an arbitrary age at which it’s traditional to do so, it’s all well and good.  If it’s reasonable to spend a given portion of your adult lifetime working, and the remainder out of the labor force engaging in rest and relaxation, it’s fair enough that as one’s life expectancy increases, so too should your working lifetime.  It may even be that the current fears of roadblocks in the form of employers who will age-discriminate, will fade; Tyler Cowen, writing last week at Bloomberg, expressed confidence that as the relative proportion of the population who fit into the mold of desirable younger workers, decreases, those companies which succeed in best adapting to an older workforce will be the most successful:

I would suggest that the ability to spot, mobilize and deploy older workers is the next biggest source of competitive advantage in the U.S. The sober reality is that many companies should retool their methods to fit better with the experience and sound judgment found so often in older workers. That also will involve a retooling of the glamour notion to valorize the young less and the idea of maturity more. HR departments may have to work harder to help older workers keep up with new technologies.

But that gets us, with apologies for the longwinded preamble, to the greater question:  will American workers be healthy enough to continue working?  It is, after all, important to recognize that increases in life expectancy are not necessarily paired with the number of years of “healthy life expectancy.”  In fact, the data is mixed.

There exists a metric developed by the World Health Organization, the Healthy Life Expectancy, or HALE, which is intended to measure the average number of years of “healthy life” at birth, or at a given age.  According to this measure, the data for which is available beginning in 2000, American’s HALE is indeed improving.  In 2016, men had 16.7 years of “healthy life,” on average, ahead of them at age 60, compared to 15.4 years in 2000.  Women had 19.0 years, compared to 18.0 in 2000.  To be sure, these numbers are lower than elsewhere (Japan:  18.6/22.9; Canada:  19.4/21.6, etc.) but it suggests that, on average, the ability remains for older workers to, well, work.

But according to a recent report by the Population Reference Bureau, which itself compiles the results of multiple recent studies, according to some indicators, Americans are less well positioned to keep working, than was the case with the prior cohort of retirees, due to greater incidences of disability, including that caused by obesity.  One study found that:

Obese individuals face a greater likelihood of having physical limitations. . . . Although baby boomers are less likely to smoke, have emphysema, or have heart attacks, they are more likely to be obese or have diabetes or high blood pressure than the previous generation at similar ages, they report.

Another study reported that

adults in their late 50s today are in poorer health than their parents’ generation was at the same age, even though the younger group will have to work longer to collect full Social Security benefits.

However, there are some bright spots.  One of them is that dementia, surprisingly, is declining in incidence, not in absolute numbers of the elderly affected (because the number of elderly is increasing to such a degree) but in the proportion of the elderly so affected.

The other bright spot is that continued employment, far from harming ailing would-be retirees, may help them retain their health.  Studies are difficult to come by, because it’s a chicken-and-egg-type situation, since those who are in poor health are more likely to retire early in the first place.  But one study compared memory test scores of older Americans to older Europeans; the later-working Americans’ scores, on average, were higher, which is consistent with a working thesis of “use it or lose it,” that is, that the mental stimulation of work helps stave off cognitive decline.  Another study found that later-retiring French retirees were less likely to develop dementia than early retirees.  On the other hand, other studies found that blue collar workers’ cognitive function was boosted due to retirement “perhaps through more opportunities for intellectual stimulation than their workplaces” and that retirees might be using their leisure time to “practice better health habits,” for example, by exercising more.

The bottom line is that there is no ready answer to the question of how successfully Americans will be able to work later.  But what is clear is that the question of Social Security’s financial stability, or of Americans’ retirement security in general, can’t be looked at as its own silo.  Instead, it’s interconnected with a number of larger issues around the broader economy and culture.

 

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.