Job-Creation Idea No. 12: Let The Old Folks Retire Early And Make Way For Young Workers
(No. 12 in Huffington Post's America Needs Jobs series.)
Looking ahead fearfully to something that may or may not be a problem decades from now, President Obama's deficit-obsessed fiscal commission is widely expected to recommend some form of reduction in Social Security expenditures in a few weeks, with the mostly likely scenario being a benefit cut disguised as an increase in the retirement age.
By contrast, looking realistically at the massive unemployment crisis facing the nation right this minute, University of Texas economist and outspoken progressive James Galbraith comes to precisely the opposite conclusion. He says it's time to lower the Social Security retirement age sharply for a few years, until the labor market rebalances itself.
"We've lost a huge number of jobs. No matter how effective a program we enact -- and the fact is we're going nowhere fast -- we're not going to recreate good jobs for everyone's who's lost them," Galbraith said. "So it makes sense to have some priorities."
Galbraith's priority is jobs for younger people who desperately want to work, made possible by retirement for older people who don't. "People who have good reason not to be in the labor force should be allowed to get out and should be allowed to get out gracefully," Galbraith told the Huffington Post.
Specifically, Galbraith is calling for a three-year window during which workers aged 62 and older could retire on full Social Security -- i.e. the same monthly benefit they would normally get if they retired at age 67. Right now, if you start your retirement benefits at 62, your monthly benefit is reduced about 30 percent -- for the rest of your life. That's a brutal disincentive to retiring early.
Older people who have already lost their jobs and are unlikely to find another would no longer have to continue in a "futile and debilitating search," Galbraith said.
And those who are still working but would rather not could retire and make way for a younger person who needs the job more than they do. Galbraith said that would be particularly attractive to people in physically demanding occupations. "Many of the people in those jobs would take the opportunity to get out, if they could afford it," he said.
There are two ways to reduce the unemployment rate. One is to reduce the labor pool; the other is to put people to work. This would do both.
Galbraith's idea is not exactly gathering political steam. There's no proposed legislation. Not even any buzz, really. But, he said, "it's something that I've found to be very popular in speaking to working audiences and it's common sense."
Essentially, it's a government-sponsored version of what a lot of private employers do on their own when they want to turn over the labor force: They offer people early retirement.
"We both can afford it and should do it," Galbraith said.
The affordability, of course, is a matter of debate. Some of the money would be a wash, with federal funding obligations simply shifting from unemployment insurance to Social Security. Similarly, many older unemployed people who have signed up for Social Security disability benefits would presumably shift to retirement benefits. In both cases, for the people involved, that would mean being able to move off of programs that are both stigmatized and uncertain.
But Teresa Ghilarducci, an economist at the New School in New York, concludes that Galbraith's proposal would be "very expensive."
Ghilarducci told HuffPost she supports the idea, because even though it would cost billions, that money would be very effective as stimulus for the economy. "Studies of the consumer expenditure patterns for the elderly on Social Security show that they spend a great deal of it," she said.
And on the plus side, it wouldn't be nearly as expensive as Galbraith's other idea -- which is to make Medicare available (at a cost) to workers as young as 55.
"The idea would be that if you are in your job only because you are desperate to hang on to health insurance, you have an affordable option to move into Medicare at a much earlier age," Galbraith said. "That would appeal to people who are in a medically difficult position."
But covering that population would be costly, and premiums would either have to be astronomical -- or heavily subsidized.
(Ghilarducci has an alternate idea, which is letting people to buy into Veterans Administration coverage in areas where there is lots of unused capacity, such as Detroit.)
There's something very humane about a policy that provides jobs for people who really want them, and an out for people who really don't.
But Ghilarducci warns that if it ever did get raised seriously, employers would be against it.
"Employers would hate it," she said. "The more people they have in the labor force, the less pressure there is on them to increase wages. Employers are upset -- but they are not upset about the unemployment rate. That's the balm."
She also cautioned that not every job vacated by an older person would necessarily get filled. Employers might instead continue trying to squeeze more productivity out of fewer workers. "In manufacturing, they're just downsizing," she said. "And the skills that the older people have when they leave may not be needed anymore"
Galbraith's proposal does stand in stark contrast with the rumored position of the fiscal commission. As he put it: "It provides a concrete alternative to the nonsense notion that we should be stretching out the work lives of older working Americans."
"The last thing you want is for young people who actually need those jobs to have four or five years more before they can find them," Galbraith said. And raising the retirement age would be particularly punishing to the elderly unemployed, he said, "forcing them therefore to scrounge for work longer than they otherwise would, as well as impoverishing them in their old age."
Ghilarducci asked of the commission's members: "Do they think the elderly unemployed can find jobs? Do they think American workers don't work long enough? That they should work longer?"
COMING NEXT IN THE AMERICA NEEDS JOBS SERIES: Serious Infrastructure Spending
Have you missed any of the previous installments of HuffPost's America Needs Jobs series? Read the introduction, Idea No. 1: A Payroll Tax Holiday, No. 2: Rescue The States, No. 3: The Joys Of Retrofitting, No. 4: Put Young People To Work, No. 5: Gearing Up For Climate Change, No. 6: Sharing The Pain Of Layoffs, No. 7: Drawing A Line With China, No. 8: Time For A New WPA, No. 9: Encourage Banks To Lend -- Or Else, No. 10: A Lower Dollar Would Level The Playing Field, and No. 11: Buy American -- If You Can.
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Dan Froomkin is senior Washington correspondent for the Huffington Post. You can send him an e-mail, bookmark his page; subscribe to RSS feed, follow him on Twitter, friend him on Facebook, and/or become a fan and get e-mail alerts when he writes.