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Young Workers Face Bleak Old Age

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On a visit to see my mother recently, our conversation turned to finances. She divulged that she doesn't know how she's going to retire, something that will likely happen within the next ten years. When she first started teaching at a public school, she had a decent retirement plan and put money toward it. But then she left to teach at a private school and spent it. She explained to me that she grew up in such a time of prosperity that it never occurred to her that she'd have to stockpile her own funds to live a comfy old age. This was bewildering to me. I've been putting money away for retirement since I left college and can't imagine spending it before I hit 65 without a really, really good reason. As my generation lives through the Great Recession, we know that no one can be counted on to help us retire -- not the government, not our employers, not the stock market.

And we're right. Both the Simpson-Bowles plan to reduce the deficit and the report from Obama's fiscal commission address Social Security, and in doing so diminish it for people just like me. As Ezra Klein reports (and the figures hold true for the deficit commission's report):

Under current law, a medium-income worker (someone making about $43,000 a year) is projected to get about $15,000 a year in Social Security benefits in 2050. Under the Simpson-Bowles plan, he or she will get about $12,700.

That's me they're talking about. (Eerily so. It would only have been more directly targeted if they had also cut benefits for women 5 feet and under.) The original amount isn't a ton of money -- our program is "actually among the least generous offered by any developed nation," Klein points out. But it's going to get knocked down even further, particularly for people at my salary level. He wonders that with diminished Social Security, what will we expect seniors to do -- work longer? That's not always an option for those in physically demanding jobs or who lose their job and can't find another (39.4 percent of unemployed older workers were jobless for 27 weeks or more in 2009, compared to 23.3 percent of younger workers). Other retirement products, like the 401(k), aren't cutting it either. Klein reports that "experts say average workers approaching retirement need about $250,000 in their 401(k)s to maintain their standard of living... The number is closer to $98,000 -- not much more than a third of the recommended amount." Visions of our elderly citizens eating catfood spring to mind.

But risky retirement prospects breed another problem. There's a lot of talk about uncertainty in business -- particularly in regards to government policy -- holding companies back from investing and expanding. Whether or not that's the case, a similar mindset occurs in people when they're uncertain about their economic futures. When a young person is faced with the prospect of no assistance for retirement later in life, that narrows her possibilities. She might not risk her financial stability to create a business, or work for a cause, or take a job that pays lower than investment banking. She knows the responsible thing to do is make as much money as possible, because the future may be bleak. So it's little wonder that many of my college peers went to work on Wall Street without a second thought. My mother's generation took it for granted that someone would be there to help them retire; my generation knows the rug is being pulled out from under our feet as we speak.

That's not a good situation to put our young people in. But it's also not a good situation to put our country in. Economically, it won't create growth to have young people scared to take risks and try new ventures. Innovation will stagnate. Who will come up with the next medical cure, discover a new source for renewable energy, create a product like the computer that completely changes how we live? Socially, it's hard to breed transformational change when everyone is too concerned about their finances. Writing about the hippie generation and the sexual revolution of the 60s, Gail Collins points out in "When Everything Changed," "[A] large number of relatively privileged young people felt free to plan the reinvention of the world... They had an unprecedented amount of time to devote to the task because the still-booming economy made it easy to drop in and out of the job market at will." The cost of living was dirt cheap, as was travel and housing. My mother and her friends had the time and sense of financial support to change the way we think about race, war, gender, and a host of other critical issues. Whether or not you're keen on seeing a bunch of tie-dye sporting hippies milling about again, our country lacks a strong and organized movement to transform. This may be due in part to economically challenged young people sitting the social change game out.

Cross-posted from New Deal 2.0.