One of the most powerful forms of stimulus we could apply to our economy right now would be to lower the current Social Security retirement age from the current 65-67 to 55, and increase the benefits back to where they were in inflation-adjusted 1960s dollars by raising them between 10 to 20 percent (so people could actually live, albeit modestly, on Social Security).
The right-wing reaction to this, of course, will be to say that with fewer people working and more people drawing benefits, it would bankrupt Social Security and destroy the economy. But history shows the exact reverse.
Instead, it would eliminate the problem of unemployment in the United States. All those Boomers retiring would make room in the labor market for all the recent high-school and college graduates who are now finding it so hard to find a job.
If enough Boomers left the job market, it would even flip the current dynamic of too-many-people-chasing-too-few-jobs upside down, and create a tight labor markets. Tight labor markets drive up wages.
And as wages go up, tax revenues -- which are paying for Social Security (among other things) -- would increase.
Additionally, these new-into-the-workforce people can then pay off student loans, buy new houses and cars, and otherwise drive the economy from the bottom up. Which will further increase tax revenues further strengthening the Social Security system.
To further tighten the job market and drive up wages (and tax revenues), modify the Fair Labor Standards Act of 1938 -- which tightened the labor market and reduced unemployment by establishing the 40-hour work week - to include all hours worked by a person. We could also, like in France, drop the 40-hour maximum-workweek threshold to 35 hours (used by the Mitterrand government to successfully lower unemployment and stimulate the French economy). A final step would be to emulate the rest of the developed world and require by law that every worker get at least two to four weeks a year of paid vacation -- further tightening the labor market.
In Uganda, Joseph Okwakoi gets it. He's the president of the National Youth Council in that nation, a group that has considerable political power (and an affiliated Member of Parliament, the Central Youth Party's Joseph Kasozi).
Earlier this month, Okwakoi called on Parliament and President Museveni to lower the age of retirement for government workers (the country's largest employer) from the current 60 years of age to 55. This single act would instantly create about 15,000 job openings in the country, which could be filled by currently unemployed young people.
President Museveni replied that he'd consider it seriously, pointing out that, "The retirement age was actually 55 when we came but because of manpower shortage we put it at 60." Now that the manpower shortage has eased, wages are falling, and unemployment is rising, he noted, "We shall study it."
What Joseph Okwakoi understands is that there is a marketplace for labor. When the supply of labor exceeds demand, the price of labor ("wages") falls. On the other hand, when the demand for labor is at or greater than the supply of labor, the price of labor - wages - increases.
This is the main reason why the labor movements of the 18th and 19th centuries fought so hard against child labor; they knew that if children were removed from the labor marketplace, then the supply of labor (the number of people available to work) would decrease and the price of labor (wages) would increase. And, sure enough, that's exactly what happened - and it began the creation of a blue-collar middle class.
It's also why the labor movement pushed for an 8-hour day and a 40-hour maximum workweek. By reducing the amount of labor available from each worker from the average 60 hours a week or so people were working before 1938, the labor market tightened up, increasing the number of people who could be employed and raising wages.
Of course, this is the exact opposite of American labor policy ever since the Reagan/Bush/Clinton/Bush era. Reagan drove down wages by busting unions (which tighten a labor marketplace); declared an amnesty for millions of then-illegal immigrant workers to increase the supply of labor and depress wages (particularly whacking the carpenters and other construction trades unions); and began the process (completed in a big way by Bill Clinton with NAFTA and GATT/WTO) of dismantling tariffs, taxes, and laws that made it expensive or illegal to export American jobs.
Reagan also put into the chairmanship of the Fed Alan Greenspan, who openly declared that his most important job as chairman of the Fed was to prevent "wage inflation" -- a term which he exclusively applied to working-class people. Greenspan is still preaching that now-discredited and anti-American philosophy he learned from Ayn Rand, in fact.
Having already largely wiped out the ability of a blue-collar single-wage-earner family to have a middle class lifestyle over the past 30 years, Greenspan now wants to go after white-collar workers by eliminating limits on H1B visas for skilled workers ranging from computer programmers to physicians to scientists. The investor class would always be protected, in the Greenspan world, but the working class -- regardless of skill level -- should always be the working poor.
In September of 2007, in an interview on C-SPAN for Book TV, Greenspan said:
We pay the highest skilled labor wages in the world. If we would open up our borders to skilled labor far more than we do, we would attract a very substantial quantity of skilled labor which would suppress the wage levels of the skilled, because the skilled are essentially being subsidized by the government, meaning our competition is being kept outside the country.
It's shocking that ideologues like Greenspan, Reagan, and Clinton believe this, but they do. And the only way to reverse the past 29 years of Reaganomics/Clintonomics is to tighten up the labor market again. While a great start would be to pull out of our insane trade treaties and begin again protecting American manufacturers, that will take a decade for the impact to be truly felt even if we were to go back to our 1980 tariff levels today.
But providing space for a good chunk of the 16 percent of the American workforce over 55 years old will immediately take us to nearly zero unemployment and dramatically stimulate the economy. Then we can begin to bring our manufacturing jobs back home from China and the other important steps (Medicare For All and Card-Check for unionization) to restore the strength and integrity our nation and national economy once had.
Thom Hartmann can be heard daily on his radio show 12pm-3pm ET. Visit www.thomhartmann.com to stream live or find a station near you.
The idea that we can legislate a retirement age of 55, which would be of net benefit to society as a whole, seems riddled with flaws. You cannot simply replace an experienced high value workforce with inexperienced low value youth and then expect that you would have anything but net loss in real production and value.
And if we are then producing even less collective pie and collecting even less tax on the lowered production and wages while at the time increasing the outlays of the social safety net where would you suggest we get the real money [not fiat paper] to pay for it? Your idea really amounts to nothing but another transfer of real wealth from the pockets of one group into pockets of another group while lowering output even more and sooner or later – if we continue with shell game economic policy such as this -- the real production and wealth will dry up.
I do find your views as to what a free market actually is lacking, and you’re obviously ill informed views of Alan Greenspan and Ayn Rand are even more eyebrow raising. Personally I find myself having to agree with Zach Bibeault view, over at Mises on this subject… And if you are interested, Arianna Huffington was most interested and agreeable with Ron Paul's Austrian economic views as well. –Mike
If lowering the retirement age to 55 makes sense, why not lower it to 45? Or 35? That way, there would be PLENTY of jobs available for high school and college grads. Of course, this idea is absurd.
Doing this would encourage higher skilled Americans to leave the work force. You're essentially lobbying for less productivity and a reduction in the production of goods and services.
Likewise, if increasing SS benefits will magically stimulate the economy, why not double the benefits instead of a mere 10-20% increase? That should REALLY stimulate the economy! Of course, it won't.
Restricting the labor markets to artificially increase wages will not improve the overall standard of living for Americans.
France imposed a 35-hour maximum work week with the high ideals of 'creating' jobs out of thin air. In fact, unemployment rates went up. It also criminalized productive behavior. If a Frenchman wanted to work more hours than his neighbor to improve his standard of living, this activity would not only be discouraged, it would be criminal!
Well-intended govt regulations usually have unintended consequences. Making it harder to hire or fire employees ultimately means employers will be less reluctant to create new jobs.
Restrictions on the flow of goods and services between consumer and producer (ex. tariffs, subsidies) means fewer goods and services available to the consumer, and higher costs for the goods and services that are available.
Not to sound pessimistic, but good luck with rolling back the Reagan Tax Cuts Thom.
So, quit your job and organize!
The downside risk is that it would accelerate offshoring of jobs. I am familiar with the business strategy of a large US-based multinational which has tens of thousands of employees in India and China (as well as the US and Europe). The very profitable strategy is to take on the work of running "non-core" functions of other large US comapnies, and give those jobs to its offshore workers. The customer neither knows nor cares where the work is getting done.
This company is doing the same thing with in-house work, by practically freezing hiring in the US and continuing to grow employment in low-wage countries.
However it seems to omit an ugly little reality. Most people lost huge amounts of their retirement funds when their 401k funds started disappearing as the market tanked last fall. Most people did the math and realized their retirement goal would have to be delayed until later in life because of the loss.
So let's first get back to real retirement planning instead of gambling on the stock market for retirement via 401k plans. Then let's make it illegal for companies to opt-out of paying pensions, even if they're filing for bankruptcy.
Once those insanities are corrected, then we can start thinking about lowering the retirement age.