This is cute, but what, ultimately, is Yglesias’ point?
Matt’s poking able fun at a beltway-favorite solution – raise the retirement age – to a real problem. And he’s right: that favored “solution” puts the burden of “solving” the entitlements crisis overwhelmingly on those in need: poor elderly with a shorter-than-average life expectancy. Hence his “modest proposal” alternative, that allocates the burden in an obviously unfair and ethically horrible way but that can be similarly dressed up to look progressive.
But what’s his solution?
Based on his larger body of work (his crusade for unlicensed barbers, praise for the relatively unregulated labor markets of the Nordic countries, etc.) I would think Matt’s preferred solution in an If-I-Ran-The-Zoo mode of argument would be to abolish the concept of retirement altogether.
I mean, think about it. Everybody lives off the productive activity of the people (and machines) that do the work. If the percentage of people engaged in that productive activity goes down, either productivity has to go up to compensate or living standards will drop. It doesn’t matter whether those people drop out of the labor force because they are living on Social Security or because they are living off their private savings; it doesn’t matter whether they are spending more years in school or whether they are begging on the streets; it doesn’t matter whether they are children who are not yet able to work or elderly and disabled who are no longer able to work. Obviously, it matters down the road – more education might well increase one’s productivity in the future (though it might just be a waste of time) but begging almost certainly will not; children will (hopefully) grow up to become productive citizens, while the disabled and the elderly will not; etc. But in the moment, it doesn’t matter: those who are not contributing to the production of wealth by work are living off those who are so contributing.
The existence of a “retirement age” provides an incentive for people to plan on dropping out of the labor force – or, more correctly, specific jobs, because many retirees do at least some work in retirement – at a particular point in their life. That may drive a material misallocation of labor resources, as people either stay in jobs too long or drop out too early. How material, I have no idea – I’d be interested to know whether there’s any good research on that point. But the number is bigger than zero, and as the population ages the size of any such effect must be growing.
I’m totally on-board with a social responsibility for those unable to provide for themselves. I’m totally on-board, in fact, with socializing a pretty wide variety of risks – certainly I have no knee-jerk objection to such socialization. But we don’t want to create additional unnecessary incentives to be unproductive, and that applies to all age categories, youth, elderly and the “prime working age” folks in between.
A key component of the real rationale for a “retirement age” is paternalistic: we can’t trust that people will plan properly, so we need to socialize some economic risks, and we can’t afford to provide “social security” – i.e., lifestyle insurance – from cradle to grave. So we compromise: we provide that insurance to the elderly, who are more vulnerable in aggregate and have less time to “make up” for past mistakes in planning, and withhold it from everybody else. And the result, undoubtedly, is some misallocation of labor resources. But the aging of the population makes that misallocation a bigger and bigger problem, which will require us to revisit that compromise in some fashion.
And there are lots of ways to revisit it. The “raise the retirement age” solution is a relatively regressive one, as Matt is fond of pointing out. But we could revisit it by being less-paternalistic and more progressive. For example, we could enact something like a Guaranteed Minimum Income and abolish Social Security entirely, saying, in effect, we’d rather not provide lifestyle insurance at all (if you want a comfortable retirement, then you’d better plan for it) but we don’t want anybody to live in conditions of true poverty, elderly or not. The strongest arguments against such a scheme are, again, paternalistic – that providing a no-strings-attached income to working-age people creates a very bad incentive structure for individuals who are poor planners, a set that overlaps substantially with the set of people living in poverty.
In any event, the point is that the problem is a real one. There are only three general categories of solutions to the problem of too many non-workers living off too few workers: (1) allow living standards to fall (nobody likes this, but it will happen inevitably if nothing else is done); (2) increase the productivity of the existing workforce (easier said than done); and (3) increase the number of workers. This third category again can be broken into three: (3a) import workers (but imported workers generally come with dependents, and the workers need to be comparably or more productive than the existing workforce or you have a productivity problem that will prove a big drag long-term); (3b) increase the birth rate (easier said than done, operates only with a substantial time lag – initially you get more dependents, not fewer – and Matt should favor a slowly declining world population for environmental reasons); or (3c) increase workforce participation rates of the existing population. Raising the retirement age is both a regressive way of achieving (3c) (the poorest elderly will face the most pressure to remain in the workforce longer) and is perceived as a somewhat progressive way to achieve (1) (the elderly in general are wealthier than average, and raising the retirement age reduces the share of national consumption allocated to the elderly).
If Matt has serious, immodest but more progressive proposals to achieve (3c), I think they’d be worth hearing.