Still Too Shy And Retiring
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.
it seems like we should means-test social security for the wealthy. that would encourage them to stay in the work-force longer, and they’re the most productive workers.
alternatively (or perhaps, conjunctively), we could fund social security with consumption instead of payroll taxes to encourage ppl to work longer.
— jc · Feb 7, 05:30 PM · #
Matt’s just making a meta-point / joke that can only be understood if you read through to his link at the end about “the haters.” He’s annoyed that some conservatives deliberately mis-read him (often ignoring his sarcasm, or partial critiques of points he supports partially) so he just put this up to drive them nuts.
He’s opposed to raising the retirement age (since it’s regressive) but he definitely doesn’t want to start killing people off at 80.
— right · Feb 7, 07:36 PM · #
right – yeah, I got that. He’s mocking the idea of raising the retirement age by pointing out how involuntary euthanasia at age 80 is arguably a “better” solution using some of the same metrics.
I still want to know what he really thinks.
— Noah Millman · Feb 7, 09:12 PM · #
Noah: Yep.
— PEG · Feb 8, 11:30 AM · #
PEG: “Yep.”
A good way to abolish the concept of retirement is to abolish the concept of jobs. The construct will probably go away anyway. It’s an artifact of the industrial era, and maybe we’re leaving that behind.
Aside from the other benefits, think what a relief it will be not to have politicians constantly yapping their mouths about “jobs.”
— The Reticulator · Feb 8, 08:43 PM · #
Means-testing is a bad idea. It turns universal social insurance (where you get out benefits roughly proportional to what you put in, with a minimum exception and a cap) into a welfare program. The only way a guaranteed minimum income would work is if everybody got the income at all times whether they needed it or not. No retirement age, no means-testing, everybody gets a minimum income paycheck from the government every month. That’s going to be a lot more expensive than Social Security, and certainly provides for more opportunities for inefficient disincentives to work.
You might be able to expand Social Security so that along with OASDI (old age/survivor/disability) insurance, there are funds for other life circumstances that allow for benefits to be paid. Like, say, an unemployment insurance fund for people out of work past 99 weeks (as long as they continue to meet state job search requirements). You could have an income insurance fund that temporarily supplements the income of someone forced into a lower-paying job by a layoff or career change. Or an adult education insurance fund, whereby people can draw on social insurance to pay the bills while they complete professional or vocation training (preferably with tuition paid after the fact out of future income once that training results in gainful employment). You could also fold a true universal single-payer health plan into Social Security. The possibilities are many.
The bottom line is that the mechanism of Social Security is sound. What’s needed is some adjustment to revenue sources, and a willingness to increase benefits (and payroll taxes) to cover more than simple retirement, the death of a spouse or parent, or disability.
— Cascadian · Feb 8, 11:19 PM · #
All means testing gets you is a bloated bureacracy busy trying to sort out who gets what. Waste of money. The guaranteed minimum income coupled with a removal of all minimum wage laws is what really needs to happen. Take all the money that would normally be going to unemployment, social security, disability, housing vouchers, etc…. every part of the existing social safety net system, and instead give everyone a GMI with none of the ridiculous overhead admin costs.
Still don’t buy it? Tie it to a revamp of the tax code into a “fair tax” VAT and call it a monthly tax prebate and there you have it…a comprehensive, untouchable, bipartisan solution to poverty.
— POP · Feb 9, 02:20 AM · #
If you talk about means testing for Social Security, the usual suspects say, no, you can’t have that. It would turn it from an investment/pension program into a welfare program. So if you point out that as an investment/pension program it gives pretty crappy returns and could be partly privatized, they say, no, you can’t have that, because it’s needed as a safety net/welfare program.
— The Reticulator · Feb 9, 05:42 AM · #
Lifting the cap on Social Security/Medicare individual income taxes (while maintaining an indexed payroll tax) would help provide for the long-term solvency of the trust fund as well as address some of the regressive elements of the current system. The vast majority of working Americans would continue to pay the same net tax rate while the greater total contributions of wealthy workers would essential offset issue of means for wealthy beneficiaries.
— Jason · Feb 9, 05:56 PM · #
Lifting the cap on Social Security/Medicare individual income taxes (while maintaining an indexed payroll tax) would help provide for the long-term solvency of the trust fund as well as address some of the regressive elements of the current system.
I could go for this for the purpose of removing some of the regressivity, but there would need to be some offsetting tax cuts to pay for the increases; otherwise you’re just growing the government.
— The Reticulator · Feb 9, 06:33 PM · #
Why not let people opt out of future social security benefits. I wouldn’t mind continuing to pay social security taxes without collecting the benefit if the government would agree to not tax my withdrawls from retirement accounts like 401ks and Traditional IRAs. I’m confident I can make up for the loss in social security dollars with tax free growth of investments of my own choosing.
— vaildog · Feb 9, 09:06 PM · #